S-1/A

As filed with the Securities and Exchange Commission on October 4, 2007

Registration No. 333-144004

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 3

to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

SandRidge Energy, Inc.

(Exact name of registrant as specified in its charter)

Delaware	1311	20-8084793
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1601 N.W. Expressway, Suite 1600

Oklahoma City, Oklahoma 73118

(405) 753-5500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Tom L. Ward

Chairman, Chief Executive Officer and President

1601 N.W. Expressway, Suite 1600

Oklahoma City, Oklahoma 73118

(405) 753-5500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Vinson & Elkins L.L.P.
2500 First City Tower, 1001 Fannin
Houston, Texas 77002
(713) 758-2222
Attn: T. Mark Kelly Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Attn: Richard D. Truesdell, Jr., Esq.

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box.  o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

CALCULATION OF REGISTRATION FEE

	Proposed Maximum
Title of Each Class	Aggregate Offering	Amount of
of Securities to be Registered	Price(1)(2)	Registration Fee(3)
Common Stock, par value $0.001	$702,588,000	$21,569

(1) Includes common stock issuable upon the exercise of the underwriters’ over-allotment option.

(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act.

(3) Includes $21,183 previously paid in connection with the initial filing of this registration statement.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated October 4, 2007

PROSPECTUS

           Shares

SandRidge Energy, Inc.

Common Stock

We and the selling stockholders are offering 26,000,000 shares and           shares, respectively, of our common stock. We are offering 4,170,000 of these shares at the public offering price directly to Tom L. Ward, our Chairman, Chief Executive Officer and largest shareholder. This is our initial public offering, and no public market currently exists for our common stock. We anticipate that the initial public offering price of our common stock will be between $22.00 and $24.00 per share.

We have applied to have our common stock listed on the New York Stock Exchange under the symbol “SD.”

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 13.

	Per Share	Total
Public offering price	$	$
Underwriting discounts(1)	$	$
Proceeds to SandRidge Energy, Inc. (before expenses)	$	$
Proceeds to the selling stockholders (before expenses)	$	$

(1) The underwriters will not receive any underwriting discount or commission on the 4,170,000 shares offered directly to Tom L. Ward. See “Underwriting.”

We have granted the underwriters a 30-day option to purchase up to an additional           shares from us on the same terms and conditions as set forth above if the underwriters sell more than           shares of common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about          , 2007.

Joint Book-Running Managers

Lehman Brothers

Goldman, Sachs & Co.

Banc of America Securities LLC

Bear, Stearns & Co. Inc.

Credit Suisse

Deutsche Bank Securities

JPMorgan

UBS Investment Bank

Howard Weil Incorporated

Raymond James

RBC Capital Markets

Simmons & Company International

TudorPickering

, 2007

TABLE OF CONTENTS

Summary	1
Risk Factors	13
Cautionary Statement Concerning Forward-Looking Statements	25
Use of Proceeds	26
Dividend Policy	26
Capitalization	27
Dilution	28
Unaudited Pro Forma Condensed Combined Financial Statements	29
Selected Consolidated Historical Financial Data	34
Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Business	68
Management	92
Executive Compensation and Other Information	98
Principal and Selling Stockholders	115
Related Party Transactions	117
Description of Capital Stock	122
Shares Eligible for Future Sale	128
Certain U.S. Tax Consequences to Non-U.S. Holders	130
Underwriting	133
Legal Matters	141
Experts	141
Where You Can Find More Information	141
Financial Statements	F-1
Glossary of Natural Gas and Oil Terms	A-1
Specimen Stock Certificate
Securities Purchase Agreement
Specimen Stock Certificate
Registration Rights Agreement
Stock Purchase Agreement
Shareholders Agreement
Form of Consent to Amend the Resale Registration Rights Agreement
Form of Consent to Amend the Resale Registration Rights Agreement
401(k) Plan
Form of Indemnification Agreement
Senior Credit Facility
Senior Bridge Facility
Credit Agreement
Letter Agreement for Acquisition of Properties
Subsidiaries
Consent of PricewaterhouseCoopers LLP
Consent of Grant Thornton LLP

You should rely only on the information contained in this prospectus or to which we have referred you. We and the selling stockholders have not, and the underwriters have not, authorized anyone to provide you with different information. We and the selling stockholders are not making an offer of these securities in any jurisdiction where such offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

Information contained in our website does not constitute part of this prospectus.

SandRidge Energy, Inc., our logo and other trademarks mentioned in this prospectus are the property of their respective owners.

This prospectus includes market share and industry data that we obtained from internal research, publicly available information and industry publications and surveys. Our internal research and forecasts are based upon management’s understanding of industry conditions. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable.

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SUMMARY

This summary contains basic information about us and the offering. Because it is a summary, it does not contain all of the information that you should consider before investing in our common stock. You should read and carefully consider this entire prospectus before making an investment decision, especially the information presented under the heading “Risk Factors” and the consolidated and pro forma condensed combined financial statements and the accompanying notes thereto included elsewhere in this prospectus. We have provided definitions for some of the natural gas and oil industry terms used in this prospectus in the “Glossary of Natural Gas and Oil Terms” on page A-1 of this prospectus. Natural gas equivalents are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids. Unless otherwise noted, all natural gas amounts are net of CO₂.

On December 29, 2006, we merged with and into a newly formed Delaware corporation and changed our name from Riata Energy, Inc. to SandRidge Energy, Inc. The purpose of the merger was to change our jurisdiction of incorporation from Texas to Delaware. Except as otherwise indicated or required by the context, references in this prospectus to “we,” “us,” “our,” “SandRidge,” “Riata,” or the “Company” refer to the business of SandRidge Energy, Inc. and its subsidiaries after the merger and its predecessor, Riata Energy, Inc., and its subsidiaries prior to the merger.

Overview

SandRidge is a rapidly growing independent natural gas and oil company concentrating in exploration, development and production activities. We are focused on expanding our continuing exploration and exploitation of our significant holdings in an area of West Texas that we refer to as the West Texas Overthrust, or “WTO,” a natural gas prone geological region where we have operated since 1986 that includes the Piñon Field and our South Sabino and Big Canyon prospects. We intend to add to our existing reserve and production base in this area by increasing our development drilling activities in the Piñon Field and our exploration program in other prospects that we have identified. As a result of our 2006 acquisitions, including the NEG acquisition described below, we have nearly tripled our net acreage position in the WTO since January 2006. We believe that we are the largest operator and producer in the WTO and have assembled the largest acreage position in the area. We also operate significant interests in the Cotton Valley Trend in East Texas, the Gulf Coast area, the Gulf of Mexico and the Piceance Basin of Colorado.

We have assembled an extensive natural gas and oil property base in which we have identified over 4,500 potential drilling locations including over 2,600 in the WTO. As of June 30, 2007, our proved reserves were 1,174.0 Bcfe, of which 82% were natural gas and 97.5% of which were prepared by independent petroleum engineers. We had 1,469 gross (1,040 net) producing wells, substantially all of which we operate. As of June 30, 2007, we had interests in approximately 959,958 gross (651,308 net) natural gas and oil leased acres. We had 30 rigs drilling in the WTO as of June 30, 2007.

We also operate businesses that are complementary to our primary exploration, development and production activities, which provides us with operational flexibility and an advantageous cost structure. We own a fleet of 32 drilling rigs, five of which are currently being retrofitted. In addition, we are party to a joint venture that owns an additional twelve rigs, eleven of which are currently operating. We own related oil field services businesses, gas gathering and treating facilities and a marketing business. We also capture and supply CO₂ to support our tertiary oil recovery projects undertaken by us or third-parties. These assets are primarily located in our primary operating area in West Texas.

We expanded our management team significantly in 2006. Tom L. Ward, the co-founder and former President and Chief Operating Officer of Chesapeake Energy Corporation (“Chesapeake”), purchased a significant ownership interest in us in June 2006 and joined us as Chief Executive Officer and Chairman of the Board. During Mr. Ward’s 17 year tenure at Chesapeake, Chesapeake became one of the most active onshore drillers in the United States. From 1998 to 2005, Chesapeake drilled over 6,500 wells. Since Mr. Ward joined us, we have added eight new executive officers, substantially all of whom have experience at public

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exploration and production companies. We have also added key professionals in exploration, operations, land, accounting and finance.

In addition, we significantly increased our proved reserves and producing properties through the acquisition of NEG in November 2006. NEG owned core assets in the Val Verde and Permian Basins of West Texas, including overlapping or contiguous interests in the properties that we own in the WTO.

Our estimated capital expenditures for 2007 of approximately $1,200 million include $943 million allocated to exploration and development (including land and seismic acquisitions and our tertiary recovery operations), $115 million allocated to drilling and oil field services and $103 million allocated to midstream operations. Approximately $704 million of our 2007 capital expenditures will be spent on our Piñon Field development and our exploratory projects in the WTO (including land and seismic acquisitions). Under this capital budget, we plan to drill approximately 296 gross (256 net) wells in 2007, including approximately 207 gross (177 net) wells in the WTO. The actual number of wells drilled and the amount of our 2007 capital expenditures will be dependent upon market conditions, availability of capital and drilling and production results. We have made capital expenditures of $492.1 million in the first six months of 2007.

Our Strategy

Our primary objective is to achieve long-term growth and maximize stockholder value over multiple business cycles by pursuing the following strategies:

•  Grow Through Exploration and Aggressive Drilling and Development of Existing Acreage.  We expect to generate long-term reserve and production growth by exploring and aggressively drilling and developing our large acreage position. Our primary exploration and development focus will be in the WTO, where we have identified over 2,600 potential drilling locations and had 30 rigs operating as of June 30, 2007.

•  Apply Technological Improvements to Our Exploration and Development Program.  We intend to enhance our drilling success rate and completion efficiency with improved 3-D seismic acquisition and interpretation technologies, together with advanced drilling, completion and production methods that historically have not been widely used in the under-explored WTO.

•  Seek Opportunistic Acquisitions in Our Core Geographic Area.  Since January 2006, through acquisitions and leasing activities, we have nearly tripled our net acreage position in the WTO. We intend to continue to seek other opportunities to optimize and enhance our exploratory acreage position in the WTO and other strategic areas.

•  Reduce Costs, Enhance Returns and Maintain Operating Flexibility by Controlling Drilling Rigs and Midstream Assets.  Our rig fleet enables us to aggressively develop our own acreage while maintaining the flexibility of a third-party contract drilling business. By controlling our fleet of drilling rigs and gathering and treating assets, we believe we will be able to better control overall costs and maintain a high degree of operational flexibility.

•  Capture and Utilize CO₂ for Tertiary Oil Recovery.  We intend to capitalize on our access to CO₂ reserves and CO₂ flooding expertise to pursue enhanced oil recovery in mature oil fields in West Texas. By utilizing this CO₂ in our own tertiary recovery projects, we expect to recover additional oil that would have otherwise been abandoned following traditional waterfloods.

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Competitive Strengths

We have a number of strengths that we believe will help us successfully execute our strategies:

•  Large Asset Base with Substantial Drilling Inventory.  Our producing properties are characterized by long-lived predominantly natural gas reserves with established production profiles. Our estimated proved reserves of 1,174.0 Bcfe as of June 30, 2007 had a proved reserves to production ratio of approximately 19 years. Our core area of operations in the WTO has expanded to 499,607 gross (404,397 net) acres as of June 30, 2007. We have identified over 2,600 potential drilling locations in the WTO and believe that we will be able to expand the number of drilling locations in the remainder of the WTO through exploratory drilling and our use of 3-D seismic technology.

•  Geographically Concentrated Exploration and Development Operations.  We intend to focus our drilling and development operations in the near term on the WTO to fully exploit this unique geological region. This geographic concentration allows us to establish economies of scale in both drilling and production operations to achieve lower production costs and generate increased cash flows from our producing properties. We believe our concentrated acreage position will enable us to organically grow our reserves and production for the next several years.

•  Experienced Management Team Focused on Delivering Long-term Stockholder Value.  During 2006, we significantly expanded our management team when Tom L. Ward, co-founder and former president of Chesapeake, purchased a significant interest in us and became our Chairman and Chief Executive Officer. We also hired a new chief financial officer, three additional executive vice presidents and other additional senior executives. Our management team, board of directors and employees will own     % of our capital stock on a fully-diluted basis following the completion of this offering, which we believe aligns their objectives with those of our stockholders.

•  High Degree of Operational Control.  We operate over 95% of our production in the WTO, East Texas and the Gulf Coast area, which permits us to manage our operating costs and better control capital expenditures and the timing of development and exploitation activities.

•  Large Modern Fleet of Drilling Rigs.   By controlling a large, modern and more efficient drilling fleet, we can develop our existing reserves and explore for new reserves on a more economic basis.

Our Businesses and Primary Operations

Exploration and Production

We explore for, develop and produce natural gas and oil reserves, with a focus on increasing our reserves and production in the WTO. We operate substantially all of our wells in the WTO. We also have significant operated leasehold positions in the Cotton Valley Trend in East Texas and the Gulf Coast area, as well as other non-core operating areas.

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The following table identifies certain information concerning our exploration and production business as of June 30, 2007 unless otherwise noted:

															Number of
	Estimated														Identified
	Net Proved				Daily		Proved								Potential
	Reserves		PV-10 (in		Production		Reserves/			Gross		Net			Drilling
Area	(Bcfe)		millions)(1)		(Mmcfe/d)(2)		Production			Acreage		Acreage			Locations
WTO		648.3	$	1,190.9		68.2		26.0	(3)		499,607		404,397			2,658
East Texas		156.3		310.2		26.8		16.0			48,606		32,557			566
Gulf Coast		105.7		416.4		35.0		8.3			53,464		34,765			51
Other(4)		263.7		641.3		38.9		18.6			358,281		179,589			1,298	(5)
Total		1,174.0	$	2,558.8		168.9		19.0			959,958		651,308	(6)		4,573

(1) PV-10 generally differs from Standardized Measure of Discounted Net Cash Flows, or Standardized Measure, which is measured only at fiscal year end, because it does not include the effects of income taxes and other items on future net revenues. For a reconciliation of PV-10 to Standardized Measure as of December 31, 2006, see “Summary Historical Operating and Reserve Data.” Our Standardized Measure was $1,440.2 million at December 31, 2006.

(2) Represents average daily net production for the month of June 2007. Average daily production for the month of September 2007 was 191.2 Mmcfe per day.

(3) Our proved reserves to production ratio in the WTO is significantly higher than our other areas of operation because of the high volume of our proved undeveloped reserves in this area. We expect this ratio to decrease as our production in the WTO increases.

(4) Includes our properties located offshore in the Gulf of Mexico, the Piceance Basin of Colorado, Other West Texas areas, including our tertiary oil recovery projects, and the Arkoma and Anadarko Basins and other non-strategic areas.

(5) Includes 828 identified potential drilling locations in the Piceance Basin.

(6) Our total net acreage as of September 30, 2007 was 757,904 acres.

West Texas Overthrust (WTO)

We have drilled and developed natural gas in the WTO since 1986. This area is located in Pecos and Terrell Counties in West Texas and provides for multi-pay exploration and development opportunities. The WTO has historically been largely under-explored due primarily to the remoteness and lack of infrastructure in the region, as well as historical limitations of conventional subsurface geological and geophysical methods. However, several fields including our prolific Piñon Field have been discovered. These fields have produced approximately 210 Bcfe from less than 300 wells through June 30, 2007. We believe our access to and control of the necessary infrastructure combined with application of modern seismic techniques will allow us to identify further exploration and development opportunities in the WTO.

In May 2007, we began the first phase of 3-D seismic data acquisition in the WTO. This is the first of six phases planned over the next three years to acquire 1,300 square miles of 3-D seismic data in the WTO. We believe this 3-D seismic program may identify structural details of potential reservoirs, thus lowering the risk of exploratory drilling and improving completion efficiency. The first two phases of the seismic program will cover 360 square miles and should both be completed by the end of 2007.

We have aggressively acquired leasehold acreage in the WTO, nearly tripling our position since January 2006. As of June 30, 2007, we owned 499,607 gross (404,397 net) acres in the WTO, substantially all of which are along the leading edge of the WTO.

Piñon Field.  The Piñon Field, located in Pecos County, is our most significant producing field, and accounts for 55% of our proved reserve base as of June 30, 2007, and approximately 73% of our 2007 exploration and development budget (including land and seismic acquisitions). The Piñon Field lies along the leading edge of the WTO.

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As of June 30, 2007, our estimated proved natural gas and oil reserves in the Piñon Field were 648.3 Bcfe, 66% of which were proved undeveloped reserves. This field has produced approximately 200 Bcfe through June 30, 2007 and currently produces in excess of 110 gross Mmcfe per day.

Our interests in the Piñon Field included 331 producing wells as of June 30, 2007. We had an 84.3% working interest in the producing area of Piñon Field and were running 30 drilling rigs in the Piñon Field as of June 30, 2007. We estimate that we will drill approximately 205 wells in the field during 2007, the majority of which will be development wells. As of June 30, 2007, we have identified 2,658 potential well locations in the Piñon Field, including 406 proved undeveloped drilling locations.

West Texas Overthrust Prospects.  Through our exploratory drilling program, we have identified two prospect areas in the WTO, the South Sabino Prospect and the Big Canyon Prospect areas, on which we will drill exploratory wells in late 2007 or early 2008:

•  South Sabino Prospect Area.  The South Sabino prospect area is located approximately twelve miles east of the Piñon Field. We have drilled two wells that appear to be on trend with the Piñon Field and are structurally higher against one of several thrust faults that make up the WTO. We began the first phase of our 3-D seismic program in this area in 2007 and may drill additional wells in late 2007 following the integration of this data and new subsurface well control.

•  Big Canyon Prospect Area.  Located approximately 20 miles east of the Piñon Field along the WTO, this prospect area represents potential opportunities for future development. We plan to conduct a 3-D seismic survey over the Big Canyon prospect area as part of Phase II of our 3-D seismic program in 2007. Exploratory wells may be planned in late 2007 and early 2008 to further evaluate both the Tesnus and the Caballos in a location structurally updip to the Big Canyon Ranch 106-1 well.

WTO Development Opportunities.  The following table provides additional information concerning our development in the WTO:

2007

Estimated

Total Gross

Capital

2006

Estimated Net

Gross PUD

Gross PUD

Drilling

Gross 2007

Expenditures

Year

Rigs

PUD Reserves

Reserves

Drilling

Locations

Drilling

Budget

End Rigs

Working at 2Q

(Bcfe)(1)

(Bcfe)(1)

Locations(1)

(1)

Locations

(in millions)(2)

Working

2007 End

431.1

675.2

406

2,658

207

$

537

9

30

(1)	As of June 30, 2007.
(2)	Excludes capital expenditures related to land and seismic acquisitions.

East Texas — Cotton Valley Trend.  We own significant interests in the natural gas bearing Cotton Valley Trend, which covers a portion of East Texas and Northern Louisiana. The production in this region is generally characterized as long-lived. We intend to target the tight sands reservoirs and plan to have five rigs running in this region during the remainder of 2007. As of June 30, 2007, East Texas accounted for 156.3 Bcfe of proved reserves, 566 potential drilling locations of which 49 are anticipated to be drilled in 2007, and approximately $110 million of budgeted 2007 capital expenditures.

Gulf Coast Area.  We own natural gas and oil interests in the Gulf Coast area, which encompasses the large coastal plain from the southernmost tip of Texas through the southern portion of Louisiana. Operations in this area are generally characterized as being comparatively higher risk and higher potential than in the other primary areas in which we operate, with successful wells typically having relatively higher initial production rates with steeper declines and shorter production lives. As of June 30, 2007, the Gulf Coast area accounted for 104.5 Bcfe of proved reserves, 51 potential drilling locations and approximately $28 million of budgeted 2007 capital expenditures.

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Other Exploration and Production Areas.  We own significant natural gas and oil assets in the Gulf of Mexico and the Piceance Basin. Our Gulf of Mexico properties are located in bay and other shallow waters and produce a significant amount of natural gas and oil. Our acreage in the Piceance Basin of northwestern Colorado, a sedimentary basin in one of the country’s most prolific natural gas producing regions, is substantially undeveloped. We intend to manage our investments in the Gulf of Mexico and the Piceance Basin area to maximize returns without increasing future capital expenditures significantly.

We also own natural gas and oil interests in West Texas other than the WTO, including our tertiary oil recovery operations. In addition, we own interests in properties in the Arkoma and Anadarko Basins and other non-strategic areas that are primarily operated by third-parties.

Drilling and Oil Field Services

We drill onshore for our own interests through our drilling and oil field services subsidiary, Lariat Services, Inc. (“Lariat Services”). We also drill wells for other natural gas and oil companies, primarily in West Texas. We own or operate a total of 38 operational rigs, including eleven operational rigs owned by Larclay, L.P. (“Larclay”), a joint venture with Clayton Williams Energy, Inc. (“CWEI”). We also own five rigs that are currently being retrofitted. Our rig fleet is designed to drill in our specific areas of operation in West Texas and the WTO. The rigs average in excess of 800 horsepower and have an average depth capacity greater than 10,500 feet.

Our oil field services divisions provide services that complement our exploration and production operations. These services include location and road construction, trucking, roustabout services, pulling units, coiled tubing units, rental tools and air drilling equipment. These services are primarily used for our own account; however, some of our service divisions also perform work for third parties. We also provide under-balanced drilling systems services for our own account.

Midstream Gas Services and Other Operations

To complement our exploration and production operations, particularly in the Piñon Field and surrounding areas, we provide gathering, compression, processing and treating services of natural gas. We have a 92.5% interest in and operate the Pike’s Peak gas treatment plant in West Texas and a 50% interest in the partnership that leases and operates the Grey Ranch gas treatment plant located in the WTO. The Pike’s Peak and Grey Ranch gas treatment plants have capacity of 58 Mmcf per day and 85 Mmcf per day of high CO₂ gas, respectively. These two gas treatment plants, along with two third-party plants in this area, serve as the primary source of CO₂ for our current and planned tertiary oil recovery operations. We also operate or own approximately 275 miles of West Texas natural gas gathering pipelines. At June 30, 2007 we operated or owned approximately 27,000 horsepower of gas compression.

In order to ensure sufficient capacity for our existing and future Piñon Field production, we plan to install an additional 26,000 horsepower of compression and approximately 40 miles of large diameter pipeline by the end of 2007.

Additionally, with our anticipated increase of high CO₂ gas production from the WTO over the next several years, we intend to build supplemental treating capacity, pipeline gathering infrastructure and compression facilities to accommodate our aggressive growth plans.

Our CO₂ gathering and tertiary oil recovery operations are conducted through our subsidiary, PetroSource Energy Company, L.P. (“PetroSource”). PetroSource is the sole gatherer of CO₂ from the four natural gas treatment plants located in the WTO. PetroSource owns 161 miles of CO₂ pipelines in West Texas with approximately 92,000 horsepower of owned and leased CO₂ compression. CO₂ injection has proven to be ideal in recovering additional oil that remains after traditional water flooding has been completed. We have interests in four current or potential CO₂ flood tertiary oil recovery projects in the West Texas region, the Wellman Unit, the George Allen Unit, the South Mallet Unit and the Jones Ranch area. We believe we have a competitive advantage in identifying, acquiring and developing these properties because of our strong expertise and available CO₂ supply.

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Risk Factors

Investing in our common stock involves risks, including, without limitation:

•  natural gas and oil prices are volatile, and a decline in natural gas and oil prices can significantly affect our financial results and impede our growth;

•  our estimated reserves are based on many assumptions that may turn out to be inaccurate, and any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves;

•  unless we replace our natural gas and oil reserves, our reserves and production will decline, which would adversely affect our business, financial condition and results of operations;

•  our potential drilling location inventories are scheduled out over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling;

•  the development of the proved undeveloped reserves in the WTO may take longer and may require higher levels of capital expenditures than we currently anticipate;

•  a significant portion of our operations are located in the WTO, making us vulnerable to risks associated with operating in one major geographic area;

•  we have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business; and

•  certain stockholders’ shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly.

Our Offices

Our company was founded in 1984 and is incorporated in Delaware. Our principal executive offices are located at 1601 N.W. Expressway, Suite 1600, Oklahoma City, Oklahoma 73118, and our telephone number at that address is (405) 753-5500.

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The Offering

Common stock offered by SandRidge Energy, Inc.(1)(2) 26,000,000 shares

Common stock offered by the selling stockholders(3)            shares

Common stock outstanding immediately prior to the completion of this offering(1)(4) 108,862,112 shares

Common stock to be outstanding immediately after the completion of this offering(1)(4) 134,862,112 shares

Use of proceeds We will receive net proceeds from the sale of the common stock offered by us of approximately $566.2 million after deducting the estimated expenses and underwriting discounts and commissions based on an assumed initial public offering price of $23.00 per share. We intend to use the net proceeds to repay (i) the outstanding balance on our senior credit facility, which balance as of September 30, 2007 was $400 million prior to the application of available cash balances and (ii) a $50 million note we intend to incur in connection with a proposed acquisition. We intend to use the remaining proceeds to fund the remaining unfunded portion of our $1,200 million capital expenditure budget for 2007. We will not receive any of the proceeds from the sale of shares by the selling stockholders. A $1.00 increase (decrease) in the assumed public offering price of $23.00 per share would increase (decrease) the net proceeds to us from this offering by $24.7 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated expenses and underwriting discounts and commissions payable by us. Please read “Use of Proceeds” and “Underwriting.”

Dividend policy We do not anticipate that we will pay cash dividends on our common stock in the foreseeable future.

Proposed New York Stock Exchange Symbol “SD”

(1) Assumes no exercise of the underwriters’ over-allotment option. See “Underwriting.”

(2) Includes 4,170,000 shares to be offered directly to Mr. Ward, our Chairman, Chief Executive Officer and President, at the initial public offering price.

(3) See “Principal and Selling Stockholders” for information on the selling stockholders.

(4) These shares exclude 22,277,808 shares issuable upon conversion of our outstanding convertible preferred stock.

8

Summary Consolidated Historical and Pro Forma Combined Financial Data

Set forth below is our summary consolidated historical and unaudited pro forma combined financial data for the periods indicated. The historical financial data for the periods ended December 31, 2004, 2005 and 2006 and the balance sheet data as of December 31, 2005 and 2006 have been derived from our audited financial statements. Our historical financial data as of June 30, 2007 and for the six months ended June 30, 2006 and 2007 are derived from our unaudited financial statements and, in our opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of this information. The pro forma financial data have been derived from our unaudited pro forma financial statements included in this prospectus, which give pro forma effect to the transactions described in “Unaudited Pro Forma Condensed Combined Financial Statements.” You should read the following summary financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical and pro forma financial statements and related notes thereto appearing elsewhere in this prospectus.

	Historical															Pro Forma
																Six Months
										Six Months Ended						Ended			Year Ended
	Years Ended December 31,									June 30,						June 30,			December 31,
	2004(1)			2005			2006			2006			2007			2006			2006
	(In thousands)
Statement of Operations Data:
Revenues	$	175,995		$	287,693		$	388,242		$	173,830		$	308,127		$	291,370		$	565,256
Expenses:
Production		10,230			16,195			35,149			13,665			49,018			38,993			84,895
Production taxes		2,497			3,158			4,654			1,529			7,926			3,833			9,770
Drilling and services		26,442			52,122			98,436			47,685			24,126			38,146			77,453
Midstream and marketing		96,180			141,372			115,076			58,386			46,747			29,205			66,848
Depreciation, depletion and amortization — natural gas and crude oil		4,909			9,313			26,321			7,868			70,699			114,284			217,013
Depreciation, depletion and amortization — other		7,765			14,893			29,305			13,808			22,263			14,030			29,701
General and administrative		6,554			11,908			55,634			20,303			25,360			25,754			67,629
Loss (gain) on derivative contracts		878			4,132			(12,291	)		(10,579	)		(15,981	)		(49,504	)		(111,998	)
Loss (gain) on sale of assets		(210	)		547			(1,023	)		—			(659	)		—			(1,023	)
Total expenses		155,245			253,640			351,261			152,665			229,499			214,741			440,288
Income from operations		20,750			34,053			36,981			21,165			78,628			76,629			124,968
Other income (expense):
Interest income		56			206			1,109			397			3,626			3,352			5,984
Interest expense		(1,678	)		(5,277	)		(16,904	)		(1,584	)		(60,108	)		(37,581	)		(74,056	)
Minority interest		(262	)		(737	)		(296	)		(99	)		(157	)		12			(185	)
Income (loss) from equity investments		(36	)		(384	)		967			(697	)		2,164			(697	)		967
Total other income (expense)		(1,920	)		(6,192	)		(15,124	)		(1,983	)		(54,475	)		(34,914	)		(67,290	)
Income before income taxes		18,830			27,861			21,857			19,182			24,153			41,715			57,678
Income tax expense		6,433			9,968			6,236			5,150			9,082			15,435			21,341
Income from continuing operations		12,397			17,893			15,621			14,032			15,071			26,280			36,337
Income from discontinued operations, net of tax		451			229			—			—			—			—			—
Extraordinary gain		12,544			—			—			—			—			—			—
Net income		25,392			18,122			15,621			14,032			15,071			26,280			36,337
Preferred stock dividends and accretion		—			—			3,967			—			21,260			18,103			40,174
Income (loss) available (applicable) to common stockholders	$	25,392		$	18,122		$	11,654		$	14,032		$	(6,189	)	$	8,177		$	(3,837	)

9

	Historical												Pro Forma
													Six Months
								Six Months Ended					Ended			Year Ended
	Years Ended December 31,							June 30,					June 30,			December 31,
	2004(1)		2005		2006			2006		2007			2006			2006
	(In thousands except per share data)
Earnings Per Share Information:
Basic
Income from continuing operations	$	0.22	$	0.31	$	0.21		$	0.20	$	0.15		$	0.23		$	0.31
Income from discontinued operations, net of income tax		0.01		0.01		—			—		—			—			—
Extraordinary gain on acquisition		0.22		—		—			—		—			—			—
Preferred stock dividends		—		—		(0.05	)		—		(0.21	)		(0.16	)		(0.34	)
Income (loss) per share available (applicable) to common stockholders	$	0.45	$	0.32	$	0.16		$	0.20	$	(0.06	)	$	0.07		$	(0.03	)
Weighted average number of shares outstanding(2):		56,312		56,559		73,727			71,596		100,025			116,045			116,046
Diluted
Income from continuing operations	$	0.22	$	0.31	$	0.21		$	0.19	$	0.15		$	0.23		$	0.31
Income from discontinued operations, net of income tax		0.01		0.01		—			—		—			—			—
Extraordinary gain on acquisition		0.22		—		—			—		—			—			—
Preferred stock dividends		—		—		(0.05	)		—		(0.21	)		(0.16	)		(0.34	)
Income (loss) per share available (applicable) to common stockholders	$	0.45	$	0.32	$	0.16		$	0.19	$	(0.06	)	$	0.07		$	(0.03	)
Weighted average number of outstanding shares(2):		56,312		56,737		74,664			72,540		100,025			116,989			116,983

(1)	We recognized an extraordinary gain from the recognition of the excess of fair value over acquisition cost of $12.5 million related to an acquisition we made in 2004.
(2)	The number of shares has been adjusted to reflect a 281.552-to-1 stock split in December 2005.

	Historical
	At December 31,				At June 30,
	2005		2006		2007
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	45,731	$	38,948	$	2,199
Property, plant and equipment, net	$	337,881	$	2,134,718	$	2,542,460
Total assets	$	458,683	$	2,388,384	$	2,765,348
Long-term debt	$	43,133	$	1,066,831	$	1,066,656
Redeemable convertible preferred stock	$	—	$	439,643	$	449,998
Total stockholders’ equity	$	289,002	$	649,818	$	950,821
Total liabilities and stockholders’ equity	$	458,683	$	2,388,384	$	2,765,348

10

Summary Historical Operating and Reserve Data

The following historical estimates of net proved natural gas and oil reserves are based on reserve reports dated December 31, 2005 and 2006 and June 30, 2007, substantially all of which were prepared by our independent petroleum engineers. You should refer to “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business — Exploration and Production” in evaluating the material presented below.

	At December 31,			At December 31,			At June 30,
	2005			2006			2007
Estimated Proved Reserves(1)
Natural Gas (Bcf)(2)		237.4			850.7			967.6
Oil (MmBbls)		10.4			25.2			34.4
Total (Bcfe)		300.0			1,001.8			1,174.0
PV-10 (in millions)	$	733.3	(3)	$	1,734.3	(3)	$	2,558.8(3	)
Standardized Measure of Discounted Net Cash Flows (in millions)(4)	$	499.2		$	1,440.2			n/a(5	)

(1)

Our estimated proved reserves and the future net revenues, PV-10, and Standardized Measure of Discounted Net Cash Flows were determined using end of the period prices for natural gas and oil that we realized as of December 31, 2005, December 31, 2006 and June 30, 2007, which were $8.40 per Mcf of natural gas and $54.04 per barrel of oil at December 31, 2005, $5.64 per Mcf of natural gas and $57.75 per barrel of oil at December 31, 2006 and $6.70 per Mcf of natural gas and $63.78 per barrel of oil at June 30, 2007.

(2)

Given the nature of our natural gas reserves, a significant amount of our production, primarily in the WTO, contains natural gas high in CO2 content. These figures are net of volumes of CO2 in excess of pipeline quality specifications.

(3) PV-10 is a non-GAAP financial measure and represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using pricing assumptions in effect at the end of the period. PV-10 differs from Standardized Measure of Discounted Net Cash Flows because it does not include the effects of income taxes and other items on future net revenues. Neither PV-10 nor Standardized Measure represent an estimate of fair market value of our natural gas and oil properties. PV-10 is used by the industry and by our management as an arbitrary reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities that are not dependent on the taxpaying status of the entity.

The following table provides a reconciliation of our Standardized Measure to PV-10:

	At December 31,		At December 31,
	2005		2006
	(In millions)
Standardized Measure of Discounted Net Cash Flows	$	499.2	$	1,440.2
Present value of future income tax and other discounted at 10%		234.1		294.1
PV-10	$	733.3	$	1,734.3

(4)

The Standardized Measure of Discounted Net Cash Flows represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs, and income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. Standardized Measure differs from PV-10 because Standardized Measure includes the effect of future income taxes.

(5)

Standardized Measure of Discounted Net Cash Flows is only calculated at fiscal year end under applicable accounting rules.

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The following tables set forth information regarding our net production of oil, natural gas and natural gas liquids and certain price and cost information for each of the periods indicated. Because of the relatively high volumes of CO₂ produced with natural gas, primarily in certain areas of the WTO, our reported sales and reserves volumes and the related unit prices received for natural gas in these areas are reported net of CO₂ volumes stripped at the gas plants. The gas plant fees for stripping CO₂ produced with natural gas have been taken into account in the disclosed average sales prices of natural gas in the WTO. In most other areas, natural gas sales are delivered to sales points with CO₂ levels within pipeline specifications and thus are included in sales and reserves volumes.

							Six Months
							Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Production Data:
Natural Gas (Mmcf)		6,708		6,873		13,410		4,219		22,292
Oil (MBbls)		37		72		322		46		906
Combined Equivalent Volumes (Mmcfe)		6,930		7,305		15,342		4,495		27,728
Average Daily Combined Equivalent Volumes (Mmcfe/d)		18.9		20.0		42.0		24.8		153.2

Our average daily combined equivalent volumes of production for the month of September was 191.2 Mmcfe per day.

							Six Months
							Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Average Prices(1):
Natural Gas (per Mcf)	$	4.43	$	6.54	$	6.19	$	6.08	$	6.90
Oil (per Bbl)	$	34.03	$	48.19	$	56.61	$	62.99	$	58.18
Combined Equivalent (per Mcfe)	$	4.47	$	6.63	$	6.60	$	6.35	$	7.45

							Six Months
							Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Expenses per Mcfe:
Lease operating expenses	$	1.48	$	2.22	$	2.29	$	3.04	$	1.77
Production taxes	$	0.36	$	0.43	$	0.30	$	0.34	$	0.29

(1) Reported prices represent actual prices for the periods presented and do not give effect to hedging transactions.

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this prospectus before deciding to invest in our common stock.

Risks Related to the Natural Gas and Oil Industry and Our Business

Natural gas and oil prices are volatile, and a decline in natural gas and oil prices can significantly affect our financial results and impede our growth.

Our revenue, profitability and cash flow depend upon the prices and demand for natural gas and oil. The markets for these commodities are very volatile. Even relatively modest drops in prices can significantly affect our financial results and impede our growth. Changes in natural gas and oil prices have a significant impact on the value of our reserves and on our cash flow. Prices for natural gas and oil may fluctuate widely in response to relatively minor changes in the supply of and demand for natural gas and oil and a variety of additional factors that are beyond our control, such as:

•  the domestic and foreign supply of natural gas and oil;

•  the price of foreign imports;

•  worldwide economic conditions;

•  political and economic conditions in oil producing countries, including the Middle East and South America;

•  the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

•  the level of consumer product demand;

•  weather conditions;

•  technological advances affecting energy consumption;

•  availability of pipeline infrastructure, treating, transportation and refining capacity;

•  domestic and foreign governmental regulations and taxes; and

•  the price and availability of alternative fuels.

Lower natural gas and oil prices may not only decrease our revenues on a per share basis, but also may reduce the amount of natural gas and oil that we can produce economically. This may result in our having to make substantial downward adjustments to our estimated proved reserves.

Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

The process of estimating natural gas and oil reserves is complex and inherently imprecise. It requires interpretations of available technical data and many assumptions, including assumptions relating to production rates and economic factors such as natural gas and oil prices, drilling and operating expenses, capital expenditures and availability of funds. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this prospectus. See “Business — Our Business and Primary Operations” for information about our natural gas and oil reserves.

Actual future production, natural gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas and oil reserves most likely will vary from our estimates. Any significant variance could materially affect the estimated quantities and present value of reserves shown in this prospectus. In addition, we may adjust estimates of proved reserves to reflect production history, results

13

of exploration and development, prevailing natural gas and oil prices and other factors, many of which are beyond our control.

The present value of future net cash flows from our proved reserves will not necessarily be the same as the current market value of our estimated natural gas and oil reserves.

We base the estimated discounted future net cash flows from our proved reserves on prices and costs in effect on the day of estimate. Actual future net cash flows from our natural gas and oil properties also will be affected by factors such as:

•  actual prices we receive for natural gas and oil;

•  actual cost of development and production expenditures;

•  the amount and timing of actual production;

•  supply of and demand for natural gas and oil; and

•  changes in governmental regulations or taxation.

The timing of both our production and our incurrence of expenses in connection with the development and production of natural gas and oil properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the natural gas and oil industry in general.

Unless we replace our natural gas and oil reserves, our reserves and production will decline, which would adversely affect our business, financial condition and results of operations.

Our future natural gas and oil reserves and production, and therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, find or acquire additional reserves to replace our current and future production at acceptable costs.

Our potential drilling location inventories are scheduled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.

As of June 30, 2007, only 699 of our 4,573 identified potential future well locations were attributed proved undeveloped reserves. These potential drilling locations, including those without proved undeveloped reserves, represent a significant part of our growth strategy. Our ability to drill and develop these locations is subject to a number of uncertainties, including the availability of capital, seasonal conditions, regulatory approvals, natural gas and oil prices, costs and drilling results. Because of these uncertainties, we do not know if the numerous potential drilling locations we have will ever be drilled or if we will be able to produce natural gas or oil from these or any other potential drilling locations. As such, our actual drilling activities may materially differ from our current expectations, which could adversely affect our business.

We will not know conclusively prior to drilling whether natural gas or oil will be present in sufficient quantities to be economically viable.

We describe some of our current prospects and drilling locations and our plans to explore those prospects and drilling locations in this prospectus. A prospect is a property on which we have identified what our geoscientists believe, based on available seismic and geological information, to be indications of natural gas or oil. Our prospects and drilling locations are in various stages of evaluation, ranging from a prospect that is ready to drill to a prospect that will require substantial additional seismic data processing and interpretation. The use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. Even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation

14

or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. From January 1, 2007 through June 30, 2007, we participated in drilling a total of 109 gross wells, of which three have been identified as a dry hole. If we drill additional wells that we identify as dry holes in our current and future prospects, our drilling success rate may decline and materially harm our business. In sum, the cost of drilling, completing and operating any well is often uncertain, and new wells may not be productive.

Properties that we buy may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against them.

Our reviews of properties we acquire are inherently incomplete because it generally is not feasible to review in depth every individual property involved in each acquisition. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as soil or ground water contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, we often assume certain environmental and other risks and liabilities in connection with acquired properties, which risks and liabilities could have a material adverse effect on our results of operations and financial condition.

The development of the proved undeveloped reserves in the WTO and other areas of operation may take longer and may require higher levels of capital expenditures than we currently anticipate.

Approximately 66% of the estimated proved reserves that we own or have under lease in the WTO as of June 30, 2007 are proved undeveloped reserves and 62% of our total reserves are proved undeveloped reserves. Development of these reserves may take longer and require higher levels of capital expenditures than we currently anticipate. Therefore, ultimate recoveries from these fields may not match current expectations. Delays in the development of our reserves or increases in costs to drill and develop such reserves will reduce the PV-10 value of our estimated proved undeveloped reserves and future net revenues estimated for such reserves.

A significant portion of our operations are located in WTO, making us vulnerable to risks associated with operating in one major geographic area.

As of June 30, 2007, approximately 55% of our proved reserves and approximately 40% of our production were located in the WTO. In addition, a substantial portion of our WTO natural gas contains a high concentration of CO₂ and requires treating. As a result, we may be disproportionately exposed to the impact of delays or interruptions of production from these wells caused by transportation and treatment capacity constraints, curtailment of production or treatment plant closures for scheduled maintenance or unanticipated occurrences.

Many of our prospects in the WTO may contain natural gas that is high in CO₂ content, which can negatively affect our economics.

The reservoirs of many of our prospects in the WTO may contain natural gas that is high in CO₂ content. The natural gas produced from these reservoirs must be treated for the removal of CO₂ prior to marketing. If we cannot obtain sufficient capacity at treatment facilities for our natural gas with a high CO₂ concentration, or if the cost to obtain such capacity significantly increases, we could be forced to delay production and development or experience increased production costs.

Furthermore, when we treat the gas for the removal of CO₂, some of the methane is used to run the treatment plant as fuel gas and other methane and heavier hydrocarbons, such as ethane, propane and butane, cannot be separated from the CO₂ and is lost. This is known as plant shrink. Historically our plant shrink has been approximately 14% in the WTO. We do not know the amount of CO₂ we will encounter in any well until it is drilled. As a result, sometimes we encounter CO₂ levels in our wells that are higher than expected. The

15

amount of CO₂ in the gas produced affects the heating content of the gas. For example, if a well is 65% CO₂, the gas produced often has a heating content of between 300 and 350 MBtu per Mcf. Giving consideration for plant shrink, as many as four Mcf of high CO₂ gas must be produced to sell one MmBtu of natural gas. We report our volumes of natural gas reserves and production net of CO₂ volumes that are removed prior to sales. Since the treatment expenses are incurred on an Mcf basis, we will incur a higher effective treating cost per MmBtu of natural gas sold for natural gas with a higher CO₂ content. As a result, high CO₂ gas wells must produce at much higher rates than low CO₂ gas wells to be economic, especially in a low natural gas price environment.

We may experience difficulty in staffing and retaining employees on our new drilling rigs, which may adversely affect the efficiency of our drilling program.

We have increased our number of drilling rigs and the level of our activity substantially. This has required us to add additional employees to staff our drilling rigs and to add professional and support staff to other departments. If we are unable to retain these employees, we may experience decreased efficiency and delays in our drilling program.

A significant decrease in natural gas production in our areas of midstream gas services operation, due to the decline in production from existing wells, depressed commodity prices or otherwise, would adversely affect our revenues and cash flow for our midstream gas services segment.

The profitability of our midstream business is materially impacted by the volume of natural gas we gather, transmit and process at our facilities. Most of the reserves backing up our midstream assets are operated by our exploration and production segment. A material decrease in natural gas production in our areas of operation would result in a decline in the volume of natural gas delivered to our pipelines and facilities for gathering, transmitting and processing. The effect of such a material decrease would be to reduce our revenues, operating income and cash flows. Fluctuations in energy prices can greatly affect production rates and investments by our exploration and production business and third-parties in the development of new natural gas and oil reserves. Drilling activity generally decreases as natural gas and oil prices decrease. We have no control over factors affecting production activity, including prevailing and projected energy prices, demand for hydrocarbons, the level of reserves, geological considerations, governmental regulation and the availability and cost of capital. Failure to connect new wells to our gathering systems would, therefore, result in the amount of natural gas we gather, transmit and process being reduced substantially over time and could, upon exhaustion of the current wells, cause us to abandon our gathering systems and, possibly cease gathering, transmission and processing operations. Our ability to connect to new wells will be dependent on the level of drilling activity in our areas of operations and competitive market factors. As a consequence of these declines, our revenues and cash flows could be materially adversely affected.

Our use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of natural gas and oil, which could adversely affect the results of our drilling operations.

A significant aspect of our exploration and development plan involves seismic data. Even when properly used and interpreted, 2-D and 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are present in those structures. Other geologists and petroleum professionals, when studying the same seismic data, may have significantly different interpretations than our professionals. In addition, the use of 2-D and 3-D seismic and other advanced technologies requires greater predrilling expenditures than traditional drilling strategies, and we could incur losses due to such expenditures. As a result, our drilling activities may not be geologically successful or economical, and our overall drilling success rate or our drilling success rate for activities in a particular area may not improve.

We often gather 2-D and 3-D seismic data over large areas. Our interpretation of seismic data delineates for us those portions of an area that we believe are desirable for drilling. Therefore, we may choose not to acquire option or lease rights prior to acquiring seismic data, and in many cases, we may identify hydrocarbon indicators before seeking option or lease rights in the location. If we are not able to lease those locations on

16

acceptable terms, it would result in our having made substantial expenditures to acquire and analyze 2-D and 3-D data without having an opportunity to attempt to benefit from those expenditures.

Drilling for and producing natural gas and oil are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

Our drilling and operating activities are subject to many risks, including the risk that we will not discover commercially productive reservoirs. Drilling for natural gas and oil can be unprofitable, not only from dry holes, but from productive wells that do not produce sufficient revenues to return a profit. In addition, our drilling and producing operations may be curtailed, delayed or canceled as a result of other factors, including:

•  unusual or unexpected geological formations and miscalculations;

•  pressures;

•  fires;

•  blowouts;

•  loss of drilling fluid circulation;

•  title problems;

•  facility or equipment malfunctions;

•  unexpected operational events;

•  shortages of skilled personnel;

•  shortages or delivery delays of equipment and services;

•  compliance with environmental and other regulatory requirements; and

•  adverse weather conditions.

Any of these risks can cause substantial losses, including personal injury or loss of life; damage to or destruction of property, natural resources and equipment; pollution; environmental contamination or loss of wells; and regulatory fines or penalties.

Insurance against all operational risks is not available to us. Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. We do not carry environmental insurance, thus, losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not covered in full or in part by insurance could have a material adverse impact on our business activities, financial condition and results of operations.

Market conditions or operational impediments may hinder our access to natural gas and oil markets or delay our production.

Market conditions or a lack of satisfactory natural gas and oil transportation arrangements may hinder our access to natural gas and oil markets or delay our production. The availability of a ready market for our natural gas and oil production depends on a number of factors, including the demand for and supply of natural gas and oil and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production depends in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities. For example, we are currently experiencing capacity limitations in the Piñon Field. Our failure to obtain such services on acceptable terms or expand our midstream assets could materially harm our business. We may be required to shut in wells for a lack of a market or because access to natural gas pipelines, gathering system capacity or processing facilities may be limited or unavailable. If that were to occur, then we would be unable to realize revenue from those wells until production arrangements were made to deliver the production to market.

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Our development and exploration operations require substantial capital and we may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties and a decline in our natural gas and oil reserves.

The natural gas and oil industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business and operations for the exploration, development, production and acquisition of natural gas and oil reserves. To date, we have financed capital expenditures primarily with proceeds from the sale of equity, bank borrowings and cash generated by operations. We intend to finance our future capital expenditures with the sale of equity, asset sales, cash flow from operations and current and new financing arrangements. Our cash flow from operations and access to capital are subject to a number of variables, including:

•  our proved reserves;

•  the level of natural gas and oil we are able to produce from existing wells;

•  the prices at which natural gas and oil are sold; and

•  our ability to acquire, locate and produce new reserves.

If our revenues decrease as a result of lower natural gas and oil prices, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at current levels. In order to fund our capital expenditures, we must seek additional financing. Our senior credit facility and term loan contain covenants restricting our ability to incur additional indebtedness without the consent of the lenders. Our lenders may withhold this consent in their sole discretion.

In addition, we may not be able to obtain debt or equity financing on terms favorable to us, or at all. The failure to obtain additional financing could result in a curtailment of our operations relating to exploration and development of our prospects, which in turn could lead to a possible loss of properties and a decline in our natural gas and oil reserves.

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business.

As of June 30, 2007, our total indebtedness was $1.1 billion, which represented approximately 43% of our total capitalization. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. Our substantial indebtedness, combined with our lease and other financial obligations and contractual commitments, could have other important consequences to you. For example, it could:

•  make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

•  require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

•  limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•  place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that our leverage prevents us from pursuing; and

•  limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes.

Any of the above listed factors could materially adversely affect our business, financial condition and results of operations.

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Our senior credit facility and term loan have restrictions and financial covenants which could adversely affect our operations.

We will depend on our senior credit facility for a portion of future capital needs. The senior credit facility and term loan restrict our ability to obtain additional financing, make investments, lease equipment, sell assets and engage in business combinations. We also are required to comply with certain financial covenants and ratios. Our ability to comply with these restrictions and covenants in the future is uncertain and will be affected by the levels of cash flow from our operations and events or circumstances beyond our control. Our failure to comply with any of the restrictions and covenants under the senior credit facility, term loan or other debt financing could result in a default under those facilities, which could cause all of our existing indebtedness to be immediately due and payable.

The senior credit facility limits the amounts we can borrow to a borrowing base amount, determined by the lender in its sole discretion on a semi-annual basis, based upon projected revenues from the natural gas and oil properties securing our loan. The lender can unilaterally adjust the borrowing base and the borrowings permitted to be outstanding under the senior credit facility, and any increase in the borrowing base requires its consent. Outstanding borrowings in excess of the borrowing base must be repaid immediately, or we must pledge other natural gas and oil properties as additional collateral. We do not currently have any substantial unpledged properties, and we may not have the financial resources in the future to make any mandatory principal prepayments required under the senior credit facility.

Our derivative activities could result in financial losses or could reduce our earnings.

To achieve a more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of natural gas and oil, we currently, and may in the future, enter into derivative instruments for a portion of our natural gas and oil production, including collars and price-fix swaps. We have not designated any of our derivative instruments as hedges for accounting purposes and record all derivative instruments on our balance sheet at fair value. Changes in the fair value of our derivative instruments are recognized in current earnings. Accordingly, our earnings may fluctuate significantly as a result of changes in fair value of our derivative instruments. Derivative instruments also expose us to the risk of financial loss in some circumstances, including when:

•  production is less than expected;

•  the counter-party to the derivative instrument defaults on its contract obligations; or

•  there is a change in the expected differential between the underlying price in the derivative instrument and actual prices received.

In addition, these types of derivative arrangements limit the benefit we would receive from increases in the prices for natural gas and oil and may expose us to cash margin requirements.

Competition in the natural gas and oil industry is intense, which may adversely affect our ability to succeed.

The natural gas and oil industry is intensely competitive, and we compete with companies that have greater resources. Many of these companies not only explore for and produce natural gas and oil, but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive natural gas and oil properties and exploratory prospects or identify, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low natural gas and oil market prices. Our larger competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because

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we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing natural gas and oil properties.

Downturns in natural gas and oil prices can result in decreased oil field activity which, in turn, can result in an oversupply of service providers and drilling rigs. This oversupply can result in severe reductions in prices received for oil field services or a complete lack of work for crews and equipment.

We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations.

Our natural gas and oil exploration, production, transportation and treatment operations are subject to complex and stringent laws and regulations. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to our operations. For instance, we may be unable to obtain all necessary permits, approvals and certificates for proposed projects. Alternatively, we may have to incur substantial expenditures to obtain, maintain or renew authorizations to conduct existing projects. If a project is unable to function as planned due to changing requirements or public opposition, we may suffer expensive delays, extended periods of non-operation or significant loss of value in a project. All such costs may have a negative effect on our business and results of operations.

Our business is subject to federal, state and local laws and regulations as interpreted and enforced by governmental agencies and other bodies vested with much authority relating to the exploration for, and the development, production and transportation of, natural gas and oil. Failure to comply with such laws and regulations, as interpreted and enforced, could have a material adverse effect on us. For instance, the U.S. Department of the Interior’s Minerals Management Service (“MMS”), may suspend or terminate our operations on federal leases for failure to pay royalties or comply with safety and environmental regulations.

Our operations expose us to potentially substantial costs and liabilities with respect to environmental, health and safety matters.

We may incur substantial costs and liabilities as a result of environmental, health and safety requirements applicable to our natural gas and oil exploration, development, production, transportation, treatment, and other activities. These costs and liabilities could arise under a wide range of environmental, health and safety laws, that cover, among other things, emissions into the air and water, habitat and endangered species protection, the containment and disposal of hazardous substances, oil field waste and other waste materials, the use of underground injection wells, and wetlands protection. These laws and regulations are complex, change frequently and have tended to become increasingly strict over time. Failure to comply with environmental, health and safety laws or regulations may result in assessment of administrative, civil, and criminal penalties, imposition of cleanup and site restoration costs and liens, and the issuance of orders enjoining or limiting our current or future operations. Compliance with these laws and regulations also increases the cost of our operations and may prevent or delay the commencement or continuance of a given operation. Specifically, we may incur increased expenditures in the future in order to maintain compliance with laws and regulations governing emissions of air pollutants from our natural gas treatment plants. See “Business — Environmental Matters and Regulation.”

Under certain environmental laws that impose strict, joint and several liability we may be required to remediate our contaminated properties regardless of whether such contamination resulted from the conduct of others or from consequences of our own actions that were or were not in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property may result from environmental and other impacts of our operations. Moreover, new or modified environmental, health or safety laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. Therefore, the costs to comply with environmental, health or safety

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laws or regulations or the liabilities incurred in connection with them could significantly and adversely affect our business, financial condition or results of operations. In addition, many countries as well as several states of the U.S. have agreed to regulate emissions of “greenhouse gases.” Methane, a primary component of natural gas, and carbon dioxide, a byproduct of burning of natural gas and oil are greenhouse gases. Regulation of greenhouse gases could adversely impact some of our operations and demand for some of our services or products in the future. See “Business — Environmental Matters and Regulation.”

The inability of one or more of our customers to meet their obligations may adversely affect our financial results.

Substantially all of our accounts receivable for natural gas and oil sales, drilling and oil field services and midstream gas services result from billings to third-parties in the energy industry. This concentration of customers and joint interest owners may impact our overall credit risk in that these entities may be similarly affected by changes in economic and other conditions. In addition, our natural gas and oil derivative arrangements expose us to credit risk in the event of nonperformance by counterparties.

We have identified a material weakness in our internal control over financial reporting. If additional material weaknesses are detected or if we fail to maintain an adequate system of internal control over financial reporting this could adversely affect our ability to accurately report our results.

We are not currently required to comply with Section 404 of the Sarbanes Oxley Act of 2002, and are therefore not required to make an assessment of the effectiveness of our internal controls over financial reporting for that purpose. As disclosed elsewhere in this prospectus and in Note 1 to our consolidated financial statements included in this prospectus, we have restated our consolidated financial statements for our December 31, 2006 year end. We have considered the internal control over financial reporting implications of the error which resulted in the restatement of our consolidated financial statements and determined a material weakness existed as it relates to financial reporting process and accounting for derivatives. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Restatement of Previously Issued Financial Statements — Correction of an Accounting Error.”

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. A material weakness is a control deficiency or a combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. Our efforts to develop and maintain our internal controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002. We will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 effective as of December 31, 2008. Any failure to develop or maintain effective controls, or difficulties encountered in their implementation or other effective improvement of our internal controls could harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information.

Risks Related to this Offering and Our Common Stock

Certain stockholders’ shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly.

After this offering, we will have outstanding 134,862,112 shares of common stock. In addition, 22,277,808 shares of common stock will be issuable upon conversion of our outstanding convertible preferred stock. Of these shares, the           shares we and the selling stockholders are selling in this offering, or           shares if the underwriters exercise their over-allotment option in full, will be freely tradable without

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restriction under the Securities Act except for any shares purchased by one of our “affiliates” as defined in Rule 144 under the Securities Act. All of the other shares outstanding (a total of           shares) are “restricted securities” within the meaning of Rule 144 under the Securities Act.

In connection with this offering, we and our executive officers, directors each of the selling stockholders and holders of more than  % of our outstanding stock will enter into lock-up agreements with Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC under which such holders of restricted shares will agree that, other than in this offering and subject to certain exceptions, they will not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock, or publicly announce the intention to do any of the foregoing, without the prior written consent of the underwriters for a period of 180 days (60 days in the case of each selling stockholder) from the date of this prospectus. See “Underwriting” for a description of these lock-up arrangements. The lock-up agreement that Mr. Ward, our Chairman, Chief Executive Officer and President, entered into contains an exception for approximately           restricted shares of our common stock that he has pledged as a portion of the collateral for a personal loan and any additional shares of our common stock that he may pledge as collateral for such loan. If Mr. Ward defaults on this loan, the lender may foreclose on and sell these shares pursuant to an exemption under the Securities Act notwithstanding the lock-up agreement. The lock-up agreement of Mr. Mitchell, our former Chairman, Chief Executive Officer and President, allows him to pledge up to all of his common shares as collateral for a personal loan provided that the lender agrees to be bound by the terms of Mr. Mitchell’s lock-up with respect to any shares that are transferred to the lender as a result of foreclosure. There are additional restrictions on the transfer of shares by Messrs. Ward and Mitchell contained in the Amended and Restated Shareholders Agreement, dated as of April 4, 2007. The Amended and Restated Shareholders Agreement, however, also permits Messrs. Ward and Mitchell to pledge their shares, subject to certain conditions, in connection with a bona fide loan. See “Description of Capital Stock — Amended and Restated Shareholders Agreement.”

In addition, purchasers in our December 2005 private placement have agreed not to effect any sale of shares purchased in such private placement until the earlier of (i) 60 days from the date of effectiveness of the registration statement containing this prospectus and (ii) December 21, 2007. Shareholders party to the Amended and Restated Shareholders Agreement, including Mr. Ward, Mr. Mitchell and entities affiliated with Ares Management Fund LLC, have agreed not to effect any sale or distribution of our equity securities or securities convertible into or exchangeable or exercisable for any of our equity securities for a period of 180 days from the date of effectiveness of the registration statement containing this prospectus.

Giving effect to such lock-up agreements (but excluding the effect of the exclusion for Mr. Ward’s pledged shares), the           restricted shares outstanding immediately prior to this offering will be eligible for sale in the public market under Rule 144 of the Securities Act, subject to volume limitations and other restrictions contained in Rule 144, as follows: (i) at the date of this prospectus           shares, (ii) commencing 60 days thereafter an additional shares, (iii) commencing 90 days thereafter an additional           shares, (iv) commencing 180 days thereafter an additional           shares and (iv) thereafter an additional           shares.

We have filed a shelf registration statement to register the resale, from time to time, of up to 62,036,000 shares of our common stock sold in or issuable upon the conversion of securities sold in our December 2005, November 2006 and March 2007 private placements. We anticipate that this shelf registration statement will be declared effective within 90 days of the completion of this offering. We may also register certain shares issued or reserved for issuance under our stock option plans. Please read “Shares Eligible for Future Sale.”

The resale of these shares in the future could cause the market price of our stock to drop significantly.

There has been no active trading market for our common stock, and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on the New York Stock Exchange. We do not know if an active trading market will develop for our common stock or how the common stock will trade in the future, which may make it more difficult for

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you to sell your shares. Negotiations between the underwriters, the selling stockholders and us will determine the initial public offering price. You may not be able to resell your shares at or above the initial public offering price.

The market price for shares of our common stock may be highly volatile and could be subject to wide fluctuations.

The market price for shares of our common stock may be highly volatile and could be subject to wide fluctuations, even if an active trading market develops. Some of the factors that could negatively affect our share price include:

•  actual or anticipated variations in our reserve estimates and quarterly operating results;

•  liquidity and the registration of our common stock for public resale;

•  sales of our common stock by our stockholders;

•  changes in natural gas and oil prices;

•  changes in our cash flows from operations or earnings estimates;

•  publication of research reports about us or the exploration and production industry generally;

•  increases in market interest rates which may increase our cost of capital;

•  changes in applicable laws or regulations, court rulings and enforcement and legal actions;

•  changes in market valuations of similar companies;

•  adverse market reaction to any increased indebtedness we incur in the future;

•  additions or departures of key management personnel;

•  actions by our stockholders;

•  speculation in the press or investment community regarding our business;

•  large volume of sellers of our common stock pursuant to our resale registration statement with a relatively small volume of purchasers;

•  general market and economic conditions; and

•  domestic and international economic, legal and regulatory factors unrelated to our performance.

We do not anticipate paying any dividends on our common stock in the foreseeable future.

We do not expect to declare or pay any cash or other dividends in the foreseeable future on our common stock, as we intend to use cash flow generated by operations to expand our business. Our senior credit facility and term loan restrict our ability to pay cash dividends on our common stock, and we may also enter into credit agreements or other borrowing arrangements in the future that restrict our ability to declare or pay cash dividends on our common stock. In addition, the certificate of designation for our convertible preferred stock prohibits the payment of dividends to holders of our common stock without the consent of holders of a majority of our outstanding convertible preferred stock.

You may experience dilution of your ownership interests due to the future issuance of additional shares of our common stock.

We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of our present stockholders and purchasers of common stock offered hereby. As of June 30, 2007, we were authorized to issue 400 million shares of common stock and 50 million shares of preferred stock with preferences and rights as determined by our Board of Directors. Immediately prior to the closing of this offering, we will have approximately 1.6 million shares of common stock outstanding and pursuant to our stock incentive plan, we have also reserved approximately 5.6 million shares of our common stock for future issuance as restricted stock, stock options or other equity-based grants to employees and directors. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with the hiring of personnel, future acquisitions, future private

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placements of our securities for capital raising purposes or for other business purposes. We have 2,184,286 shares of convertible preferred stock outstanding, which may be converted into approximately 22,277,808 shares of common stock at any time by the holders of such preferred stock or by us at anytime following 180 days after the closing of this offering upon satisfaction of other conditions. See “Description of Capital Stock — Preferred Stock — Convertible Preferred Stock.” In addition, Mr. Ward, our Chairman, Chief Executive Officer and President, has pledged approximately           restricted shares of our common stock as a portion of the collateral for a personal loan and may pledge additional shares in the future. If Mr. Ward defaults on this loan, the lender may foreclose on and sell these shares pursuant to an exemption under the Securities Act. The lock-up agreement of Mr. Mitchell, one of our directors, allows him to pledge up to all of his common shares as collateral for a personal loan provided that the lender agrees to be bound by the terms of Mr. Mitchell’s lock-up with respect to any shares that are transferred to the lender as a result of foreclosure. There are additional restrictions on the transfer of shares by Messrs. Ward and Mitchell contained in the Amended and Restated Shareholders Agreement, dated as of April 4, 2007. The Amended and Restated Shareholders Agreement, however, also permits Messrs. Ward and Mitchell to pledge their shares, subject to certain conditions, in connection with a bona fide loan. See “Description of Capital Stock — Amended and Restated Shareholders Agreement.” At the closing of this offering, the potential issuance or sale of additional shares of common stock may create downward pressure on the trading price of our common stock.

Our certificate of incorporation and bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.

Our certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In addition, some provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including:

•  a classified board of directors, so that only approximately one-third of our directors are elected each year;

•  limitations on the removal of directors;

•  the prohibition of stockholder action by written consent;

•  and limitations on the ability of our stockholders to call special meetings and establish advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders.

Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our board of directors.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Various statements contained in this prospectus, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this prospectus speak only as of the date of this prospectus; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties relating to, among other matters, the risks discussed under the heading “Risk Factors” and the following:

•  the volatility of natural gas and oil prices;

•  discovery, estimation, development and replacement of natural gas and oil reserves;

•  cash flow and liquidity;

•  financial position;

•  business strategy;

•  amount, nature and timing of capital expenditures, including future development costs;

•  availability and terms of capital;

•  timing and amount of future production of natural gas and oil;

•  availability of drilling and production equipment;

•  timing of drilling rig fabrication and delivery;

•  customer contracting of drilling rigs;

•  availability of oil field labor;

•  availability and regulation of CO₂;

•  operating costs and other expenses;

•  prospect development and property acquisitions;

•  availability of pipeline infrastructure to transport natural gas production;

•  marketing of natural gas and oil;

•  competition in the natural gas and oil industry;

•  governmental regulation and taxation of the natural gas and oil industry; and

•  developments in oil-producing and natural gas-producing countries.

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USE OF PROCEEDS

We will receive net proceeds from the sale of 26,000,000 shares of the common stock offered by us of approximately $566.2 million after deducting estimated expenses and underwriting discounts and commissions of $31.8 million. We base this amount on an assumed initial public offering price of $23.00. We will not receive any of the proceeds from the sale of shares by the selling stockholders.

A $1.00 increase (decrease) in the assumed initial public offering price of $23.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to repay the outstanding balance on our senior credit facility, which balance as of September 30, 2007 was $400 million, prior to the application of available cash balances. Affiliates of Banc of America Securities LLC and Credit Suisse Securities (USA) LLC are lenders under our senior credit facility. These borrowings were incurred primarily to fund capital expenditures in connection with our accelerated drilling program and the expansion of our midstream capacity. Our senior credit facility matures November 21, 2011 and bore interest at a rate of 6.92% per annum as of September 30, 2007. We also intend to use the net proceeds to repay a $50 million note we intend to incur in connection with a potential acquisition of natural gas and oil properties. This note matures on September 30, 2008 and bears interest at 7.00% per annum. We intend to use the remaining proceeds to fund the remaining unfunded portion of our $1,200 million capital expenditures budget for 2007, including $943 million in exploration and development (including land and seismic acquisitions and our tertiary recovery operations), $115 million in drilling and oilfield services and $103 million in midstream operations. We intend to fund the remaining capital expenditures from cash on hand and additional borrowings under our senior credit facility. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

DIVIDEND POLICY

We do not anticipate declaring or paying any cash dividends to holders of our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business, including exploration, development and acquisition activities. In addition, the terms of our revolving credit facility and term loan restrict our ability to pay dividends to holders of common stock. In addition, the certificate of designation for our convertible preferred stock prohibits the payment of dividends to holders of our common stock without the consent of holders of a majority of our outstanding convertible preferred stock. Accordingly, if our dividend policy were to change in the future, our ability to pay dividends would be subject to these restrictions and our then existing conditions, including our results of operations, financial condition, contractual obligations, capital requirements, business prospects and other factors deemed relevant by our board of directors.

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CAPITALIZATION

The following table sets forth, as of June 30, 2007, a summary of our capitalization, both on an actual basis and on an as adjusted basis to give effect to the sale by us of 26,000,000 shares at an assumed initial public offering price of $23.00 per share and the application of the net proceeds as set forth under “Use of Proceeds.”

You should read the following table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

	As of June 30, 2007
	Actual			As Adjusted(1)
	(In thousands)
Cash and cash equivalents(2)	$	2,199		$	2,199
Long term debt, including current maturities:
Revolving credit facility(2)		—			—
Senior term loan		1,000,000			1,000,000
Other long term debt		66,656			66,656
Minority interest		5,772			5,772
Convertible preferred stock, $0.001 par value; 2,650,000 shares authorized; 2,184,286 shares issued and outstanding		449,998			449,998
Stockholders’ equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 110,311,000 issued and 108,859,000 outstanding (actual), 134,859,000 shares issued and          outstanding (as adjusted)		109			135
Preferred stock, no par value; 50,000,000 shares authorized, no shares issued and outstanding		—			—
Additional paid-in capital		886,508			1,452,657
Retained earnings		82,694			82,694
Treasury stock, at cost		(18,490	)		(18,490	)
Total stockholders’ equity		950,821			1,516,996
Total capitalization	$	2,473,247		$	3,039,422

(1) A $1.00 increase (decrease) in the assumed public offering price of $23.00 per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

(2) At September 30, 2007, we had $400 million outstanding on our revolving credit facility, prior to application of available cash balances.

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DILUTION

Our net tangible book value as of June 30, 2007 was approximately $921.6 million or $8.47 per share of common stock. Net tangible book value per share is determined by dividing our tangible net worth (tangible assets less total liabilities) by the total number of outstanding shares of common stock that will be outstanding immediately prior to the closing of this offering. After giving effect to the sale of the shares in this offering and assuming the receipt of the estimated net proceeds (after deducting estimated discounts and expenses of this offering), our adjusted net tangible book value as of June 30, 2007 would have been approximately $1,487.8 million or $11.03 per share. This represents an immediate increase in the net tangible book value of $2.56 per share to our existing stockholders and an immediate dilution (i.e., the difference between the offering price and the pro forma net tangible book value after this offering) to new investors purchasing shares in this offering of $11.97 per share. The following table illustrates the per share dilution to new investors purchasing shares in this offering:

Offering price per share			$	23.00
Net tangible book value per share at June 30, 2007	$	8.47
Increase per share attributable to new investors		2.56
Adjusted net tangible book value per share after this offering				11.03
Dilution per share to new investors			$	11.97

A $1.00 increase (decrease) in the assumed public offering price of $23.00 per share would increase (decrease) our net tangible book value as of June 30, 2007 by approximately $      million, the as adjusted net tangible book value per share after this offering by $      and the dilution to new investors in this offering by $      per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on an as adjusted basis as of June 30, 2007, the total number of shares of common stock owned by existing stockholders and to be owned by new investors, the total consideration paid, and the average price per share paid by our existing stockholders and to be paid by new investors in this offering at $23.00, the mid-point of the range of the initial public offering prices set forth on the cover page of this prospectus, calculated before deduction of estimated underwriting discounts and commissions.

	Shares Purchased(1)					Total Consideration					Average Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders		113,029,000		84	%	$	982,427,000		66	%	$	8.69
New Public Investors		21,830,000		16	%		502,090,000		34	%		23.00
Total		134,859,000		100	%	$	1,484,517,000		100	%	$	11.01

(1) The number of shares disclosed for the existing stockholders includes (i) shares being sold by the selling stockholders in this offering and (ii) 4,170,000 shares offered directly to Mr. Ward. The number of shares disclosed for the new investors does not include the shares being purchased by the new investors from the selling stockholders in this offering.

28

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial information reflects our historical results as adjusted on a pro forma basis to give effect to the NEG acquisition and other 2006 acquisitions and the related financing transactions, which were entered into in order to fund these transactions and the issuance of 26,000,000 shares in this offering at an assumed offering price of $23.00 per share. The unaudited pro forma condensed combined statements of operations information for the year ended December 31, 2006 and the six months ended June 30, 2006 give effect to these transactions as if they occurred on January 1, 2006. The pro forma adjustments are based on available information and assumptions that our management believes are reasonable and are described in the related notes.

NEG acquisition

We acquired all the outstanding membership interests of NEG on November 21, 2006 for approximately $990.4 million in cash, 12,842,000 shares of our common stock (valued at approximately $231.2 million) and the assumption of $300 million in debt, and received $21.1 million in available cash. The cash requirements were funded from the issuance of $550 million in preferred stock, common units and additional banking arrangements.

Prior to our acquisition of NEG, NEG acquired the remaining 50% membership interests in NEG Holding LLC that NEG did not already own, and NEG distributed all of its 50.1% capital stock and $148 million senior notes investment in National Energy Group, Inc. (“NEGI”). As a result, we acquired 100% of the membership interests in NEG Holding LLC and no interest in NEGI.

Other 2006 acquisitions

•  Our acquisition in March 2006 from a former director and former executive officer of additional equity interests in PetroSource to increase our ownership percentage from 86.5% to 99% in exchange for the extinguishment of subordinated debt of approximately $1.0 million and a $4.5 million cash payment for a total consideration of approximately $5.5 million.

•  Our acquisition in May 2006 of working interests in WTO leases for cash consideration of $40.9 million.

•  Our acquisition in May 2006 of working interests in leases in WTO for $4.7 million of common stock at $18.50 per share and cash of $8.2 million for a total consideration of $12.9 million.

•  Our acquisition in June 2006 from a former director and former executive officer of additional working interests in WTO leases in which we already held interests in exchange for cash consideration of $9.0 million.

•  Our acquisition in June 2006 of the remaining 1% equity interest in PetroSource in exchange for common stock of $0.5 million at $17.25 per share.

The historical statement of operations information for the year ended December 31, 2006 is derived from our audited consolidated financial statements. The historical statement of operations information for the six months ended June 30, 2006 is derived from our unaudited condensed consolidated financial statements. We have provided the historical information regarding us and our subsidiaries and the assumptions and adjustments for the pro forma information.

The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not necessarily indicative of the combined results of operations which would have been realized had the transactions been effective for the period presented or the combined results of operations of SandRidge and its subsidiaries (including the entities to be acquired in the NEG acquisition) in the future. The unaudited pro forma condensed combined financial information for the period presented may have been different had the transactions actually been completed during the period due to, among other factors, those factors discussed in “Risk Factors.”

You should read the unaudited pro forma condensed combined financial information in conjunction with our historical financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.

29

SandRidge Energy, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2006

				NEG
				Historical
				(January 1,						SandRidge
	SandRidge			2006 through						Energy Pro
	Energy			November 21,			Pro Forma			Forma
	Historical			2006)			Adjustments			Combined
	(In thousands except per share data)
Revenues	$	388,242		$	253,832		$	(76,818	)(a)(b)	$	565,256
Expenses:
Production		35,149			50,527			(781	)(a)(b)		84,895
Production taxes		4,654			5,116			—			9,770
Drilling and services		98,436			—			(20,983	)(a)		77,453
Midstream and marketing		115,076			—			(48,228	)(a)		66,848
Depreciation, depletion and amortization — natural gas and crude oil		26,321			91,611			99,081	(a)(c)		217,013
Depreciation, depletion and amortization — other		29,305			396			—			29,701
General and administrative		55,634			16,566			(4,571	)(a)		67,629
Gain on derivative contracts		(12,291	)		(99,707	)		—			(111,998	)
Gain on sale of assets		(1,023	)		—			—			(1,023	)
Income from operations		36,981			189,323			(101,336	)		124,968
Interest income		1,109			4,875			—			5,984
Interest expense		(16,904	)		(10,411	)		(46,741	)(d)		(74,056	)
Minority interest		(296	)		—			111	(e)		(185	)
Income from equity investments		967			—			—			967
Income before income tax provision		21,857			183,787			(147,966	)		57,678
Income tax provision		6,236			2,143			12,962	(f)		21,341
Income from continuing operations		15,621			181,644			(160,928	)		36,337
Preferred stock dividends and accretion		3,967			—			36,207	(g)		40,174
Income (loss) available (applicable) to common stockholders	$	11,654		$	181,644		$	(197,135	)	$	(3,837	)
Earnings per share available (applicable) to common stockholders:
Basic	$	0.16								$	(0.03	)
Diluted	$	0.16								$	(0.03	)
Number of shares used in calculating earnings per share:
Basic		73,727						42,319	(h)(i)		116,046
Diluted		74,664						42,319	(h)(i)		116,983

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

30

SandRidge Energy, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2006

				NEG
				Historical
				(January 1,						SandRidge
	SandRidge			2006 through						Energy Pro
	Energy			June 30,			Pro Forma			Forma
	Historical			2006)			Adjustments			Combined
	(in thousands except per share data)
Revenues	$	173,830		$	155,973		$	(38,433	)(a)(b)	$	291,370
Expenses:
Production		13,665			24,596			732	(a)(b)		38,993
Production taxes		1,529			2,304			—			3,833
Drilling and services		47,685			—			(9,539	)(a)		38,146
Midstream and marketing		58,386			—			(29,181	)(a)		29,205
Depreciation, depletion and amortization — natural gas and crude oil		7,868			48,927			57,489	(a)(c)		114,284
Depreciation, depletion and amortization — other		13,808			222			—			14,030
General and administrative		20,303			7,039			(1,588	)(a)		25,754
Gain on derivative contracts		(10,579	)		(38,925	)		—			(49,504	)
Income from operations		21,165			111,810			(56,346	)		76,629
Interest income		397			2,955			—			3,352
Interest expense		(1,584	)		(10,525	)		(25,472	)(d)		(37,581	)
Minority interest		(99	)		—			111	(e)		12
Loss from equity investments		(697	)		—			—			(697	)
Income before income tax provision		19,182			104,240			(81,707	)		41,715
Income tax provision		5,150			1,712			8,573	(f)		15,435
Income from continuing operations		14,032			102,528			(90,280	)		26,280
Preferred stock dividends and accretion		—			—			18,103	(g)		18,103
Income available to common stockholders	$	14,032		$	102,528		$	(108,383	)	$	8,177
Earnings per share available to common stockholders:
Basic	$	0.20								$	0.07
Diluted	$	0.19								$	0.07
Number of shares used in calculating earnings per share:
Basic		71,596						44,449	(h)(i)		116,045
Diluted		72,540						44,449	(h)(i)		116,989

See Notes to Unaudited Pro Forma Condensed Combined Financial Information

31

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Basis of Presentation

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2006 and the six months ended June 30, 2006 give effect to the NEG acquisition and the other 2006 acquisitions and the related financing transactions and the issuance of 26,000,000 shares in this offering as if they occurred on January 1, 2006.

NEG’s combined financial statements include the accounts of NEG and subsidiaries excluding NEGI, and the 103/4% Senior Notes due from NEGI, but including NEGI’s 50% membership interest in NEG Holding LLC, from January 1, 2006 through November 21, 2006, the date of the NEG acquisition for purposes of the pro forma condensed combined statement of operations for the year ended December 31, 2006 and January 1, 2006 through June 30, 2006 for purposes of the pro forma condensed combined statement of operations for the six months ended June 30, 2006.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2006 and the six months ended June 30, 2006 have been prepared based on the following information:

(a) audited consolidated financial statements of SandRidge and its subsidiaries as of and for the year ended December 31, 2006;

(b) unaudited condensed consolidated financial statements of SandRidge and its subsidiaries as of and for the six months ended June 30, 2006; and

(c) other supplementary information we considered necessary for the purpose of reflecting the transactions contemplated in the pro forma combined financial statements.

We accounted for this acquisition using the purchase method of accounting for business combinations. Under the purchase method of accounting, we are deemed to be the acquirer for accounting purposes based on a number of factors determined in accordance with GAAP. The purchase method of accounting requires the assets we acquired and liabilities we assumed to be recorded at their estimated fair values.

For purposes of these pro forma condensed combined financial statements, the presentation of certain historical NEG financial information has been modified to conform to this pro forma presentation.

Statement of Operations Adjustments

(a) Reflects the pro forma elimination of activity between us and NEG. We provided services to NEG as the operator of certain oil and gas properties and also provided other services to NEG.

(b) Reflects the increase in revenues and expenses related to the other 2006 acquisitions of $5.2 million in revenues and $1.5 million in production expenses. These acquisitions were completed by June 30, 2006.

(c) Reflects a $97.0 million and $55.5 million incremental increase in depletion expense resulting from the step-up of property, plant and equipment acquired based on the allocation of the purchase price to the properties’ fair value at December 31, 2006 and June 30, 2006, respectively. Adjustment assumes no material changes in the estimated lives or amortization periods for acquired assets as a result of the purchase price allocation.

(d) Reflects adjustment to increase interest expense for the effect of the additional debt assumed from the merger and the amounts borrowed as well as to recognize amortization expense associated with our estimated debt issuance costs. The interest rate used in the calculation of interest expense is monthly LIBOR plus 4.5%, the expected actual interest rates, and the life used in the calculation of amortization expense is based on the expected life of the new debt. If the actual interest rate is 1/8% more or less than

32

the assumed rate, the interest cost will increase or decrease by approximately $0.4 million for the year ended December 31, 2006 and $0.3 million for the six months ended June 30, 2006.

(e) Reflects the net pro forma adjustment to minority interest as a result of the acquisition of additional interests in PetroSource in our financial statements.

(f) Reflects adjustment to income tax expense to reflect total combined pro forma income tax expense at a 37% statutory income tax rate as NEG was organized as a limited liability company for the period presented, thus not subject to corporate taxes.

(g) Reflects preferred dividends of 7.75% per annum and accretion on convertible preferred stock.

(h) Reflects shares issued for the NEG and other 2006 acquisitions adjusted for the inclusion of weighted average share amounts at December 31, 2006 and June 30, 2006.

Year ended December 31, 2006

Shares issued for the NEG and other 2006 acquisitions are as follows (in thousands):

NEG acquisition and related financing arrangements	18,174
Other 2006 acquisitions	279
	18,453
Less: weighted shares included in historical results	(2,134	)
	16,319

Six months ended June 30, 2006

Shares issued for the NEG and other 2006 acquisitions are as follows (in thousands):

NEG acquisition and related financing arrangements	18,174
Other 2006 acquisitions	279
	18,453
Less: weighted shares included in historical results	(4	)
	18,449

(i) Reflects the issuance of 26,000,000 shares in this offering.

33

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

Set forth below is our selected consolidated historical financial data for the periods indicated. The historical statement of operations data for the periods ended December 31, 2002, 2003, 2004, 2005 and 2006 and the balance sheet data as of December 31, 2002, 2003, 2004, 2005 and 2006 have been derived from our audited financial statements. Our historical statement of operations data as of and for the six months ended June 30, 2006 and 2007 are derived from our unaudited financial statements and, in our opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of this information. You should read the following summary financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical and pro forma financial statements and related notes thereto appearing elsewhere in this prospectus.

	Years Ended December 31,															Six Months Ended June 30,
	2002			2003(1)			2004(2)			2005			2006			2006			2007
	(In thousands)
Statement of Operations Data:
Revenues	$	59,247		$	155,337		$	175,995		$	287,693		$	388,242		$	173,830		$	308,127
Expenses:
Production		7,949			7,980			10,230			16,195			35,149			13,665			49,018
Production taxes		661			2,099			2,497			3,158			4,654			1,529			7,926
Drilling and services		8,858			13,847			26,442			52,122			98,436			47,685			24,126
Midstream marketing		23,689			94,620			96,180			141,372			115,076			58,386			46,747
Depreciation, depletion and amortization — natural gas and crude oil		3,142			3,298			4,909			9,313			26,321			7,868			70,699
Depreciation, depletion and amortization — other		2,431			5,284			7,765			14,893			29,305			13,808			22,263
General and administrative		4,355			3,705			6,554			11,908			55,634			20,303			25,360
Loss (gain) on derivative contracts		3,193			3,450			878			4,132			(12,291	)		(10,579	)		(15,981	)
Loss (gain) on sale of assets		—			(1,284	)		(210	)		547			(1,023	)		—			(659	)
Total operating expenses		54,278			132,999			155,245			253,640			351,261			152,665			229,499
Income from operations		4,969			22,338			20,750			34,053			36,981			21,165			78,628
Other income (expense):
Interest income		84			103			56			206			1,109			397			3,626
Interest expense		(1,000	)		(1,208	)		(1,678	)		(5,277	)		(16,904	)		(1,584	)		(60,108	)
Minority interest		(673	)		(96	)		(262	)		(737	)		(296	)		(99	)		(157	)
Income (loss) from equity investments		304			1,056			(36	)		(384	)		967			(697	)		2,164
Total other income (expense)		(1,285	)		(145	)		(1,920	)		(6,192	)		(15,124	)		(1,983	)		(54,475	)
Income before income taxes		3,684			22,193			18,830			27,861			21,857			19,182			24,153
Income tax expense		1,334			7,585			6,433			9,968			6,236			5,150			9,082
Income from continuing operations		2,350			14,608			12,397			17,893			15,621			14,032			15,071
Income (loss) from discontinued operations, net of tax		1,105			(85	)		451			229			—			—			—
Cumulative effect of accounting change		—			(1,636	)		—			—			—			—			—
Extraordinary gain		—			—			12,544			—			—			—			—
Net income		3,455			12,887			25,392			18,122			15,621			14,032			15,071
Preferred stock dividends and accretion		—			—			—			—			3,967			—			21,260
Income (loss) available (applicable) to common stockholders	$	3,455		$	12,887		$	25,392		$	18,122		$	11,654		$	14,032		$	(6,189	)

34

	Historical
	Years Ended December 31,												Six Months Ended June 30,
	2002		2003(1)			2004(2)		2005		2006			2006		2007
	(In thousands except per share data)
Earnings Per Share Information:
Basic
Income from continuing operations	$	0.04	$	0.26		$	0.22	$	0.31	$	0.21		$	0.20	$	0.15
Income (loss) from discontinued operations, net of income tax		0.02		—			0.01		0.01		—			—		—
Extraordinary gain on acquisition		—		—			0.22		—		—			—		—
Cumulative effect of change in accounting principle, net of income tax		—		(0.03	)		—		—		—			—		—
Preferred stock dividends		—		—			—		—		(0.05	)		—		(0.21	)
Income (loss) per share available (applicable) to common stockholders	$	0.06	$	0.23		$	0.45	$	0.32	$	0.16		$	0.20	$	(0.06	)
Weighted average number of shares outstanding(3):		56,312		56,312			56,312		56,559		73,727			71,596		100,025
Diluted
Income from continuing operations	$	0.04	$	0.26		$	0.22	$	0.31	$	0.21		$	0.19	$	0.15
Income (loss) from discontinued operations, net of income tax		0.02		—			0.01		0.01		—			—		—
Extraordinary gain on acquisition		—		—			0.22		—		—			—		—
Cumulative effect of change in accounting principle, net of income tax		—		(0.03	)		—		—		—			—		—
Preferred stock dividends		—		—			—		—		(0.05	)		—		(0.21	)
Income (loss) per share available (applicable) to common stockholders	$	0.06	$	0.23		$	0.45	$	0.32	$	0.16		$	0.19	$	(0.06	)
Weighted average number of shares outstanding(3):		56,312		56,312			56,312		56,737		74,664			72,540		100,025

(1)	We adopted the provisions of SFAS 143 “Accounting for Retirement Obligations,” resulting in a cumulative effect of change in accounting principal of $1.6 million.
(2)	We recognized an extraordinary gain from the recognition of the excess of fair value over acquisition cost of $12.5 million related to an acquisition we made in 2004.
(3)	The number of shares has been adjusted to reflect a 281.562-to-1 stock split in December 2005.

	As of December 31,										As of June 30,
	2002		2003		2004		2005		2006		2006		2007
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	1,876	$	176	$	12,973	$	45,731	$	38,948	$	4,661	$	2,199
Property, plant and equipment, net	$	43,839	$	70,289	$	114,818	$	337,881	$	2,134,718	$	479,694	$	2,542,460
Total assets	$	88,247	$	127,744	$	197,017	$	458,683	$	2,388,384	$	560,465	$	2,765,348
Long-term debt	$	20,549	$	24,740	$	59,340	$	43,133	$	1,066,831	$	88,260	$	1,066,656
Redeemable convertible preferred stock	$	—	$	—	$	—	$	—	$	439,643	$	—	$	449,998
Total stockholders’ equity	$	22,106	$	33,940	$	59,330	$	289,002	$	649,818	$	298,634	$	950,821
Total liabilities and stockholders’ equity	$	88,247	$	127,744	$	197,017	$	458,683	$	2,388,384	$	560,465	$	2,765,348

35

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with the “Selected Consolidated Historical Financial Data” and the accompanying financial statements and related notes thereto and the “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for natural gas and oil, economic and competitive conditions, regulatory changes, estimates of proved reserves, potential failure to achieve production from development projects, capital expenditures and other uncertainties, as well as those factors discussed below and elsewhere in this registration statement, particularly in “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.

Overview of Our Company

We are a rapidly growing independent natural gas and oil company concentrating on exploration, development and production activities. We are focused on continuing the exploration and exploitation of our significant holdings in the WTO, a natural gas prone geological region where we have operated since 1986 that includes the Piñon Field and our South Sabino and Big Canyon Prospects. We also own and operate drilling rigs and conduct related oil field services, and we own and operate interests in gas gathering, marketing and processing facilities and CO₂ gathering and transportation facilities.

On November 21, 2006, we acquired all of the outstanding membership interests in NEG Oil & Gas LLC, or NEG, for total consideration of approximately $1.5 billion, excluding cash acquired. With core assets in the Val Verde and Permian Basins of West Texas, including overlapping or contiguous interests in the WTO, the NEG acquisition has dramatically increased our exploration and production segment operations. For more information concerning our acquisition of NEG, see “Business — The NEG Acquisition.”

The NEG acquisition, coupled with six acquisitions of additional working interests completed during 2006 and late 2005, have significantly increased our holdings in the WTO. We believe we have assembled the largest acreage position and that we are the largest operator and producer in the WTO. We also operate significant interests in the Cotton Valley Trend in East Texas and the Gulf Coast region.

Restatement of Previously Issued Financial Statements

  Change in Method of Accounting for Oil and Gas Operations

In the fourth quarter of 2006, we changed from the successful efforts method to the full cost method of accounting for our oil and gas operations. All prior years’ financial statements presented have been restated to reflect the change.

Our management believes that the full cost method is preferable for a company more actively involved in the exploration and development of oil and gas reserves. The full cost method was also utilized by NEG prior to the NEG acquisition, and the assets acquired from NEG constituted more than our total oil and natural gas assets at that time.

Our financial results have been retroactively restated to reflect the conversion to the full cost method. As required by full cost accounting rules, all costs associated with property acquisition, exploration and development activities are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding oil and gas reserves.

36

In accordance with full cost accounting rules, we are subject to a limitation on capitalized costs. The capitalized cost of natural gas and oil properties, net of accumulated depreciation, depletion and amortization, may not exceed the estimated future net cash flows from proved oil and gas reserves discounted at 10%, plus the lower of cost or fair market value of unproved properties as adjusted for related tax effects, which is known as the ceiling limitation. If capitalized costs exceed the ceiling limitation, the excess must be charged to expense. We did not have any adjustment to earnings due to the ceiling limitation for the periods presented herein.

  Correction of an Accounting Error

In May 2007, we determined that we had incorrectly accounted for certain derivative instruments as of and for the year ended December 31, 2006 due to a clerical error. For the year ended December 31, 2006, we recognized an unrealized gain on change in fair value of derivatives related to mark-to-market adjustments of derivative instruments with a counterparty of approximately $3.0 million. As part of our first quarter 2007 closing process, we discovered that the mark-to-market adjustments booked in 2006 for the derivative instruments with this counterparty were recorded incorrectly. As part of our normal closing procedures, we requested from the counterparty our mark-to-market position. Historically, the counterparties have sent the statement in terms of our position. During the fourth quarter of 2006, we entered into derivative instruments with a new counterparty. The new counterparty confirmed the mark-to-market loss (gain) with respect to the counterparty’s position, not our position, which we had requested. The position terms of the statement were not specified on the confirmation and it was recorded in error during the 2006 year end closing process. The restatement had no effect on our previously presented net cash provided by (used in) operating activities, investing activities or financing activities for any period presented.

Management has taken steps to improve and continues to improve our internal control over financial reporting, including the hiring of experienced financial reporting professionals, redefining and realigning responsibilities and defining additional controls, reporting processes and procedures.

Segment Overview

Operating income is computed as segment operating revenue less direct operating costs. These measurements provide important information to us about the activity and profitability of our lines of business. Set forth in the table below is financial information regarding each of our current segments.

							Six Months Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
	(In thousands)
Segment revenue:
Exploration and production	$	37,564	$	54,051	$	106,413	$	29,853	$	207,305
Drilling and oil field services		39,211		80,151		138,657		70,324		40,228
Midstream gas services		99,044		147,499		122,892		61,890		52,100
Other		176		5,992		20,280		11,763		8,494
Total revenues	$	175,995	$	287,693	$	388,242	$	173,830	$	308,127

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										Six Months Ended
	Year Ended December 31,									June 30,
	2004			2005			2006			2006			2007
	(In thousands)
Segment operating income:
Exploration and production		14,000			14,886			17,069			7,962			76,463
Drilling and oil field services		4,206			18,295			32,946			17,025			8,876
Midstream gas services		2,636			4,096			3,528			1,777			2,301
Other		(92	)		(3,224	)		(16,562	)		(5,599	)		(9,012	)
Total operating income		20,750			34,053			36,981			21,165			78,628
Interest income		56			206			1,109			397			3,626
Interest expense		(1,678	)		(5,277	)		(16,904	)		(1,584	)		(60,108	)
Other income (expense)		(298	)		(1,121	)		671			(796	)		2,007
Income before income taxes	$	18,830		$	27,861		$	21,857		$	19,182		$	24,153

							Six Months Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Production data:
Gas (Mmcf)		6,708		6,873		13,410		4,219		22,292
Oil (MBbls)		37		72		322		46		906
Combined equivalent volumes (Mmcfe)		6,930		7,305		15,342		4,495		27,728
Daily combined equivalent volumes (Mmcfe/d)		18.9		20.0		42.0		24.8		153.2
Average prices(1):
Natural gas (per Mcf)	$	4.43	$	6.54	$	6.19	$	6.08	$	6.90
Oil (per Bbl)	$	34.03	$	48.19	$	56.61	$	62.99	$	58.18
Combined equivalent (per Mcfe)	$	4.47	$	6.63	$	6.60	$	6.35	$	7.45
Drilling and oil field services:
Number of operational drilling rigs owned at end of period		10		19		25		21		27	(3)
Average number of operational drilling rigs owned during the period		8.0		14.3		21.9		20.3		25.5	(3)
Average total revenue per rig per day(2)	$	9,128	$	11,503	$	17,034	$	17,071	$	17,193

(1)	Reported prices represent actual average prices for the periods presented and do not give effect to hedging transactions.
(2)	Does not include revenues for related rental equipment.
(3)	Does not include five rigs being retrofitted as of June 30, 2007.

We report the results of our operations in the following segments:

Exploration and Production Segment

We explore for, develop and produce natural gas and oil reserves, with a focus on our proved reserves and extensive undeveloped acreage positions in the WTO. We operate substantially all of our wells in our core areas and employ our drilling rigs and other drilling services in the exploration and development of our operated wells and, to a lesser extent, on our non-operated wells.

The primary factors affecting the financial results of our exploration and production segment are the prices we receive for our natural gas and oil production, the quantity of our natural gas and oil production and changes in the fair value of derivative instruments we use to reduce the volatility of the prices we receive for

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our natural gas and oil production. Because we are vertically integrated, our exploration and production activities affect the results of our oil field service and midstream segments. The NEG acquisition substantially increased our revenues and operating income in our exploration and production segment. However, because our working interest in the Piñon Field increased to approximately 83%, there are greater intercompany eliminations that affect the consolidated financial results of our oil field service and midstream segments.

Exploration and production segment revenues increased to $207.3 million in the six months ended June 30, 2007 from $29.9 million in the six months ended June 30, 2006, an increase of 593%, as a result of a 517% increase in volumes and a 17% increase in the average price we received for the natural gas and oil we produced. In the six month period ended June 30, 2007 we increased production by 23.2 Bcfe, to 27.7 Bcfe. Natural gas production increased 18.1 Bcf or 428%. Of the 23.2 Bcfe increase, approximately 21.2 Bcfe of the increase was attributable to the properties acquired in the NEG acquisition, with the remainder of the increase due to our successful drilling in the WTO.

The average price we received for our natural gas and oil production for the six month period ended June 30, 2007 increased 17%, or $1.10 per Mcfe, to $7.45 per Mcfe from $6.35 per Mcfe in the comparable period in 2006. During late 2006 and continuing into 2007 we entered into derivatives contracts to mitigate the impact of commodity price fluctuations on our 2007 and 2008 production. Our derivatives contracts are not designated as accounting hedges and, as a result, gains or losses on derivatives contracts are recorded as an operating expense. Internally, our management views the settlement of such derivatives contracts as adjustments to the price received for natural gas and oil production to determine “effective prices.” Including the impact of derivative contract settlements, the effective price received for natural gas for the six month period ended June 30, 2007 was $6.86 per Mcf and $7.42 per Mcfe on a combined equivalent basis. Our derivatives contracts had no impact on effective oil prices during the six months ended June 30, 2007 or effective natural gas and oil prices received for the comparable period in 2006.

For the six months ended June 30, 2007, we had $76.5 million in operating income in our exploration and production segment, compared to $8.0 million operating income for the same period in 2006. Our $177.5 million increase in exploration and production revenues was offset by a $18.8 million increase in production expenses, and a $63.5 million increase in depreciation, depletion and amortization, or DD&A, due to the step up in basis on the NEG properties. The increase in production expenses was attributable to the additional properties acquired in the NEG acquisition and operating expenses on our new wells. During the six month period ended June 30, 2007, the exploration and production segment reported a $16.0 million net gain on our derivatives positions ($16.8 million in unrealized gains and $0.8 million in realized losses) compared to $10.6 million in unrealized gains and no realized losses in the comparable period in 2006. During 2007, we selectively entered into natural gas swaps and basis swaps by capitalizing on what we perceived as spikes in the price of natural gas or favorable basis differences between the NYMEX price and natural gas prices at our principal West Texas pricing point. Unrealized gains or losses on derivative contracts represent the change in fair value of open derivative positions during the period. The change in fair value is principally measured based on period end prices as compared to the contract price. The unrealized gain recorded in the six month period ended June 30, 2007 was attributable to a decrease in average natural gas prices at June 30, 2007 as compared to the average natural gas prices at the various contract dates. Future volatility in natural gas and oil prices could have an adverse effect on the operating results of our exploration and production segment.

For the year ended December 31, 2006, exploration and production segment revenues increased to $106.4 million from $54.1 million in 2005 and from $37.6 million in 2004. The increase in 2006 compared to 2005 was attributable to increased production due to successful drilling activity and approximately 40 days of production from the NEG acquisition effective November 21, 2006. NEG contributed approximately $36.9 million of revenues in the 2006 period. Production volumes increased to 15,342 Mmcfe in 2006 from 7,305 Mmcfe in 2005, representing a 8,037 Mmcfe, or 110% increase. Approximately 4,902 Mmcfe, or 61%, of the increase was attributable to the NEG production for the period from November 21, 2006 to December 31, 2006. Average combined prices were essentially unchanged at $6.60 per Mcfe as compared to $6.63 in 2005. The increase in 2005 compared to 2004 was primarily due to a 48% increase in prices. Production volumes increased approximately 6% during 2005 as compared to 2004 with average daily volumes of 20.0 Mmcfe per day and 18.9 Mmcfe per day, respectively.

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Exploration and production segment operating income increased $2.2 million in 2006 to $17.1 million from $14.9 million in 2005. The increase was primarily attributable to the increased production revenues described above, approximately $12.3 million in derivative gains ($1.9 million unrealized loss) in 2006 as compared to a $4.1 million derivative loss ($1.3 million unrealized loss) in 2005, and the addition of NEG for the period from November 21, 2006 to December 31, 2006. The increase in the exploration and production segment income was substantially offset by a $20.5 million, or 106%, increase in production costs, a $26.7 million, or 380%, increase in general and administrative expenses and a $19.3 million increase in DD&A. Approximately $7.0 million of the increase in production costs was attributable to the NEG acquisition with remainder of the increase attributable to the increase in the number of wells operated in 2006 as compared to 2005. The increase in DD&A for our exploration and production segment was attributable to higher production and the increase in the full-cost pool due to the NEG acquisition. Exploration and production operating income increased to $14.9 million in 2005 from $14.0 million in 2004, due primarily to higher natural gas and oil prices and a 6% increase in volumes.

As of June 30, 2007 we had 1,174.0 Bcfe of estimated net proved reserves with an associated PV-10 of $2,558.8 million, representing an increase in reserves of 172.2 Bcfe from December 31, 2006. Approximately 78 Bcfe of this increase were added as a result of our successful drilling activity, approximately 14 Bcfe were added through acquisition and the remainder of the increase was due to revisions of estimates.

As of December 31, 2006, we had 1,001.8 Bcfe of estimated net proved reserves with a PV-10 of $1,734.3 million, while at December 31, 2005 we had 300.0 Bcfe of estimated net proved reserves with a PV-10 of $733.3 million. Our Standardized Measure of Discounted Future Net Cash Flows was $499.2 million at December 31, 2005 and $1,440.2 million at December 31, 2006. For a discussion of PV-10 and a reconciliation to Standardized Measure of Discounted Net Cash Flows, see “Summary Historical Operating and Reserve Data.” The increase is primarily related to the addition of the NEG reserves which was partially offset by a decrease in the price of natural gas from $8.40 per Mcf at December 31, 2005 to $5.64 per Mcf at December 31, 2006. Our estimated proved reserves at December 31, 2005 were considerably higher than our estimated proved reserves at December 31, 2004, which were 148.5 Bcfe, with an increase of $300.2 million in PV-10, due to an increase in the price of natural gas and oil, the acquisition of PetroSource and the establishment of additional proved reserves in the Piñon Field area. Estimates of net proved reserves are inherently imprecise. In order to prepare our estimates, we must analyze available geological, geophysical, production and engineering data and project production rates and the timing of development expenditures. The process also requires economic assumptions about matters such as natural gas and oil prices, drilling and operating expenses, capital expenditures, taxes and the availability of funds. We may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing natural gas and oil prices and other factors, many of which are beyond our control. Over 98% of our mid-year and year-end reserve estimates are reviewed by independent petroleum reserve engineers.

Over the past several years, higher natural gas and oil prices have led to higher demand for drilling rigs, operating personnel and field supplies and services. Higher prices have also caused increases in the costs of those goods and services. To date, the higher sales prices have more than offset the higher field costs. Our ownership of drilling rigs has also assisted us in stabilizing our overall cost structure. Given the inherent volatility of natural gas and oil prices that are influenced by many factors beyond our control, we plan our activities and budget based on conservative sales price assumptions, which generally are lower than the average sales prices received in 2006. We focus our efforts on increasing natural gas reserves and production while controlling costs at a level that is appropriate for long-term operations. Our future earnings and cash flows are dependent on our ability to manage our overall cost structure to a level that allows for profitable production.

Like all exploration and production companies, we face the challenge of natural production declines. As initial reservoir pressures are depleted, natural gas and oil production from a given well naturally decreases. Thus, a natural gas and oil exploration and production company depletes part of its asset base with each unit of oil or natural gas it produces. We attempt to overcome this natural decline by drilling and acquiring more reserves than we produce. Our future growth will depend on our ability to continue to add reserves in excess of production. We will maintain our focus on managing the costs associated with adding reserves through drilling and acquisitions as well as the costs associated with producing such reserves. Our ability to add

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reserves through drilling is dependent on our capital resources and can be limited by many factors, including our ability to timely obtain drilling permits and regulatory approvals. In the WTO, this has not posed a problem. However, in other areas, the permitting and approval process has been more difficult in recent years due to increased activism from environmental and other groups. This has increased the time it takes to receive permits in some locations.

Drilling and Oil Field Services Segment

We drill for our own account primarily in the WTO through our drilling and oil field services subsidiary, Lariat Services. We also drill wells for other natural gas and oil companies, primarily located in the West Texas region. Our oil field services business conducts operations that complement our drilling services operation. These services include providing pulling units, mud logging, trucking, rental tools, location and road construction and roustabout services to ourselves and to third-parties. Additionally, we provide under-balanced drilling systems only for our own account.

In October 2005, we entered into a joint venture, Larclay, with CWEI, pursuant to which we jointly acquired twelve newly-constructed rigs to be used for drilling on CWEI’s prospects and for contracting to third-parties on daywork drilling contracts. All of these rigs have been delivered, although one rig has not been assembled. CWEI was responsible for financing the purchase of the rigs by the terms of the joint venture and has financed 100% of the acquisition cost of the rigs. We operate the rigs owned by the joint venture, and after the initial construction and equipping, all operating costs to maintain the equipment are borne proportionately between us and CWEI. We have a 50% interest in Larclay, and we account for this joint venture as an equity investment.

The financial results of our drilling and oil field services segment depend on many factors, particularly the demand for and the price we can charge for our services. We provide drilling services for our own account and for others, generally on a daywork, footage or turnkey contract basis. The majority of our drilling contract revenues are derived from daywork drilling contracts. However, we generally assess the complexity and risk of operations, the on-site drilling conditions, the type of equipment to be used, the anticipated duration of the work to be performed and the prevailing market rates in determining the contract terms we offer.

Daywork Contracts.  Under a daywork drilling contract, we provide a drilling rig with required personnel to our customer who supervises the drilling of the well. We are paid based on a negotiated fixed rate per hour while the rig is used. Daywork drilling contracts specify the equipment to be used, the size of the hole and the depth of the well. Under a daywork drilling contract, the customer bears a large portion of the out-of-pocket drilling costs, and we generally bear no part of the usual risks associated with drilling, such as time delays and unanticipated costs. As of June 30, 2007, 22 of our rigs were operating under daywork contracts.

Footage Contracts.  Under a footage contract, we are paid a fixed amount for each foot drilled, regardless of the time required or the problems encountered in drilling the well. We typically pay more of the out-of-pocket costs associated with footage contracts as compared to daywork contracts. The risks to us on a footage contract are greater because we assume most of the risks that are associated with drilling operations and that would normally be assumed by the operator in a daywork contract, including the risk of blowout, loss of hole, stuck drill pipe, machinery breakdowns, abnormal drilling conditions and risks associated with subcontractors’ services, supplies, cost escalation and personnel. As of June 30, 2007, none of our rigs were operating under footage contracts. We do not anticipate that a significant portion of our rigs will operate under footage contracts in the future.

Turnkey Contracts.  Under a typical turnkey contract, a customer will pay us to drill a well to a specified depth and under specified conditions for a fixed price, regardless of the time required or the problems encountered in drilling the well. We provide technical expertise and engineering services, as well as most of the equipment and drilling supplies required to drill the well. We subcontract for related services such as the provision of casing crews, cementing and well logging. Generally we do not receive progress payments and are paid only after the well is drilled. We routinely enter into turnkey contracts in areas where our experience and expertise permit us to drill wells more profitably than under a daywork contract. As of June 30, 2007, two of our rigs were operating under turnkey contracts.

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Drilling and oil field services segment revenue decreased to $40.2 million in the six month period ended June 30, 2007 from $70.3 million in the six month period ended June 30, 2006. Operating income decreased to $8.9 million in the six month period ended June 30, 2007 from $17.0 million in the same period in 2006. The decline in revenues and operating income is primarily attributable to an increase in the number of rigs operating on our properties and an increase in our ownership interest in our natural gas and oil properties. Our drilling and oil field services segment records revenues and operating income only on wells drilled for or on behalf of third parties. The portion of drilling costs incurred by our drilling and oil field services segment relating to our ownership interest are capitalized as part of our full-cost pool. With the NEG acquisition and other WTO property acquisitions, our average working interest has increased to approximately 83% in the wells we operate in the WTO, and the third party interest has declined to less than 20%. Approximately $11.9 million of the decrease in drilling and oil field services was due to the increase in our working interest and the number of wells drilled for our own account. The number of drilling rigs we owned increased 26% to an average of 25.5 rigs during the six month period ended June 30, 2007 from an average of 20.3 rigs in the comparable period in 2006. The average daily rate we received per rig of $17,193, excluding revenues for related rental equipment and before intercompany eliminations was essentially unchanged from the comparable period in 2006. Our rig utilization rate was 89%, representing 512 stacked rig days in 2007 as compared to 100% in the comparable period in 2006. The decrease in our rig utilization rate primarily resulted from the removal of two rigs from service for major refurbishment. The decline in operating income was principally attributable to the increase in the number and working interest ownership in wells drilled for our own account.

During 2006, our drilling and oil field services segment reported $138.7 million in revenues, an increase of $58.5 million, or 73%, from 2005. Operating income increased to $32.9 million in 2006 from $18.3 million in 2005. The increase in revenue and operating income was primarily attributable to an increase in the number of rigs we owned and an increase in the average revenue per rig per day we earned from the rigs. The number of rigs we owned increased 32% to 25 rigs as of December 31, 2006 and the average revenue we received per rig, excluding revenues for related rental equipment, increased 48% (before intercompany eliminations) to $17,034 per day from $11,503 per day. Our margins increased primarily due to our rig rates increasing faster than our operating costs.

Drilling and oil field services segment revenue increased to $80.2 million in 2005 from $39.2 million in 2004. Operating income increased to $18.3 million in 2005 from $4.2 million in 2004. The increase in revenue and operating income was primarily attributable to an increase in the number of rigs we owned and an increase in the average revenue per rig per day we earned from the rigs. The average number of rigs we owned in 2005 increased 79% from 2004 and the average revenue we received per rig per day, excluding revenues for related rental equipment, in 2005 increased 26% from 2004 (before intercompany eliminations).

We believe our ownership of drilling rigs and related oil field services will continue to be a major catalyst of our growth. As of August 15, 2007, our drilling fleet consisted of 44 rigs, including the twelve rigs owned by Larclay. Currently, 26 of our rigs are working on properties that we operate; ten of our rigs are drilling on a contract basis for third-parties; five are being retrofitted and three are idle or being repaired.

In 2005 we placed an order for 26 drilling rigs to be constructed by Chinese manufacturers for an approximate aggregate purchase price of $126.4 million, of which $75.6 million was attributable to Larclay. We believe this is a lower cost when compared to newly built U.S. manufactured rigs with similar capabilities. In the first quarter of 2007, we took delivery of the three remaining rigs that we ordered from Chinese manufacturers bringing our total deliveries to ten rigs.

Midstream Gas Services Segment

We provide gathering, compression, processing and treating services of natural gas in West Texas and the Piceance Basin in northwestern Colorado, primarily through our wholly-owned subsidiary, ROC Gas. Through our gas marketing subsidiary, Integra Energy LLC (“Integra Energy”), we buy and sell natural gas produced from our operated wells as well as third-party operated wells. Gas marketing revenue is one of our largest revenue components; however, it is a very low margin business. Substantially all of our marketing fees are billed on a per unit basis. On a consolidated basis, gas purchases and other costs of sales includes the total

42

value we receive from third-parties for the gas we sell and the amount we pay for gas, which are reported as midstream and marketing expense.

The primary factors affecting our midstream gas services are the quantity of gas we gather, treat and market and the prices we pay and receive for natural gas.

Midstream gas services revenue for the six months ended June 30, 2007 was $52.1 million compared to $61.9 million in the comparable period in 2006. The $9.8 million decrease in midstream gas services revenues is attributable to the increase in our working interest in the WTO as a result of the NEG and other acquisitions.

Midstream gas services segment revenue decreased $24.6 million for the year ended December 31, 2006 from $147.5 million in 2005 to $122.9 million in 2006. The NEG acquisition significantly decreased our midstream gas services revenue as more gas was transported for our own account. We do not record midstream gas revenue for transportation, treating and processing of our own gas. Prior to the NEG acquisition, transportation, treating and processing of gas for NEG was recorded as midstream gas services revenue. Operating income decreased to $3.5 million in 2006 from $4.1 million in the 2005 period, primarily due to the NEG acquisition and start-up operating expenses for our Sagebrush processing plant in 2006. The Sagebrush plant was placed into full operation during May 2007. We have the contractual right to periodically increase fees we receive for transportation and processing based on certain indexes.

Midstream gas services revenue increased to $147.5 million in 2005 from $99.0 million in 2004, primarily due to an increase in the price of natural gas. Volumes in the midstream gas services segment increased 5% in 2005 from 2004 due to two acquisitions completed in 2005. Operating income also increased to $4.1 million in 2005 from $2.6 million in 2004, due primarily to a $1.5 million contribution from our consolidating subsidiary, Cholla Pipeline, L.P.

Other Segment

Our other segment consists primarily of our CO₂ gathering and tertiary oil recovery operations and other investments. We conduct our CO₂ gathering and tertiary oil recovery operations through PetroSource. In the fourth quarter of 2005 we acquired a majority interest in PetroSource, and in the first and second quarters of 2006 we acquired the remaining interests in PetroSource. Prior to the majority acquisition of PetroSource we accounted for PetroSource’s results of operation as an equity investment in an unconsolidated subsidiary. We now include PetroSource in our other segment. Currently most of the natural gas and oil revenue we receive is from the production of natural gas; however, we expect more of our revenue to come from oil production after we initiate our CO₂ flood operations. PetroSource gathers CO₂ from natural gas treatment plants located in West Texas and transports this CO₂ for use in our and third-parties’ tertiary oil recovery operations.

While it is extremely difficult to accurately forecast future natural gas and oil production, we believe tertiary oil recovery operations will provide significant long-term production growth potential at reasonable rates of return with relatively low risk. The increasing emphasis on CO₂ tertiary oil recovery projects has had, and will continue to have, an impact on our financial condition in the following manner:

•  there is a significant delay between the initial capital expenditures for infrastructure and CO₂ injections and the resulting production increases, if any, as tertiary oil recovery operations require the construction of facilities before CO₂ flooding can commence. After the infrastructure is in place and injections begin, it usually takes an additional 18 months before the field responds (i.e. oil production increases) to the injection of CO₂;

•  it is anticipated that PetroSource will not be profitable for the first several years after this offering closes. The anticipated lack of profitability in the initial years is due largely to the significant outlay of capital investment in the CO₂ flood projects and the lag of revenues associated with such expenditures. Thereafter, we will recognize profits only if the tertiary oil recovery efforts are successful; and

•  our tertiary oil recovery projects are more expensive to operate than conventional oil fields because of the additional cost of injecting and recycling the CO₂ (primarily due to the cost of CO₂ and the

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significant energy requirements to re-compress the CO₂ back into a liquid state for re-injection purposes). If commodity and energy prices increase, our operating expenses in these fields will also increase because we use natural gas to compress the CO₂.

Subsequent Event

On July 11, 2007, we purchased property located in downtown Oklahoma City, Oklahoma to serve as our future corporate headquarters. The purchase price of the property was approximately $25 million in cash plus the assumption of an obligation to indemnify the sellers in connection with pending litigation involving the property. We believe the ultimate resolution of the related pending litigation will not have a material adverse effect on our results of operations or our financial condition. Payment of the purchase price was funded through borrowings under our senior credit facility. We intend to refinance these borrowings through a long-term mortgage during the fourth quarter of 2007.

Future Charges

Public Company Expenses

Following the completion of this offering, we will be a public company. We believe that our general and administrative expenses will increase in connection with becoming a public company. This increase will consist of legal and accounting fees and additional expenses associated with compliance with the Sarbanes-Oxley Act of 2002 and other regulations. Following the filing of a registration statement, we anticipate that our ongoing general and administrative expenses will also increase as a result of being a publicly traded company. This increase will be due to accounting support services, filing annual and quarterly reports with the SEC, investor relations, directors’ fees, directors’ and officers’ insurance and registrar and transfer agent fees. As a result, we believe that our general and administrative expenses for 2008 will significantly increase. Our consolidated financial statements following the completion of this offering will reflect the impact of these increased expenses and affect the comparability of our financial statements with periods prior to the completion of this offering.

Liquidated Damage Payments

In connection with our private placements in December 2005, November 2006 and March 2007, we entered into registration rights agreements that require us to use our commercially reasonable efforts to register the securities sold in such private placements by certain deadlines and to maintain effectiveness after registration. Generally, if we fail to have either registration statement declared effective within the specified time periods or fail to maintain an effective registration statement, we will be subject to liquidated damages payments. Please read “— Liquidated Damages Under Registration Rights Agreements.” We have not accrued any reserves related to these potential payments.

Results of Operations

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2007

The financial information with respect to the six months ended June 30, 2006 and 2007 that is discussed below is unaudited. In the opinion of management, this information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.

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Revenue.  Total revenue increased 77% to $308.1 million for the six months ended June 30, 2007 from $173.8 million in the same period in 2006. This increase was due to a $177.9 million increase in natural gas and oil sales and was partially offset by lower revenues in our other segments.

	Six Months Ended
	June 30,
	2006		2007		$ Change			% Change
	(In thousands)
Revenue:
Natural gas and crude oil	$	28,563	$	206,450	$	177,887			622.8	%
Drilling and services		69,971		40,244		(29,727	)		(42.5	)%
Midstream and marketing		61,892		52,101		(9,791	)		(15.8	)%
Other		13,404		9,332		(4,072	)		(30.4	)%
Total revenues	$	173,830	$	308,127	$	134,297			77.3	%

Total natural gas and crude oil revenues increased $177.9 million to $206.5 million for the six months ended June 30, 2007 compared to $28.6 million for the same period in 2006, primarily as a result of an increase in natural gas production volumes. Total natural gas production increased 428% to 22,292 Mmcf in 2007 compared to 4,219 Mmcf in 2006. Of the 18,073 Mmcf increase in natural gas production, approximately 16,162 Mmcf of the increase was attributable to the NEG acquisition. Average natural gas prices increased 13% in the 2007 period to $6.90 per Mcf compared to $6.08 per Mcf in 2006.

Drilling and services revenue decreased 43% to $40.2 million for the six months ended June 30, 2007 compared to $70.0 million in the same period in 2006. The decline in revenues is primarily attributable to an increase in the number of rigs operating on our properties and an increase in our ownership interest in our natural gas and oil properties. The number of rigs we owned increased to 25.5 (average for the six months ended June 30, 2007) in 2007 compared to 20.3 (average for the six months ended June 30, 2006) in 2006, an increase of 26%, and the average daily revenue per rig, after considering the effect of the elimination of intercompany usage, was essentially unchanged at $17,193 per day.

Midstream and marketing revenue decreased $9.8 million, or 16%, with revenues of $52.1 million in the six month period ended June 30, 2007 as compared to $61.9 million in the six month period ended June 30, 2006. The NEG acquisition significantly decreased our midstream gas services revenues as more gas was transported for our own account. Prior to the acquisition, transportation, treating and processing of gas for NEG was recorded as midstream gas services revenue. We have the contractual right to periodically increase fees we receive for transportation and processing based on certain indexes.

Other revenue decreased to $9.3 million for the six months ended June 30, 2007 from $13.4 million for the same period in 2006. The decrease was primarily due to the sale of Stockton Plaza, a commercial shopping center located in Fort Stockton, Texas. Stockton Plaza revenues are included in the 2006 period prior to its sale to Mr. Mitchell, our former Chairman, Chief Executive Officer and President, in August 2006. See “Related Party Transactions.”

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Operating Costs and Expenses.  Total operating costs and expenses increased to $229.5 million for the six months ended June 30, 2007 compared to $152.7 million for the same period in 2006.

	Six Months Ended
	June 30,
	2006			2007			$ Change			% Change
	(In thousands)
Operating costs and expenses:
Production	$	13,665		$	49,018		$	35,353			258.7	%
Production taxes		1,529			7,926			6,397			418.4	%
Drilling and services		47,685			24,126			(23,559	)		(49.4	)%
Midstream and marketing		58,386			46,747			(11,639	)		(19.9	)%
Depreciation, depletion and amortization-natural gas and crude oil		7,868			70,699			62,831			798.6	%
Depreciation, depletion and amortization-other		13,808			22,263			8,455			61.2	%
General and administrative		20,303			25,360			5,057			24.9	%
Gain on derivative instruments		(10,579	)		(15,981	)		(5,402	)		(51.1	)%
Gain on sale of assets		—			(659	)		(659	)		(100.0	)%
Total operating costs and expenses	$	152,665		$	229,499		$	76,834			50.3	%

Production expense includes the costs associated with our exploration and production activities, including, but not limited to, lease operating expense and processing costs.

Production expenses increased $35.4 million primarily due to a $23.2 million increase because of the addition of the NEG properties in 2007. The remainder of the increase was due to an increase in lease operating expenses due to an increase in the number of wells we operate.

Production taxes increased $6.4 million, or 418%, to $7.9 million primarily due to the addition of the NEG properties in 2007.

Drilling and services and midstream and marketing expenses decreased 49% and 20% respectively, for the six months ended June 30, 2007 as compared to the same period in 2006 primarily because of the increase in the number and working interest ownership of the wells we drilled for our own account.

DD&A for our natural gas and crude oil properties increased to $70.7 million for the six months ended June 30, 2007 from $7.9 million in the same period in 2006. The increase is primarily attributable to the NEG acquisition, which increased our depreciable properties by the purchase price plus future development costs and increased production. Our production increased 516% to 27.7 Bcfe from 4.5 Bcfe in 2006. Our DD&A per Mcfe increased $0.80 to $2.55 from $1.75 in the comparable period in 2006.

DD&A for our other assets consists primarily of depreciation of our drilling rigs and other equipment. The increase in DD&A for our drilling and oil field services equipment was due primarily to the increase in the number of rigs we own. We calculate depreciation of property and equipment using the straight-line method over the estimated useful lives of the assets, which range from three to 25 years. Our drilling rigs and related oil field services equipment are depreciated over an average seven-year useful life.

General and administrative expenses increased $5.1 million to $25.4 million for the six months ended June 30, 2007 from $20.3 million for the comparable period in 2006. The increase was principally attributable to a $6.7 million increase in corporate salaries and wages which was due to an increase in corporate staff, particularly more highly compensated employees. As of June 30, 2007, we had 2,052 employees as compared to 1,259 at June 30, 2006. The increase in salaries and wages was partially offset by a $2.2 million decrease in stock compensation expense. As part of an executive officer’s resignation in 2006, the vesting period of certain restricted stock awards was modified resulting in increased compensation expense recognized in June 2006.

46

For the six month period ended June 30, 2007, we recorded a gain of $16.0 million ($16.8 million unrealized gain) on our derivatives instruments compared to a $10.6 million unrealized gain for the comparable period in 2006. During 2007, we selectively entered into natural gas swaps and basis swaps by capitalizing on what we perceived as spikes in the price of natural gas or favorable basis differences between the NYMEX price and natural gas prices at our principal West Texas pricing point. Unrealized gains or losses on derivatives contracts represent the change in fair value of open derivatives positions during the period. The change in fair value is principally measured based on period end prices as compared to the contract price. The unrealized gain recorded in the six month period ended June 30, 2007 was attributable to a decrease in average natural gas prices at June 30, 2007 as compared to the average natural gas prices at the various contract dates.

Other Income (Expense).  Total other expense increased to $54.5 million in the six month period ended June 30, 2007 from $2.0 million in the six month period ended June 30, 2006. The increase is reflected in the table below.

	Six Months Ended
	June 30,
	2006			2007			$ Change			% Change
	(In thousands)
Other income (expense):
Interest income	$	397		$	3,626		$	3,229			813.4	%
Interest expense		(1,584	)		(60,108	)		(58,524	)		(3,694.7	)%
Minority interest		(99	)		(157	)		(58	)		(58.6	)%
Income (loss) from equity investments		(697	)		2,164			2,861			410.5	%
Total other expense		(1,983	)		(54,475	)		(52,492	)		(2,647.1	)%
Income before income taxes		19,182			24,153			4,971			25.9	%
Income tax expense		5,150			9,082			3,932			76.3	%
Net income	$	14,032		$	15,071		$	1,039			7.4	%

Interest income increased to $3.6 million for the six months ended June 30, 2007 from $0.4 million for the same period in 2006. This increase was due to interest income from excess cash in investment accounts.

Interest expense increased to $60.1 million for the six months ended June 30, 2007 from $1.6 million for the same period in 2006. This increase was attributable to increased average debt balances.

To finance the NEG acquisition, we entered into a $750 million senior credit facility, which has an initial borrowing base of $300 million, and an $850 million senior bridge facility. In March 2007, we entered into a $1.0 billion senior unsecured term loan and sold 17.8 million shares of common stock in a private placement. A portion of the proceeds from the term loan and the private placement were used to repay the bridge loan. Please see “— Liquidity and Capital Resources.”

Minority interest represents income attributable to the minority interest owners of Cholla Pipeline, Sagebrush Pipeline and Integra Energy.

During the six months ended June 30, 2007 we reported income from equity investments of $2.2 million as compared to a loss of $0.7 million in the comparable period in 2006. Approximately $1.6 million of the increase was attributable to income from our interest in the Grey Ranch processing plant which changed owners in 2006 and, after a change-over period, has been operating at a profit since the ownership change. Approximately $1.3 million of the increase was attributable to income from Larclay as all of Larclay’s rigs have now been delivered and all but one rig is operational.

We reported an income tax expense of $9.1 million for the six months ended June 30, 2007 from an expense of $5.2 million for the same period in 2006. The current period income tax expense represents an effective income tax rate of 37.6% as compared to 26.8% in the comparable period in 2006. The increase in our effective income tax rate was attributable to favorable percentage depletion in 2006.

47

Year Ended December 31, 2005 Compared to Year Ended December 31, 2006

Revenue.  Total revenue increased to $388.2 million in 2006 from $287.7 million in 2005, which is further explained by the categories below.

	Year Ended December 31,
	2005		2006		$ Change			% Change
	(In thousands)
Revenue:
Natural gas and crude oil	$	49,987	$	101,252	$	51,265			102.6	%
Drilling and services		80,343		139,049		58,706			73.1	%
Midstream and marketing		147,133		122,896		(24,237	)		(16.5	)%
Other		10,230		25,045		14,815			144.8	%
Total revenues	$	287,693	$	388,242	$	100,549			35.0	%

Natural gas and crude oil revenue increased $51.3 million to $101.3 million in 2006 from $50.0 million in 2005. This was primarily a result of an increase in natural gas production volumes. Total natural gas production almost doubled to 13,410 Mmcf in 2006 compared to 6,873 Mmcf in 2005. Natural gas prices decreased $0.35, or 5%, in the 2006 period to $6.19 per Mcf compared to $6.54 per Mcf in 2005.

Drilling and services revenue increased 73% to $139.0 million for the year ended December 31, 2006 compared to $80.3 million in the same period in 2005, primarily due to an increase in the number of drilling rigs we owned and to an increase in the average daily revenue per rig. The number of rigs we owned increased to 25 (21.9 average for the year) as of December 31, 2006 compared to 19 (14.3 average for the year) in 2005, an increase of 32%, and the average daily revenue per rig, after considering the effect of the elimination of intercompany usage, increased 48% to $17,034 in 2006 compared to $11,503 in 2005. Additionally, the revenue from our heavy hauling trucking subsidiary increased $7.8 million during the comparison period due to an expansion of our trucking services. The revenue from our pulling unit operations increased $7.7 million because of an increase in the demand for these oil field services and an increase in the rate we charge.

Midstream and marketing revenue decreased $24.2 million from 2005 with revenues of $122.9 million during the year ended December 31, 2006 as compared to $147.1 million in 2005. We do not record midstream and marketing revenues for marketing, transportation, treating and processing of our own gas. The NEG acquisition significantly decreased our midstream gas services revenues as more gas was transported and marketed for our own account. Prior to the NEG acquisition, transportation, treating and processing of gas for NEG was recorded as midstream and marketing revenue. We have the contractual right to periodically increase fees we receive for transportation and processing based on certain indexes.

Other revenues increased $14.8 million to $25.0 million in 2006 from $10.2 million in 2005. The increase was primarily attributable to an increase of $12.0 million in CO₂ and tertiary oil recovery revenues. In December 2005, we acquired an additional equity interest in PetroSource which increased our ownership interest to 86.5%, resulting in the consolidation of PetroSource commencing in the fourth quarter of 2005. We recorded PetroSource revenues for the full year in 2006. The remainder of the increase was attributable to additional administration fees collected from operating natural gas and oil wells and lease acreage income received as a result of an increase in the number of wells, an increase in overhead rates and an increase in leasing activities. Approximately $0.9 million of the increase was related to an increase of revenue from Stockton Plaza.

48

Operating Costs and Expenses.  Total operating costs and expenses increased $97.6 million to $351.3 million in 2006 from $253.6 million in 2005, which is further explained by the categories below.

	Year Ended December 31,
	2005		2006			$ Change			% Change
	(In thousands)
Operating costs and expenses:
Production	$	16,195	$	35,149		$	18,954			117.0	%
Production taxes		3,158		4,654			1,496			47.4	%
Drilling and services		52,122		98,436			46,314			88.9	%
Midstream and marketing		141,372		115,076			(26,296	)		(18.6	)%
Depreciation, depletion and amortization-natural gas and oil		9,313		26,321			17,008			182.6	%
Depreciation, depletion and amortization-other		14,893		29,305			14,412			96.8	%
General and administrative		11,908		55,634			43,726			367.2	%
Loss (gain) on derivative instruments		4,132		(12,291	)		(16,423	)		(397.5	)%
Loss (gain) on sale of assets		547		(1,023	)		(1,570	)		(287.0	)%
Total operating costs and expenses	$	253,640	$	351,261		$	97,621			38.5	%

Production expense increased to $35.1 million in 2006 from $16.2 million in 2005 primarily due to the increase in the number of wells operated in 2006 as compared to 2005, the addition of NEG for the period from November 21, 2006 to December 31, 2006 and the addition of PetroSource for the full year in 2006 as compared to one quarter in 2005. Approximately $7.5 million of the increase was attributable to the NEG acquisition and approximately $3.2 million of the increase was attributable to PetroSource with the remainder of the increase due to an increase in the number of wells we operate.

Production taxes increased $1.5 million, or 47%, to $4.7 million due to the increase in natural gas production, which was partially offset by a decline in realized natural gas prices. Production taxes are generally assessed at the wellhead and are based on the volumes produced times the price received.

Drilling and services expenses increased 89% to $98.4 million in 2006 from $52.1 million in 2005, primarily due to an increase in our oil field services operating expense. Oil field services operating expenses, including fuel, repairs and maintenance, increased $14.2 million due to an increase in the number of drilling rigs we owned as well as work we performed on a turnkey and footage basis rather than a day rate basis.

Midstream and marketing expenses decreased $26.3 million, or 19%, to $115.1 million in 2006 as compared to $141.4 million in 2005 due to a decrease in the average price paid for gas that we market and a decrease in gas purchased from third parties as we focused our marketing efforts more on our own production.

DD&A relating to our natural gas and oil properties increased 183% to $26.3 million in 2006 from $9.3 million in 2005. The increase was primarily attributable to a 110% increase in year-over-year production and a 35% increase in DD&A. The average DD&A per Mcfe was $1.72 for the year ended December 31, 2006 as compared to $1.27 in 2005. The increase in the DD&A was attributable to the NEG acquisition which added significantly higher reserves at a higher cost per Mcfe.

DD&A related to our other property, plant and equipment increased $14.4 million, or 97%, primarily due to our investment in additional drilling rigs and oil field service equipment.

General and administrative expense increased $43.7 million to $55.6 million in 2006 from $11.9 million in 2005, due in part to an increase in expense related to salaries and wages as we added a significant amount of staff to accommodate our acquisitions and increased our drilling activities, a $5 million dispute settlement, a $3.6 million increase in property and franchise taxes, higher administrative costs associated with our increase in staff, including rent, utilities, insurance and office equipment and supplies, a $2.5 million increase in bad debt expense and an increase in legal and professional expenses. Legal and professional fees increased $4.7 million due primarily to an increase in legal fees relating to two legal issues and increased audit fees.

49

For the year ended December 31, 2006, we recorded a gain on derivative instruments of $12.3 million compared to a loss of $4.1 million in 2005. We entered into collars and fixed-price swaps to mitigate the effect of price fluctuations of natural gas and oil. We enter into natural gas basis swaps to mitigate the risk of fluctuations in pricing differentials between our natural gas well head prices and benchmark spot prices. We have not designated any of these derivative contracts as hedges for accounting purposes. We record derivatives contracts at fair value on the balance sheet, and gains or losses resulting from changes in the fair value of our derivative contracts (unrealized) are recognized as a component of operating costs and expenses. Unrealized gains or losses are realized upon settlement. During the first eleven months of 2006, we settled or terminated all of our natural gas derivative contracts and realized a net gain of approximately $14.2 million. We did not enter into any new derivative instruments until December 2006 and the first quarter of 2007. Offsetting the 2006 net realized gain on the settlement or early termination of our derivative instruments was a net unrealized loss of $1.9 million which represented the change in fair value of our derivatives instruments from the purchase date in early December 2006 to December 31, 2006. Generally, we record unrealized gains on our swaps and fixed-price swaps when natural gas and oil commodity prices decrease and record unrealized losses as natural gas and oil prices increase. We record unrealized gains on our basis swaps if the pricing differential increases and unrealized losses as the pricing differential decreases. Gains or losses on derivatives contracts are realized upon settlement. During 2005 we did not terminate any derivatives positions and realized a loss of $2.8 million due to normal settlements. Future volatility in natural gas and oil prices could have an adverse effect on the operating results of our exploration and production segment.

Other Income (Expense).  Total other expense increased to $15.1 million in 2006 from $6.2 million in 2005. The increase is discussed in the table below.

	Year Ended December 31,
	2005			2006			$ Change			% Change
	(In thousands)
Other income (expense):
Interest income	$	206		$	1,109		$	903			438.3	%
Interest expense		(5,277	)		(16,904	)		(11,627	)		(220.3	)%
Minority interest		(737	)		(296	)		441			59.8	%
Income (loss) from equity investments		(384	)		967			1,351			351.8	%
Total other expense		(6,192	)		(15,124	)		(8,932	)		(144.3	)%
Income before income taxes		27,861			21,857			(6,004	)		(21.5	)%
Income tax expense		9,968			6,236			(3,732	)		(37.4	)%
Income from discontinued operations, net of tax		229			—			(229	)		(100.0	)%
Net income	$	18,122		$	15,621		$	(2,501	)		(13.8	)%

Interest income increased to $1.1 million in 2006 from $0.2 million in 2005. This increase was due to interest income recognized in 2006 related to excess cash balances with various financial institutions.

Interest expense increased to $16.9 million in 2006 from $5.3 million in 2005. This increase was due to the additional debt that we incurred to finance our purchase of NEG.

We recorded income from equity investments of $1.0 million in 2006 as compared to a $0.4 million loss in 2005. The 2005 loss was primarily due to PetroSource. We accounted for PetroSource under the equity method during the first nine months of 2005.

Income tax expense decreased to $6.2 million in 2006 from $10.0 million in 2005 primarily due to a decrease in our effective income tax rate. During 2006, we realized a $3.5 million reduction in tax expense from our percentage depletion deduction, which was partially offset by $1.3 million in additional state income taxes.

50

Year Ended December 31, 2004 Compared to Year Ended December 31, 2005

Revenue.  Total revenue increased to $287.7 million in 2005 from $176.0 million in 2004, which is further explained by the categories below.

	Year Ended December 31,
	2004		2005		$ Change		% Change
	(In thousands)
Revenue:
Natural gas and crude oil	$	33,685	$	49,987	$	16,302		48.4	%
Drilling and services		39,417		80,343		40,926		103.8	%
Midstream and marketing		98,906		147,133		48,227		48.8	%
Other		3,987		10,230		6,243		156.6	%
Total revenues	$	175,995	$	287,693	$	111,698		63.5	%

Natural gas and crude oil revenue increased $16.3 million to $50.0 million in 2005 from $33.7 million in 2004. This was due to an increase in the average price we received for the natural gas and oil we produced, which increased to $6.63 per Mcfe in 2005 from $4.47 per Mcfe in 2004. Combined volumes were essentially unchanged from 2004 to 2005.

Drilling and services revenue increased to $80.3 million in 2005 from $39.4 million in 2004, primarily due to an increase in the number of drilling rigs we owned and an increase in the average daily revenue we earned from our rigs. Average daily revenue per rig, after considering the effect of the elimination of intercompany usage, increased to $11,503 in 2005 from $9,128 in 2004, and our rig fleet increased to 19 (14.3 average) rigs in 2005 from ten (8.0 average) rigs in 2004. Revenue from our oil field trucking division increased $2.9 million because this division started operations in 2005, and our air compression rental increased $2.0 million due to an increase in the number of compressor units in operation.

Midstream and marketing revenue increased to $147.1 million in 2005 from $98.9 million in 2004, primarily due to an increase in the price of natural gas and a 5% increase in volumes. Following a review of area gathering fees in May 2005, we recommended and our partners accepted a 43% increase in the gathering fees we charge to $0.10 per Mcf from $0.07 per Mcf. The plant fee also increased in April 2005 from $0.21 to $0.22, a 3% increase.

Other revenues increased $6.2 million, or 157%, primarily due to a $3.8 million increase in CO₂ and tertiary oil recovery revenue in 2005 from $0 in 2004. The increase was due to our consolidation of PetroSource in 2005. Through September 30, 2005, PetroSource was accounted for under the equity method. The remainder of the increase was due to an increase in the fees and other income collected from operating natural gas and oil wells and conducting related activities.

51

Operating Costs and Expenses.  Total operating costs and expenses increased $98.4 million to $253.6 million in 2005 from $155.2 million in 2004, which is further explained by the categories below.

	Year Ended December 31,
	2004			2005		$ Change		% Change
	(In thousands)
Operating costs and expenses:
Production	$	10,230		$	16,195	$	5,965		58.3	%
Production taxes		2,497			3,158		661		26.5	%
Drilling and services		26,442			52,122		25,680		97.1	%
Midstream and marketing		96,180			141,372		45,192		47.0	%
Depreciation, depletion and amortization-natural gas and oil		4,909			9,313		4,404		89.7	%
Depreciation, depletion and amortization-other		7,765			14,893		7,128		91.8	%
General and administrative		6,554			11,908		5,354		81.7	%
Loss on derivative instruments		878			4,132		3,254		370.6	%
Loss (gain) on sale of assets		(210	)		547		757		360.5	%
Total operating costs and expenses	$	155,245		$	253,640	$	98,395		63.4	%

Production expense increased to $16.2 million in 2005 from $10.2 million in 2004 primarily as a result of an increase in lease operating expense. Lease operating expense increased $1.6 million, primarily due to an increase in the number of wells operated. The consolidation of PetroSource added $2.2 million in 2005 production expense. In December 2005, we increased our equity interest in PetroSource to 86.5% which required us to consolidate PetroSource effective in the fourth quarter of 2005. Generally, our production expense has increased along with the growth in our exploration and production activities.

Production taxes increased 27% primarily as a result of an increase in the average price realized on our natural gas production of $2.11 per Mcf.

Drilling and services expenses increased 97% to $52.1 million in 2005 from $26.4 million in 2004, primarily due to an increase in our oil field services operating expense. Oil field services operating expenses, including fuel, repairs and maintenance, increased $14.2 million due to an increase in the number of drilling rigs we owned as well as work we performed on a turnkey and footage basis rather than a day rate basis.

Midstream and marketing increased 47% to $141.4 million in 2005 from $96.2 million in 2004, primarily due to a 48% increase in the average price of natural gas paid by our marketing company. Volumes during 2005 were essentially unchanged from 2004.

DD&A relating to our natural gas and oil properties increased 90% to $9.3 million in 2005 from $4.9 million in 2004. The increase was primarily attributable to a 79% increase in our DD&A in 2005 and a 5% increase in production volumes. The average DD&A was $1.27 per Mcfe for the year ended December 31, 2005 as compared to $0.71 per Mcfe in 2004. The increase in the DD&A was attributable to our increased drilling activities which added reserves at a higher cost per Mcfe.

DD&A for our other property, plant and equipment increased $7.1 million, or 92%, primarily due to our investment in additional drilling rigs and oil field service equipment.

General and administrative expense increased $5.3 million to $11.9 million in 2005 from $6.6 million in 2004, primarily as a result of an increase in salaries and wages of $4.3 million and a slight increase in legal and professional expenses.

52

Other Income (Expense).  Total other expense increased to $6.2 million in 2005 from $1.9 million in 2004. The increase is discussed in the table below.

	Year Ended
	December 31,
	2004			2005			$ Change			% Change
	(In thousands)
Other income (expense):
Interest income	$	56		$	206		$	150			267.9	%
Interest expense		(1,678	)		(5,277	)		(3,599	)		(214.5	)%
Minority interest		(262	)		(737	)		(475	)		(181.3	)%
Loss from equity investments		(36	)		(384	)		(348	)		(966.7	)%
Total other expense		(1,920	)		(6,192	)		(4,272	)		(222.5	)%
Income before income taxes		18,830			27,861			9,031			48.0	%
Income tax expense		6,433			9,968			3,535			55.0	%
Income from discontinued operations, net of tax		451			229			(222	)		(49.2	)%
Extraordinary gain		12,544			—			(12,544	)		(100.0	)%
Net income	$	25,392		$	18,122		$	(7,270	)		(28.6	)%

Interest expense increased to $5.3 million in 2005 from $1.7 million in 2004. This increase was due to the additional debt that we incurred to finance our investment in natural gas and oil properties and oil field services equipment, including the additional drilling rigs.

The increase in loss from equity investments was primarily due to the operating loss from our equity investment in Grey Ranch, L.P. in 2005.

Income tax expense increased to $10.0 million in 2005 from $6.4 million in 2004 primarily due to an increase in income before taxes, which increased to $27.9 million in 2005 from $18.8 million in 2004. Our effective tax rate for the year ended December 31, 2005 increased slightly to 36% from 34% in 2004.

The extraordinary gain was attributable to our purchase of the Foreland Corporation in 2004 and represented the difference between the fair value of assets acquired and the purchase price. The fair value of the assets acquired was $13.8 million and the purchase price was $1.2 million.

Liquidity and Capital Resources

Summary

Our operating cash flow is influenced mainly by the prices that we receive for our natural gas and oil production; the quantity of natural gas we produce and, to a lesser extent, the quantity of oil we produce; the success of our development and exploration activities; the demand for our drilling rigs and oil field services and the rates we receive for these services; and the margins we obtain from our natural gas and CO₂ gathering and processing contracts.

During 2006 and the first quarter of 2007, we entered into various debt and equity transactions to fund the acquisition of NEG and our 2007 capital expenditure program. As of June 30, 2007, our cash and cash equivalents were $2.2 million, and we had approximately $400 million available under our senior credit facility. As of September 30, 2007, we had $400 million outstanding under our senior credit facility, prior to the application of available cash. As of June 30, 2007, we had approximately $1,066.7 million in total debt outstanding, and our capital expenditures for the third and fourth quarters of 2007 are projected to be approximately $708 million.

53

The NEG Acquisition

On November 21, 2006, we acquired all of the outstanding membership interest of NEG from AREP for approximately $990.4 million in cash, the assumption of $300 million in debt, the receipt of cash of $21.1 million and 12,842,000 shares of our common stock (valued at approximately $231.2 million).

To finance the NEG acquisition, we entered into a $750 million senior credit facility and an $850 million senior bridge facility. The $750 million senior credit facility had an initial borrowing capacity of $300 million. During 2007 the borrowing capacity was increased to $400 million. This revolving credit facility is collateralized by our natural gas and oil properties, except our Piceance Basin assets, and allows, but does not require any hedging. We also issued in a private placement $550 million of convertible preferred stock and common units consisting of shares of common stock and a warrant to purchase convertible preferred stock upon surrender of the common stock. The $850 million senior bridge facility was repaid in 2007 with the proceeds from the term loan and private placement of common stock described below.

Capital Expenditures

We make and expect to continue to make substantial capital expenditures in the exploration, development, production and acquisition of natural gas and oil reserves. We believe that our cash flows from operations, current cash and investments on hand, availability under our senior credit facility and the proceeds from this offering will be sufficient to meet our capital expenditure budget for the next twelve months.

Our capital expenditures by segment were:

	Year Ended						Six Months Ended
	December 31,						June 30,
	2004		2005		2006		2006		2007
	(In thousands)
Capital Expenditures:
Exploration and production	$	29,105	$	61,227	$	170,872	$	51,734	$	377,120
Drilling and oil field services		22,679		43,730		89,810		49,123		83,913
Midstream gas services		2,026		25,904		16,975		8,019		23,130
Other		4,116		3,735		28,884		5,624		7,981
Total capital expenditures	$	57,926	$	134,596	$	306,541	$	114,500	$	492,144

We estimate that our total capital expenditures for 2007 will be approximately $1,200 million, of which $492.1 million has been spent as of June 30, 2007. Our planned 2007 capital expenditures represents a 292% increase over 2006.

Our 2007 capital expenditures for our exploration and production segment are focused on growing and developing our reserves and production on our existing acreage and acquiring additional acreage, primarily in the WTO. Of our total $1,200 million capital expenditure budget, approximately $943 million is budgeted for exploration and production activities. We plan to drill 207 gross (177 net) wells in the WTO and 89 gross (79 net) wells in other areas in 2007. Included in our 2007 exploration and production capital expenditure budget is $167 million allocated to increasing our acreage positions in the WTO and the acquisition of seismic data, including proprietary 3-D seismic, which will be a valuable tool in helping us to explore and further develop the WTO.

During 2007 we expect to complete our rig fleet expansion program that we started in 2005. We have accepted the delivery of all of the rigs ordered from Chinese manufacturers. We are in the process of retro-fitting and rigging up five of these rigs, which we expect to join our fleet during the fourth quarter of 2007 through the second quarter of 2008. We are also continuing to upgrade and modernize our rig fleet. Approximately $115 million of our capital expenditure budget will be spent on our drilling and oil field services segment.

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We anticipate spending approximately $103 million in capital expenditures in our midstream gas services segment as we aggressively expand our network of gas gathering lines and plant and compression capacity.

During the remainder of 2007, we expect to incur approximately $24 million in 2007 in additional capital expenditures related to PetroSource primarily for the continuance of our CO₂ flood operations at the Wellman Unit and the commencement of our CO₂ flood operations at the George Allen Unit. We capitalize a portion of the acquisition cost of CO₂ used in our CO₂ floods as development cost when it is injected.

We expect our 2008 capital expenditure program to be approximately $1,100 million, subject to market conditions and availability of capital on attractive terms, as we continue to explore and develop our core properties and expand our other business segments. We anticipate that approximately $957 million will be spent on exploration and production capital expenditures, $107 million on midstream services capital expenditures and $36 million on oil field services capital expenditures.

The majority of our capital expenditures will be discretionary and could be curtailed if our cash flows decline from expected levels or we are unable to obtain capital on attractive terms; however, we have various sources of capital in the form of our revolving credit facility, potential asset sales or the incurrence of additional long-term debt.

Cash Flows from Continuing Operations

Our cash flows from continuing operations are as follows:

										Six Months Ended
	Year Ended December 31,									June 30,
	2004			2005			2006			2006			2007
	(In thousands)
Cash Flows from Continuing Operations:
Cash flows provided by operating activities	$	38,458		$	63,297		$	67,349		$	30,402		$	180,844
Cash flows used in investing activities		(59,408	)		(155,826	)		(1,340,567	)		(119,597	)		(493,310	)
Cash flows provided by financing activities		34,700			126,413			1,266,435			48,125			275,717
Net increase (decrease) in cash and cash equivalents	$	13,750		$	33,884		$	(6,783	)	$	(41,070	)	$	(36,749	)

Operating Activities.  Cash flows provided by operating activities increased $150.4 million to $180.8 million for the six months ended June 30, 2007 from $30.4 million for the six months ended June 30, 2006. The increase was caused by increased revenues of $134.3 million and lower cash payments for expenses during the six months ended June 30, 2007. We accelerated our collections of trade receivables resulting in lower accounts receivables in spite of significantly higher revenues. Trade accounts payables provided $56.2 million in operating cash flows as we actively managed our cash and debt balances at June 30, 2007.

Cash flows provided by operating activities increased $4.0 million to $67.3 million in 2006 from $63.3 million in 2005 primarily due to an increase in non-cash DD&A of $31.4 million and an increase in non-cash stock-based compensation expense of $8.3 million as net income decreased approximately $2.5 million in 2006 over 2005. The increases were substantially offset by changes in operating assets and liabilities.

Cash flows provided by continuing operating activities increased $24.8 million to $63.3 million in 2005 from $38.5 million in 2004, due primarily to an increase in operating income and an increase in non-cash expenses. Operating income increased $13.3 million whereas net income decreased $7.3 million. The 2004 period included a $12.5 million extraordinary gain that had no effect on cash flow from operations. DD&A increased $11.5 million, and the remainder of the change was due to a $0.9 million net increase in operating assets and liabilities and a $3.1 million change due to changes in fair value of derivatives contracts.

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Investing Activities.  Cash flows used in investing activities increased to $493.3 million in the six month period ended June 30, 2007 from $119.6 million in the 2006 period as we continued to ramp up our capital expenditure program. For the six month period ended June 30, 2007, our capital expenditures were $377.1 million in our exploration and production segment, $83.9 million for drilling and oil field services, $23.1 million for midstream gas services and $8.0 million for other capital expenditures. During the same period in 2006, capital expenditures were $51.7 million in our exploration and production segment, $49.1 million for drilling and oil field services, $8.0 million for midstream gas services and $5.6 million for other capital expenditures.

Cash flows used in investing activities increased to $1,341 million for the year ended December 31, 2006 from $155.8 million in 2005 and $59.4 million in 2004. During 2006, our cash flows used in investing activities included acquisitions of $1,054 million, including the NEG acquisition described above. During the comparison period, exploration and production capital expenditures increased to $170.9 million in 2006 from $61.2 million in 2005 and $29.1 million in 2004 primarily because of the additional wells that were drilled in the Piñon Field in 2006 and 2005. Capital expenditures for drilling and oil field services increased to $89.8 million in 2006 from $43.7 million in 2005 and $22.7 million in 2004 due to an increase in the number of drilling rigs. Proceeds from the sale of assets increased to $19.7 million in 2006 from $3.3 million in 2005 and $1.4 million in 2004.

Financing Activities.  Since December 2005, we have used equity issuances, borrowings and, to a lesser extent, our cash flows from operations to fund our rapid growth. Proceeds from borrowings increased to $1,152.8 million for the six months ended June 30, 2007, and we repaid approximately $1,154.4 million leaving net repayments during the period of approximately $1.6 million. We also received net proceeds of approximately $318.7 million from a private placement of our common stock. We used the net proceeds from the term loan and the common stock issuance to repay the senior bridge facility and to repay all of our outstanding borrowings under our senior credit facility. Our financing activities provided $275.7 million in cash for the six month period ended June 30, 2007 compared to $48.1 million in the comparable period in 2006.

During the year ended December 31, 2006 we incurred net borrowings of $743 million, raised $100.8 million from issuances of common stock and raised $439.5 million from an issuance of redeemable convertible preferred stock. Our net borrowings, common stock issuances and issuance of redeemable preferred stock in 2006 were primarily used to finance the NEG acquisition as well as our 2006 capital expenditure program. During 2005 we received proceeds of $173.1 million from the issuance of common stock and had net repayments of $53.8 million as compared to net borrowings of $34.8 million in 2004. Most of our borrowings in 2005 funded the acquisition of our drilling rigs, our exploration and production activities and the expansion of our gathering and treating assets. In December 2005, we received $173.1 million in net proceeds from a private placement of 12.5 million shares of common stock, which was primarily used to reduce outstanding borrowings.

Credit Facilities and Other Indebtedness

Senior Credit Facility.  On November 21, 2006, we entered into a new $750 million senior secured revolving credit facility (the “senior credit facility”) with Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager. The senior credit facility matures on November 21, 2011.

The proceeds of the senior credit facility were used to (i) partially finance the NEG acquisition, (ii) refinance our existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and our existing credit facility. Future borrowings under the senior credit facility will be available for capital expenditures, working capital and general corporate purposes and to finance permitted acquisitions of natural gas and oil properties and other assets related to the exploration, production and development of natural gas and oil properties. The senior credit facility will be available to be drawn on and repaid without restriction so long as we are in compliance with its terms, including certain financial covenants.

The senior credit facility contains various covenants that limit our and certain of our subsidiaries’ ability to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay

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debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of our assets. Additionally, the senior credit facility limits our and certain of our subsidiaries’ ability to incur additional indebtedness with certain exceptions, including under the senior unsecured bridge facility (as discussed below).

The senior credit facility also contains financial covenants, including maintenance of agreed upon levels for the ratio of (i) our total funded debt to EBITDAX (as defined in the senior credit facility), which may not exceed 4.5:1.0 calculated using the last fiscal quarter on an annualized basis as of the end of fiscal quarters ending on or before September 30, 2008 and calculated using the last four completed fiscal quarters thereafter, (ii) our ratio of EBITDAX to interest expense plus current maturities of long-term debt, which may not exceed 2.5:1.0 calculated using the last fiscal quarter on an annualized basis as of the end of fiscal quarters ending on or before September 30, 2008 and calculated using the last four completed fiscal quarters thereafter, and (iii) our current ratio, which may not exceed 1.0:1.0. As of the end of the second quarter 2007, we were in compliance with these financial covenants.

The obligations under the senior credit facility are secured by first priority liens on all shares of capital stock of each of our present and future subsidiaries; all intercompany debt of us and our subsidiaries; and substantially all of our assets and the assets of our subsidiaries, including proven natural gas and oil reserves representing at least 80% of the present discounted value (as defined in the senior credit facility) of our proven natural gas and oil reserves reviewed in determining the borrowing base for the senior credit facility (as determined by the Administrative Agent). Additionally, the obligations under the senior credit facility will be guaranteed by certain of our subsidiaries.

The borrowing base for the senior credit facility is determined by the administrative agent in its sole discretion in accordance with its normal and customary natural gas and oil lending practices and approved by lenders. The reaffirmation of an existing borrowing base amount or an increase in the borrowing base will require approval by Required Lenders (as defined in the senior credit facility). The borrowing base is subject to review semi-annually; however, Required Lenders reserve the right to have (a) one additional redetermination within the first twelve months from the closing date and (b) one additional redetermination of the borrowing base per calendar year thereafter. Unscheduled redeterminations may be made at our request, but are limited to two such requests during the twelve months following the closing date and one request per twelve months thereafter.

The borrowing base includes proved developed producing reserves, proved developed non-producing reserves and proved undeveloped reserves and was initially set at $300.0 million and was subsequently increased to $700.0 million. As of June 30, 2007 we had no outstanding indebtedness on our senior credit facility and as of September 30, 2007 we had $400 million outstanding under the senior credit facility, prior to the application of available cash balances.

At our election, interest under the senior credit facility is determined by reference to (i) the British Bankers Association LIBOR rate, or LIBOR, plus an applicable margin between 1.25% and 2.00% per annum or (ii) the higher of the federal funds rate plus 0.5% or the prime rate plus, in either case, an applicable margin between 0.25% and 1.00% per annum. Interest will be payable quarterly for prime rate loans and at the applicable maturity date for LIBOR loans, except that if the interest period for a LIBOR loan is six months, interest will be paid at the end of each three-month period.

If an event of default exists under the senior credit facility, the lenders may accelerate the maturity of the obligations outstanding under the senior credit facility and exercise other rights and remedies. Each of the following will be an event of default:

•  failure to pay any principal when due or any interest, fees or other amount within certain grace periods;

•  failure to perform or otherwise comply with the covenants in the credit agreement or other loan documents, subject, in certain instances, to certain grace periods;

•  bankruptcy or insolvency events involving us or our subsidiaries;

•  a change of control (as defined in the senior credit facility).

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March 2007 Term Loan.  On March 22, 2007, we entered into a $1 billion senior unsecured term loan. The proceeds of the term loan were used to partially repay the senior bridge facility described below. The term loan includes both a fixed rate tranche and floating rate tranche. Approximately $650 million was issued at a fixed rate of 8.625% with principal due on April 1, 2015 (the “Fixed Rate Term Loans”). Under the terms of the Fixed Rate Term Loans, interest is payable quarterly and during the first four years interest may be paid, at our option, either entirely in cash or entirely with additional Fixed Rate Term Loans. If we elect to pay the interest due during any period in additional Fixed Rate Term Loans, the interest rate increases to 9.375% during such period. After April 1, 2011 the Fixed Rate Term Loans may be prepaid in whole or in part with prepayment penalties as follows (the prepayment penalty is multiplied by the principal amount prepaid):

Period	Prepayment Penalty
April 1, 2011 to March 31, 2012		4.313	%
April 1, 2012 to March 31, 2013		2.156	%
April 1, 2013 and thereafter		—

Approximately $350 million of the term loan was issued at a variable rate with interest payable quarterly and principal due on April 1, 2014 (the “Variable Rate Term Loans”). The Variable Rate Term Loans bear interest, at our option, at LIBOR plus 3.625% or the higher of (i) the federal funds rate, as defined, plus 3.125% or (ii) a Bank’s prime rate plus 2.625%. After April 1, 2009 the Variable Rate Term Loans may be prepaid in whole or in part with a prepayment penalty as follows (the prepayment penalty is multiplied by the principal amount prepaid):

Period	Prepayment Penalty
April 1, 2009 to March 31, 2010		3.00	%
April 1, 2010 to March 31, 2011		2.00	%
April 1, 2011 to March 31, 2012		1.00	%
April 1, 2012 and thereafter		—

After one year from the closing date, we are required to offer to exchange the term loan for senior unsecured notes with registration rights. The senior unsecured notes will have substantially similar terms and conditions as the term loan. If we are unable to or do not offer to exchange the term loan for senior unsecured notes with registration rights by the specified date, the interest rate on the term loan will increase by 0.25% every 90 days up to a maximum of 0.50%.

The term loan contains ordinary and customary covenants including limitations on the incurrence of indebtedness, payment of dividends, asset sales, certain asset purchases, transactions with related parties and consolidation or merger agreements.

Other Indebtedness.  We have financed a portion of our drilling rig fleet and related oil field services equipment through notes with Merrill Lynch Capital Corporation. At June 30, 2007, the aggregate outstanding balance of these credit agreements was $54.6 million, with a fixed interest rate ranging from 7.64% to 8.87%. The notes have a final maturity date of November 1, 2010, aggregate monthly installments for principal and interest in the amount of $1.2 million and are secured by the equipment. The notes have a prepayment penalty (currently 1-3%) in the event we repay the notes prior to maturity.

We have financed the purchase of various vehicles, oil field services equipment and other equipment used in our business. The aggregate outstanding balance of these notes as of June 30, 2007 was $6.2 million.

On October 14, 2005, Sagebrush Pipeline, LLC borrowed $4.0 million from Bank of America, N.A. for the purpose of completing the gas processing plant and pipeline in Colorado. This loan was repaid in full in July 2007.

Senior Bridge Facility.  On November 21, 2006, we also entered into a $850 million senior unsecured bridge facility (the “senior bridge facility”) with Banc of America Bridge LLC, as the Initial Bridge Lender and Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P., and Lehman Brothers Inc., as joint lead arrangers and bookrunners.

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Together with borrowings under the senior credit facility, the proceeds from the senior bridge facility were used to (i) partially finance the NEG acquisition, (ii) refinance our existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and our existing credit facility. The obligations under the senior bridge facility are general unsecured obligations of our company and certain of our subsidiaries. The senior bridge facility was paid in full in March 2007 with the proceeds from the term loan and the common stock issuance described above.

The senior bridge facility contained customary restrictive covenants pertaining to management and operations of our company and our subsidiaries similar to those contained in the senior credit facility. Generally, amounts outstanding under the senior bridge facility bore interest at a base rate equal to the greater of (i) three-month LIBOR plus an applicable margin initially equal to 4.50% per annum or (ii) 9.0% per annum plus an applicable margin initially equal to 0% per annum; provided that the applicable margin for the senior bridge facility will increase by 0.5% at the end of the period that is six months after the closing date for the senior bridge facility and an additional 0.25% per quarter thereafter for as long as the senior bridge facility, Rollover Loans or Exchange Notes remain outstanding subject to a cap of 11% (subject to certain additional interest rate increases in certain circumstances). In addition, the senior bridge facility included a covenant that obligated us to use commercially reasonable efforts to refinance the senior bridge facility as promptly as practicable.

Prior Senior Credit Facility.  Prior to its termination on November 21, 2006, we had a $130 million revolving credit facility in place with Bank of America, N.A. (the “prior senior credit facility”). The prior senior credit facility included a $20 million sub-limit for letters of credit. The prior senior credit facility was replaced by the senior credit facility as of November 21, 2006. Advances under the prior senior credit facility were subject to a borrowing base based on our proved developed producing reserves, our proved developed non-producing reserves and proved undeveloped reserves. It is subject to re-determination semi-annually at the sole discretion of the lender based on the reports of independent petroleum engineers in accordance with normal and customary natural gas and oil lending practices.

The prior senior credit facility bore interest at our option at either LIBOR plus 2.15% or the Bank of America, N.A. prime rate. We paid a commitment fee on the unused portion of the borrowing base amount equal to 1/8% per annum. The prior senior credit facility was collateralized by natural gas and oil properties representing at least 80% of the present discounted value of our proved reserves and by a negative pledge on any of our non-mortgaged properties.

Convertible Preferred Stock

We have 2,184,286 shares of convertible preferred stock issued and outstanding. Each holder of our convertible preferred stock is entitled to quarterly cash dividends at the annual rate of 7.75% of the accreted value of its convertible preferred stock. At our option, we may choose to increase the accreted value of the convertible preferred stock in lieu of paying any quarterly cash dividend. The accreted value is $210 per share as of June 30, 2007. Each share of convertible preferred stock is currently convertible into approximately 10.2 shares of common stock at the option of the holder, subject to certain anti-dilution adjustments. Upon satisfaction of certain conditions set forth in the certificate of designations, we have the right to convert all of the outstanding shares of convertible preferred stock to common stock at any time after 180 days following the completion of the offering. In connection with this conversion, we may be required to make a cash payment to each holder of convertible preferred stock. Please see “Description of Capital Stock — Convertible Preferred Stock.”

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Contractual Obligations

A summary of our contractual obligations as of June 30, 2007 is provided in the following table:

	Remainder		Payments Due by Year
	of 2007		2008		2009		2010		2011		After 2011		Total
	(In thousands)
Long-term debt	$	14,158	$	16,285	$	17,330	$	12,286	$	6,597	$	1,000,000	$	1,066,656
Interest on term loan(1)		43,738		87,475		87,475		87,475		87,475		252,881		646,519
Firm transportation(2)		475		949		949		949		949		4,592		8,863
Operating leases		2,418		4,525		2,707		110		46		0		9,806
Third party drilling rig commitments(3)		10,077		8,325		—		—		—		—		18,402
Dispute settlement payments(4)		—		5,000		5,000		5,000		5,000		—		20,000
Asset retirement obligations		828		147		—		195		8,403		46,265		55,838
Total	$	71,694	$	122,706	$	113,461	$	106,015	$	108,470	$	1,303,738	$	1,826,084

(1)	Based on interest rates as of June 30, 2007.
(2)	We entered into a firm transportation agreement with Questar Pipeline Company giving us guaranteed capacity on their pipeline for 10 MmBtu per day at an estimated charge of $0.9 million per year, with a total commitment of $9.1 million. In December 2006 we assigned our rights and obligations to a third party.
(3)	Drilling contracts with third party drilling rig operators at specified day rates. All of our drilling rig contracts contain operator performance conditions that allow for pricing adjustments or early termination for operator nonperformance.
(4)	In January 2007, we settled a royalty interest dispute and agreed to pay five installments of $5 million each, plus interest commencing April 1, 2007. The remaining installments are due on July 1 of each year commencing July 1, 2008.

In connection with the NEG acquisition, we acquired restricted deposits aggregating $31.9 million. The restricted deposits represent bank trust and escrow accounts required to be set up by surety bond underwriters and certain former owners of a subsidiary on NEG’s offshore properties. In accordance with requirements of MMS, the NEG subsidiary was required to put in place surety bonds or escrow agreements to provide satisfaction of its eventual responsibility to plug and abandon wells and remove structures when certain offshore fields are no longer in use. As part of the agreement with the surety bond underwriter or the former owners of the particular fields, bank trust and escrow accounts were set up and funded based on the terms of the escrow agreements. Certain amounts are required to be paid upon receipt of proceeds from production.

In connection with one of the escrow accounts, we are required to make quarterly deposits to the escrow accounts of $0.8 million. Additionally, for some of the offshore properties, we will be required to deposit additional funds in an escrow account, representing the difference between the required escrow deposit under the surety bond and actual escrow deposit balance at various points in time in the future. Aggregate payments to the escrow accounts are estimated as follows (in thousands):

Remainder of 2007	$	1,600
2008		3,200
2009		3,200
2010		5,000
Thereafter		4,000
	$	17,000

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Liquidated Damages Under Registration Rights Agreements

December 2005 Private Placement.  In connection with our private placement of common stock in December 2005, we entered into a registration rights agreement that requires us to use our commercially reasonable efforts to register the shares of common stock sold in the private placement prior to April 15, 2007 and to maintain effectiveness after registration until December 21, 2007. In April 2007, we amended the registration rights agreement to require us to use our commercially reasonable efforts to register the shares of common stock no later than December 21, 2007 and to maintain effectiveness until December 21, 2009.

Generally, if we fail to have a registration statement declared effective by December 21, 2007 or fail to maintain an effective registration statement, we will be subject to liquidated damages payments equal to a one time payment of $1.2 million plus a percentage of the gross proceeds of the offering for each day we are not in compliance. The payments increase every 90 days, up to a maximum as specified in the registration rights agreement as follows:

Non-Compliance Period
1-90 Days	91-180 Days	181-270 Days	270+ Days
$1.2 million plus	1.0% per annum	1.5% per annum	2.0% per annum
0.5% per annum ($3,300 per day)	($6,600 per day)	($9,900 per day)	($13,200 per day)

The liquidated damages for initial failure to have a registration statement declared effective by December 21, 2007 is retroactive to April 15, 2007. For purposes of calculating the liquidated damages for failure to have the initial registration statement declared effective by December 21, 2007 retroactive payment would be approximately $2.8 million, and December 21, 2007 would be considered the 250th day of non-compliance.

November 2006 Private Placement.  In connection with our private placement of convertible preferred stock and common stock units, we entered into a registration rights agreement that requires us to use our commercially reasonable efforts to file a registration statement with respect to the shares of common stock underlying our convertible preferred stock prior to August 31, 2007 and use our commercially reasonable efforts to cause such registration statement to become effective prior to the earlier of (i) 181 days following the effectiveness of the registration statement related to our December 2005 private placement, or (ii) December 31, 2007. In general, if we fail to meet these deadlines or maintain effectiveness, we will be subject to liquidated damage payments equal to a percentage of the purchase price of the securities sold in the November 2006 private placement.

During the first nine months following any failure to meet the deadlines described above, the payments will be equal to a percentage of the purchase price of $550 million on a per month basis until the default is cured. During the first month following a default, the payment shall be equal to 0.25% of the purchase price and shall increase by 0.25% per month to a maximum of 0.75%. If the default has not been cured within eight months, the payments will become equal to 2.0% per annum paid on a monthly basis until such default is cured.

March 2007 Private Placement.  In connection with our private placement of common stock in March 2007, we entered into a registration rights agreement that requires us to use commercially reasonable efforts to register the shares of common stock sold in the private placement prior to 90 days following the effectiveness of the registration statement related to our December 2005 private placement. Generally, if we fail to have a registration statement declared effective within 90 days of filing or fail to maintain an effective registration statement, we will be subject to liquidated damages payments equal to a one time payment of $1.6 million plus a percentage of the gross proceeds of the offering for each day that we are not in compliance. The payments increase every 90 days, up to a maximum as specified in the registration rights agreement as follows:

Non-Compliance Period
1-90 Days	91-180 Days	181-270 Days	270+ Days
$1.6 million plus	1.0% per annum	1.5% per annum	2.0% per annum
0.5% per annum ($4,400 per day)	($8,800 per day)	($13,200 per day)	($17,600 per day)

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We have not reserved any funds related to liquidated damages and do not believe any amounts will be paid.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make assumptions and prepare estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and revenues and expenses. We base our estimates on historical experience and various other assumptions that we believe are reasonable; however, actual results may differ. See “Consolidated Financial Statements, Note 1 — Summary of Organization and Significant Accounting Policies” for a discussion of our significant accounting policies.

Proved Reserves.  Over 97% of our reserves are estimated on an annual basis by independent petroleum engineers. Our estimates of proved reserves are based on the quantities of natural gas and oil which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. However, there are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future revenues, rates of production and timing of development expenditures, including many factors beyond our control. The estimation process is very complex and relies on assumptions and subjective interpretations of available geologic, geophysical, engineering and production data, and the accuracy of reserve estimates is a function of the quality and quantity of available data, engineering and geological interpretation and judgment. In addition, as a result of volatility and changing market conditions, commodity prices and future development costs will change from period to period, causing estimates of proved reserves to change, as well as causing estimates of future net revenues to change. For the years ended December 31, 2006 and 2005, we revised our proved reserves upward from prior years’ reports by approximately 26.6 Bcfe and 12.3 Bcfe and revised our proved reserves downward 18.5 Bcfe in 2004 due to proved undeveloped reserves that were determined to contain greater (or lesser) quantities than originally estimated, due to market prices at the end of the applicable period or from production performance indicating more (or less) reserves in place or larger (or smaller) reservoir size than initially estimated. Estimates of proved reserves are key components of our most significant financial estimates involving our rate for recording depreciation, depletion and amortization and our full-cost ceiling limitation. These revisions may be material and could materially affect our future depletion, depreciation and amortization expenses.

Method of accounting for natural gas and oil properties.  Our natural gas and oil properties are accounted for using the full-cost method of accounting. All direct costs and certain indirect costs associated with the acquisition, exploration and development of natural gas and oil properties are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding natural gas and oil reserves. Amortization of natural gas and oil properties is provided using the unit-of-production method based on estimated proved natural gas and oil reserves. No gains or losses are recognized upon the sale or disposition of natural gas and oil properties unless the sale or disposition represents a significant quantity of natural gas and oil reserves, which would have a significant impact on the depreciation, depletion and amortization rate.

In accordance with full-cost accounting rules, capitalized cost are subject to a limitation. The capitalized cost of natural gas and oil properties, net of accumulated depreciation, depletion, and amortization, may not exceed the estimated future net cash flows from proved natural gas and oil reserves discounted at 10%, plus the lower of cost or fair market value of unproved properties as adjusted for related tax effects. The full-cost ceiling limitation is calculated using natural gas and oil prices in effect as of the balance sheet date and adjusted for “basis” or location differential, held constant over the life of the reserves. If capitalized costs exceed this limit (the “ceiling limitation”), the excess must be charged to expense. Once incurred, a write-down is not reversible at a later date. We did not have any adjustment to earnings due to the ceiling limitation for the periods presented herein.

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Unevaluated Properties.  The balance of unevaluated properties is comprised of capital costs incurred for undeveloped acreage, wells and production facilities in progress and wells pending determination, together with capitalized interest costs for these projects. These costs are initially excluded from our amortization base until the outcome of the project has been determined, or generally, until it is known whether proved reserves will or will not be assigned to the property. We assess all items classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. We assess our properties on an individual basis or as a group if properties are individually insignificant. Our assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full-cost pool and are then subject to amortization. We estimate that substantially all of our costs classified as unproved as of the balance sheet date will be evaluated and transferred within a four-year period.

Asset Retirement Obligations.  Asset retirement obligations represent the estimated future abandonment costs of tangible long-lived assets such as platforms, wells, service assets, pipelines and other facilities. We estimate the fair value of an asset’s retirement obligation in the period in which the liability is incurred, if a reasonable estimate can be made. We employ a present value technique to estimate the fair value of an asset retirement obligation, which reflects certain assumptions, including an inflation rate, our credit-adjusted, risk-free interest rate, the estimated settlement date of the liability and the estimated current cost to settle the liability based on third party quotes and current actual costs. Changes in timing or to the original estimate of cash flows will result in changes to the carrying amount of the liability.

Revenue Recognition and Gas Balancing.  Oil and natural gas revenues are recorded when title passes to the customer, net of royalties, discounts and allowances, as applicable. We account for oil and natural gas production imbalances using the sales method, whereby we recognize revenue on all oil and natural gas sold to our customers notwithstanding the fact that its ownership may be less than 100% of the oil and natural gas sold. Liabilities are recorded for imbalances greater than our proportionate share of remaining estimated oil and natural gas reserves.

We recognize revenues and expenses generated from “daywork” drilling contracts as the services are performed, since we do not bear the risk of completion of the well. Under “footage” and “turnkey” contracts, we bear the risk of completion of the well; therefore, revenues and expenses are recognized when the well is substantially completed. Under this method, substantial completion is determined when the well bore reaches the negotiated depth as stated in the contract. The duration of all three types of contracts range typically from 20 to 90 days. The entire amount of a loss, if any, is recorded when the loss is determinable. The costs of uncompleted drilling contracts include expenses incurred to date on “footage” or “turnkey” contracts, which are still in process at the end of the period.

We may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees received and costs incurred to mobilize a rig from one market to another are recognized over the term of the related drilling contract. The contract terms are typically from 20 to 90 days.

Revenues of our midstream gas services segment are derived from providing supply, transportation, balancing and sales services for producers and wholesale customers on our natural gas pipelines, as well as other interconnected pipeline systems. Midstream gas services are primarily undertaken to realize incremental margins on gas purchased at the wellhead, and provide value-added services to customers. In general, natural gas purchased and sold by our midstream gas business is priced at a published daily or monthly index price. Sales to wholesale customers typically incorporate a premium for managing their transmission and balancing requirements. Revenues are recognized upon delivery of natural gas to customers and/or when services are rendered, pricing is determinable and collectibility is reasonably assured.

Revenue from sales of CO₂ is recognized when the product is delivered to the customer. We recognize service fees related to the transportation of CO₂ as revenue when the related service is provided.

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Property, Plant and Equipment, Net.  Other capitalized costs, including drilling equipment, natural gas gathering and processing equipment, transportation equipment and other property and equipment are carried at cost. Renewals and improvements are capitalized while repairs and maintenance are expensed. Depreciation of drilling equipment is recorded using the straight-line method based on estimated useful lives. Depreciation of other property and equipment is computed using the straight-line method over the estimated useful lives of the assets ranging from 3 to 39 years.

Realization of the carrying value of property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset including disposal value if any, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. An estimate of fair value is based on the best information available, including prices for similar assets. Changes in such estimates could cause us to reduce the carrying value of property and equipment.

When property and equipment components are disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is generally reflected in operations.

Income Taxes.  Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns.

Derivative Financial Instruments.  To manage risks related to increases in interest rates and changes in natural gas and oil prices, we enter into interest rate swaps and natural gas and oil futures contracts.

We recognize all of our derivative instruments as either assets or liabilities at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based on the exposure being hedged, as either a fair value hedge or a cash flow hedge. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change. None of our derivatives were designated as hedging instruments during 2007, 2006 and 2005.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which establishes a formal framework for measuring fair values of assets and liabilities in financial statements that are already required by U.S. generally accepted accounting principles (“GAAP”) to be measured at fair value. SFAS No. 157 clarifies guidance in FASB Concepts Statement (“CON”) No. 7 which discusses present value techniques in measuring fair value. No new fair value measurements are prescribed, and SFAS No. 157 is intended to codify the several definitions of fair value included in various accounting standards. However, the application of this Statement may change current practices for certain companies. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS No. 157 on the financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), which permits an entity to choose to measure certain financial assets and liabilities at fair value. SFAS No. 159 also revises provisions of SFAS No. 115 that apply to available-for-sale and trading securities. This statement is

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effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS No. 157 on the financial statements.

Effects of Inflation

The effect of inflation in the natural gas and oil industry is primarily driven by the prices for natural gas and oil. Increased commodity prices increase demand for contract drilling rigs and services, which supports higher drilling rig activity. This in turn affects the overall demand for our drilling rigs and the dayrates we can obtain for our contract drilling services.

Over the last three years, natural gas and oil prices have been more volatile, and during periods of higher utilization we have experienced increases in labor cost and the cost of services to support our drilling rigs.

During this same period, when commodity prices declined, labor rates did not return to the levels that existed before the increases. If natural gas prices increase substantially for a long period, shortages in support equipment (such as drill pipe, third-party services and qualified labor) may result in additional increases in our material and labor costs. These conditions may limit our ability to realize improvements in operating profits. How inflation will affect us in the future will depend on additional increases, if any, realized in our drilling rig rates and the prices we receive for our natural gas and oil.

Quantitative and Qualitative Disclosures About Market Risk

The discussion in this section provides information about the financial instruments we use to manage commodity price and interest rate volatility. All contracts are financial contracts, which are settled in cash and do not require the delivery of a physical quantity to satisfy settlement.

Commodity Price Risk

Our most significant market risk is the prices we receive for our gas and oil production, which can be highly volatile. In light of this historical volatility, we periodically have entered into, and expect in the future to enter into, derivative arrangements aimed at reducing the variability of gas and oil prices we receive for our production. We will from time to time enter into commodities pricing derivative instruments for a portion of our anticipated production volumes depending upon our management’s view of opportunities under the then current market conditions. We do not intend to enter into derivative instruments that would exceed our expected production volumes for the period covered by the derivative arrangement. Our current credit agreement limits our ability to enter into derivatives transactions to 85% of expected production volumes from estimated proved reserves. Future credit agreements could require a minimum level of commodity price hedging.

We use, or may use, a variety of derivative instruments including collars and fixed-price swaps. These transactions generally require no cash payment upfront and are settled in cash at maturity. While this strategy may result in lower operating profits than if we were not party to these derivative instruments in times of high natural gas prices, we believe that the stabilization of prices and protection afforded us by providing a revenue floor for our production is very beneficial.

For natural gas derivatives, transactions are settled based upon the New York Mercantile Exchange price of natural gas at the Waha hub, a West Texas gas marketing and delivery center, on the final trading day of the month. Settlement for natural gas derivative contracts occurs in the month following the production month. We currently do not enter into derivative arrangements with respect to our oil production, but we may do so in the future if our oil production increases as a result of the initiation of our CO₂ tertiary oil recovery operations.

Generally, our trade counterparties are affiliates of the financial institution that is a party to our credit agreement, although we do have transactions with counterparties that are not affiliated with this institution.

While we believe that the gas and oil price derivative arrangements we enter into are important to our program to manage price variability for our production, we have not designated any of our derivative contracts

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as hedges for accounting purposes. We record all derivative contracts on the balance sheet at fair value, which will be significantly affected by changes in gas and oil prices. We establish fair value of our derivative contracts by market price quotations of the derivative contract or, if not available, market price quotations of derivative contracts with similar terms and characteristics. When market quotations are not available, we will estimate the fair value of derivative contracts using option pricing models that management believes represent its best estimate. Changes in fair values of our derivative contracts that are not designated as hedges for accounting purposes are recognized as unrealized gains and losses in current period earnings. As a result, our current period earnings may be significantly affected by changes in fair value of our commodities derivative arrangements. The gain recognized in earnings, included in operating costs and expenses, for the six months ended June 30, 2006 and 2007 was a gain of $10.6 million and $16.0 million, respectively.

At June 30, 2007, our open commodity derivative contracts consisted of the following:

					Weighted Avg.
Period	Commodity	Notional			Fix Price
Fixed price swap:
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$	7.87
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$	8.05
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$	7.02
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$	7.50
May 2007 - September 2007	Natural gas		3,060,000	MmBtu	$	7.75
May 2007 - September 2007	Natural gas		1,530,000	MmBtu	$	8.16
June 2007 - August 2007	Natural gas		920,000	MmBtu	$	8.18
June 2007 - August 2007	Natural gas		920,000	MmBtu	$	8.30
July 2007 - September 2007	Natural gas		920,000	MmBtu	$	8.25
September 2007 - December 2007	Natural gas		1,220,000	MmBtu	$	8.88
October 2007 - December 2007	Natural gas		920,000	MmBtu	$	8.77
October 2007 - December 2007	Natural gas		920,000	MmBtu	$	9.04
October 2007 - December 2007	Natural gas		920,000	MmBtu	$	8.00
November 2007 - June 2008	Natural gas		4,860,000	MmBtu	$	8.05
November 2007 - June 2008	Natural gas		9,720,000	MmBtu	$	8.20
November 2007 - March 2008	Natural gas		1,520,000	MmBtu	$	8.505
January 2008 - June 2008	Natural gas		3,640,000	MmBtu	$	7.987
January 2008 - June 2008	Natural gas		3,640,000	MmBtu	$	7.99
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$	9.00
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$	8.48
May 2008 - August 2008	Natural gas		2,460,000	MmBtu	$	8.375
Collars:
January 2007 - December 2007	Crude oil		60,000	Bbls	$	50.00 - $84.50
January 2008 - June 2008	Crude oil		42,000	Bbls	$	50.00 - $83.35
July 2008 - December 2008	Crude oil		54,000	Bbls	$	50.00 - $82.60
Waha basis swap:
January 2007 - December 2007	Natural gas		14,600,000	MmBtu	$	(0.70	)
January 2007 - December 2007	Natural gas		7,300,000	MmBtu	$	(0.5925	)
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$	(0.470	)
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$	(0.530	)
May 2007 - September 2007	Natural gas		3,060,000	MmBtu	$	(0.65	)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$	(0.585	)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$	(0.6525	)

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					Weighted Avg.
Period	Commodity	Notional			Fix Price
Waha basis swap (continued):
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$	(0.635	)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$	(0.59	)
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$	(0.625	)
January 2008 - December 2008	Natural gas		10,980,000	MmBtu	$	(0.57	)
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$	(0.595	)
May 2008 - August 2008	Natural gas		2,460,000	MmBtu	$	(0.45	)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$	(0.47	)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$	(0.49	)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$	(0.4975	)

These derivative instruments have not been designated as hedges.

Interest Rate Risk

We are subject to interest rate risk on our long-term fixed and variable interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us (i) to changes in market interest rates reflected in the fair value of the debt and (ii) to the risk that we may need to refinance maturing debt with new debt at a higher rate. Variable rate debt, where the interest rate fluctuates, exposes us to short-term changes in market interest rates as our interest obligations on these instruments are periodically redetermined based on prevailing market interest rates, primarily LIBOR and the federal funds rate.

The indebtedness evidenced by our other notes payable related to our drilling rig fleet and related oil field services equipment, insurance financing, and other equipment and vehicles and a portion of our term loan is a fixed-rate debt, which exposes us to cash-flow risk from market interest rate changes on these notes. The fair value of that debt will vary as interest rates change.

Borrowings under our senior credit facility and a portion of our term loan expose us to certain market risks. We use sensitivity analysis to determine the impact that market risk exposures may have on our variable interest rate borrowings. At June 30, 2007, we had no outstanding borrowings under our senior credit facility. Based on the approximately $350.0 million outstanding balance of the variable rate portion of our term loan at June 30, 2007, a one percent change in the applicable rate, with all other variables held constant, would result in a change in our interest expense of approximately $1.8 million for the six months ended June 30, 2007.

In addition to commodity price derivative arrangements, we may enter into derivative transactions to fix the interest we pay on a portion of the money we borrow under our credit agreements. At June 30, 2007, we are not party to any interest rate swap instruments. Future interest rate derivative instruments, if any, are expected to be with affiliates of the financial institution that are party to our credit agreements.

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BUSINESS

Overview

SandRidge is a rapidly growing independent natural gas and oil company concentrating in exploration, development and production activities. We are focused on expanding our continuing exploration and exploitation of our significant holdings in an area of West Texas we refer to as the West Texas Overthrust, or “WTO,” a natural gas prone geological region where we have operated since 1986 that includes the Piñon Field and our South Sabino and Big Canyon prospects. We intend to add to our existing reserve and production base in this area by increasing our development drilling activities in the Piñon Field and our exploration program in other prospects that we have identified. As a result of our 2006 acquisitions, including the NEG acquisition, we have nearly tripled our net acreage position in the WTO since January 2006. We believe that we are the largest operator and producer in the WTO and have assembled the largest position in the area. We also operate significant interests in the Cotton Valley Trend in East Texas, the Gulf Coast area, the Gulf of Mexico and the Piceance Basin of Colorado.

We have assembled an extensive natural gas and oil property base in which we have identified over 4,500 potential drilling locations including over 2,600 in the WTO. As of June 30, 2007, our proved reserves were 1,174.0 Bcfe, of which 82% were natural gas and 97.5% of which were prepared by independent petroleum engineers. We had 1,469 gross (1,040 net) producing wells, substantially all of which we operate. As of June 30, 2007, we had interests in approximately 959,958 gross (651,308 net) natural gas and oil leased acres. We had 30 rigs drilling in the WTO as of June 30, 2007.

We also operate businesses that are complementary to our primary exploration, development and production activities, which provides us with operational flexibility and an advantageous cost structure. We own a fleet of 32 drilling rigs, five of which are currently being retrofitted. In addition, we are a party to a joint venture that owns an additional twelve rigs, eleven of which are currently operating. We own related oil field services businesses, gas gathering and treating facilities and a marketing business. We capture and supply CO₂ to support our tertiary oil recovery projects undertaken by us or third-parties. We use this CO₂ in our own tertiary oil recovery projects and market it to third-parties for use in tertiary oil recovery projects. These assets are primarily located in our primary operating area in West Texas.

We expanded our management team significantly in 2006. Tom L. Ward, the co-founder and former President and Chief Operating Officer of Chesapeake Energy Corporation (“Chesapeake”), purchased a significant ownership interest in us in June 2006 and joined us as Chief Executive Officer and Chairman of the Board. During Mr. Ward’s 17 year tenure at Chesapeake, Chesapeake became one of the most active onshore drillers in the United States. From 1998 to 2005, Chesapeake drilled over 6,500 wells. Since Mr. Ward joined us, we have added eight new executive officers, substantially all of which have experience at public exploration and production companies. In July 2006, we relocated our corporate headquarters to Oklahoma City to take advantage of the broader market of experienced energy professionals. We have also added key professionals in exploration, operations, land, accounting and finance.

Our estimated capital expenditures for 2007 of approximately $1,200 million include $943 million allocated to exploration and development (including land and seismic acquisitions and our tertiary recovery operations), $115 million allocated to drilling and oil field services and $103 million allocated to midstream gas operations. Approximately $704 million of our capital expenditures are to be spent on our Piñon Field development and our exploratory projects in the WTO (including land and seismic acquisitions). Under this capital budget, we plan to drill approximately 296 gross (256 net) wells in 2007, including approximately 207 gross (177 net) wells in the WTO. The actual number of wells drilled in our drilling program and the amount of our 2007 capital expenditures will be dependent upon market conditions, availability of capital and drilling and production results.

The NEG Acquisition

On November 21, 2006, we acquired all of the outstanding membership interests of NEG from a subsidiary of American Real Estate Partners, L.P., or “AREP,” for approximately $990.4 million in cash, the

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assumption of $300 million in debt, the receipt of cash of $21.1 million, and the issuance of 12,842,000 shares of our common stock valued at approximately $231.2 million. NEG owned core assets in the Val Verde and Permian Basins of West Texas, including overlapping or contiguous interests in the properties that we own in the WTO. Based on reserve reports prepared as of June 30, 2006 by DeGolyer & MacNaughton and Netherland, Sewell & Associates, Inc., the estimated proved reserves of NEG were 519.7 Bcfe.

Pursuant to our acquisition agreement with AREP, we agreed to acquire NEG including all of the membership interests in NEG Holding LLC, but excluding any investment in NEGI. Prior to our acquisition of NEG:

•  NEG acquired the remaining 50% membership interest in NEG Holding LLC that NEG did not already own by exercising an option it had to redeem this interest from NEGI for fair value; and

•  NEG distributed to its former parent, a subsidiary of AREP, all of its investment in National Energy Group, Inc. (“NEGI”), consisting of 50.1% of the outstanding shares of NEGI capital stock and $148 million of outstanding 103/4% senior notes due from NEGI.

As a result, when we acquired NEG, it owned 100% of the membership interests of NEG Holding LLC and had no interest or investment in NEGI. The operating oil and gas assets of NEG are held in wholly-owned operating subsidiaries of NEG, including NEG Holding LLC.

We have included elsewhere in this prospectus the combined financial statements of NEG and subsidiaries, excluding NEGI and the 103/4% senior notes due from NEGI, but including NEGI’s 50% membership interest in NEG Holding LLC for certain periods and dates prior to our acquisition of NEG. Because of the changes effected at NEG prior to our acquisition, we believe that these combined NEG financial statements provide a clearer and more relevant presentation for our investors of the financial condition and results of operations of the acquired business of NEG than consolidated financial statements of NEG for these periods and dates.

Our Strategy

Our primary objective is to achieve long-term growth and maximize stockholder value over multiple business cycles by pursuing the following strategies:

•  Grow Through Exploration and Aggressive Drilling and Development of Existing Acreage.  We expect to generate long-term reserve and production growth by exploring and aggressively drilling and developing our large acreage position. Our primary exploration and development focus will be in the WTO, where we have identified over 2,600 potential drilling locations and had 30 rigs operating as of June 30, 2007. We have also identified 566 potential drilling locations in the Cotton Valley Trend in East Texas and plan to have five rigs running in this region through the end of 2007.

•  Apply Technological Improvements to Our Exploration and Development Program.  We intend to enhance our drilling success rate and completion efficiency with improved 3-D seismic acquisition and interpretation technology and applying advanced drilling, completion and production methods in the exploration and development of our large acreage position in the WTO. We believe that this area is under-explored with modern technology and that the application of this technology has the potential to result in a higher overall drilling success rate and higher initial production rates and ultimate well recoveries, thereby improving overall economics.

•  Seek Opportunistic Acquisitions in Our Core Geographic Area.  Since January 2006, through acquisitions and leasing activities, we have nearly tripled our net acreage position in the WTO. We intend to continue to seek other opportunities to optimize and enhance our exploratory acreage position in the WTO and other strategic areas.

•  Reduce Costs, Enhance Returns and Maintain Operating Flexibility by Controlling Drilling Rigs and Midstream Assets.  Our rig fleet enables us to aggressively develop our own acreage while maintaining the flexibility of a third-party contract drilling business. We plan to capitalize on opportunities to utilize our rigs primarily in the WTO, where we had 30 of our rigs drilling our own wells as of June 30, 2007.

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By controlling our fleet of drilling rigs and gathering and treating assets, we believe we will be able to better control overall costs and maintain a high degree of operational flexibility.

•  Capture and Utilize CO₂ for Tertiary Oil Recovery.  We intend to capitalize on our access to CO₂ reserves and CO₂ flooding expertise to pursue enhanced oil recovery in mature oil fields in West Texas. By utilizing this CO₂ in our own tertiary recovery projects, we expect to recover additional oil that would have otherwise been abandoned following traditional waterfloods.

Competitive Strengths

We have a number of strengths that we believe will help us successfully execute our strategies:

•  Large Asset Base with Substantial Drilling Inventory.  Our producing properties are characterized by long-lived predominantly natural gas reserves with established production profiles. Our estimated proved reserves of 1,174.0 Bcfe as of June 30, 2007 had a proved reserves to production ratio of approximately 19 years. Our core area of operations in the WTO has expanded to 499,607 gross (404,397 net) acres as of June 30, 2007. We have identified over 2,600 potential drilling locations in the WTO and believe that we will be able to expand the number of drilling locations in the remainder of the WTO through exploratory drilling and our use of 3-D seismic technology.

•  Geographically Concentrated Exploration and Development Operations.  We intend to focus our drilling and development operations in the near term on the WTO to fully exploit this unique geological area. The WTO was created by the collision of the ancestral North and South American continents, which fractured and thrust the reservoir rock to come to rest in repeating layers. We believe the geological environment of the WTO and the height of the prospective pay zones create opportunities for significant conventional accumulations of natural gas and oil. To a lesser extent, we will also focus on the highly prolific Cotton Valley Trend in East Texas. This geographic concentration allows us to establish economies of scale in both drilling and production operations to achieve lower production costs and generate increased cash flows from our producing properties. We believe our concentrated acreage position will enable us to organically grow our reserves and production for the next several years.

•  Experienced Management Team Focused on Delivering Long-term Stockholder Value.  During 2006, we significantly expanded our management team when Tom L. Ward, co-founder and former president of Chesapeake, purchased a significant interest in us and became our Chairman and Chief Executive Officer. We also hired a new chief financial officer and three additional executive vice presidents. Our nine executive officers and 27 senior executives average over 23 years of experience working in or servicing the natural gas and oil industry. Our management team, board of directors and employees will own     % of our capital stock on a fully-diluted basis following the completion of this offering, which we believe aligns their objectives with those of our stockholders.

•  High Degree of Operational Control.  We operate over 95% of our production in the WTO, East Texas and the Gulf Coast area, which permits us to manage our operating costs and better control capital expenditures and the timing of development and exploitation activities.

•  Large Modern Fleet of Drilling Rigs.  We own a fleet of 32 drilling rigs, five of which are currently being retrofitted. In addition, we are a party to a joint venture that owns an additional twelve rigs, eleven of which are currently operating. By controlling a large, modern and more efficient drilling fleet, we can develop our existing reserves and explore for new reserves on a more economic basis.

Our Businesses and Primary Operations

Exploration and Production

We explore for, develop and produce natural gas and oil reserves, with a focus on increasing our reserves and production in the WTO. We operate substantially all of our wells in the WTO. We also have significant

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operated leasehold positions in the Cotton Valley Trend in East Texas and the Gulf Coast area, as well as other non-core operating areas.

The following table identifies certain information concerning our exploration and production business as of June 30, 2007 unless otherwise noted:

	Estimated														Number of
	Net														Identified
	Proved				Daily		Proved								Potential
	Reserves		PV-10 (in		Production		Reserves/			Gross		Net			Drilling
	(Bcfe)		millions)(1)		(Mmcfe/d)(2)		Production			Acreage		Acreage			Locations
Area
WTO		648.3	$	1,190.9		68.2		26.0	(3)		499,607		404,397			2,658
East Texas		156.3		310.2		26.8		16.0			48,606		32,557			566
Gulf Coast		105.7		416.4		35.0		8.3			53,464		34,765			51
Other:
Gulf of Mexico		57.3		176.7		20.5		7.7			73,614		36,770			82
Other West Texas		27.0		98.5		8.3		9.0			23,059		22,140			68
PetroSource		120.8		243.8		1.3		263.1			9,064		8,195			47
Piceance Basin		10.5		11.8		1.3		21.6			40,334		15,686			828
Other		48.1		110.5		7.5		17.3			212,210		96,798			273
Total		1,174.0	$	2,558.8		168.9		19.0			959,958		651,308	(4)		4,573

(1) PV-10 generally differs from Standardized Measure of Discounted Net Cash Flows, or Standardized Measure, which is measured only at fiscal year end, because it does not include the effects of income taxes on future net revenues. For a reconciliation of PV-10 to Standardized Measure as of December 31, 2006, see “Summary Historical Operating and Reserve Data.” Our Standardized Measure was $1,440.2 million at December 31, 2006.

(2) Represents average daily net production for the month of June 2007. Average daily production for the month of September 2007 was 191.2 Mmcfe per day.

(3) Our proved reserves to production ratio in the WTO is significantly higher than our other areas of operation because of the high volume of our proved undeveloped reserves in this area. We expect this ratio to decrease as our production in the WTO increases.

(4) Our total net acreage as of September 30, 2007 was 757,904 acres.

West Texas Overthrust (WTO)

We have drilled and developed natural gas in the WTO since 1986. This area is located in Pecos and Terrell Counties in West Texas and is associated with the Marathon-Ouachita fold and thrust belt that extends east-northeast across the United States into the Appalachian Mountain Region. The WTO was created by the collision of the ancestral North American and South American continents resulting in source rock and reservoir rock, including potential hydrocarbon traps, becoming thrusted upon one another in multiple layers (imbricate stacking) along the leading edge of the WTO. The collision and thrusting resulted in the reservoir rock becoming highly fractured, increasing the likelihood of conventional natural gas and oil accumulations in the reservoir rock and creating a unique geological setting in North America.

The primary reservoir rocks in the WTO range in depth from 2,000 to 10,000 feet and range in geologic age from the Permian to the Devonian. The imbricate stacking of these conventional gas-prone reservoirs provides for multi-pay exploration and development opportunities. Despite this, the WTO has historically been largely under-explored due primarily to the remoteness and lack of infrastructure in the region, as well as historical limitations of conventional subsurface geological and geophysical methods. However, several fields including our prolific Piñon Field have been discovered. These fields have produced approximately 210 Bcfe from less than 300 wells through June 30, 2007. We believe our access to and control of the necessary infrastructure combined with application of modern seismic techniques will allow us to identify further exploration and development opportunities in the WTO.

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In May 2007, we began the first phase of 3-D seismic data acquisition in the WTO. This is the first of six phases planned over the next three years to acquire 1,300 square miles of modern 3-D seismic data in the WTO. We believe this enhanced 3-D seismic program may identify structural details of potential reservoirs, thus lowering risk of exploratory drilling and improving completion efficiency. The first two phases of the seismic program will cover 360 square miles and should both be completed by the end of 2007.

We have aggressively acquired leasehold acreage in the WTO, nearly tripling our position since January 2006. As of June 30, 2007 we owned 499,607 gross (404,397 net) acres in the WTO, substantially all of which are along the leading edge of the WTO.

Piñon Field.  The Piñon Field, located in Pecos County, is our most significant producing field, and accounts for 55% of our proved reserve base as of June 30, 2007 and approximately 73% of our 2007 exploration and development budget (including land and seismic acquisitions). The Piñon Field lies along the leading edge of the WTO. The primary reservoirs are the Wolfcamp sands (average depth of 2,500 to 3,500 feet), the Tesnus sands (average depth of 3,700 to 4,750 feet), the Upper Caballos chert (average depth of 5,500 feet), and the Lower Caballos chert (average depth of 7,300 to 10,000 feet).

As of June 30, 2007, our estimated proved natural gas and oil reserves in the Piñon Field were 648.3 Bcfe, 66% of which were proved undeveloped reserves. This field has produced approximately 200 Bcfe through June 30, 2007 and currently produces in excess of 110 gross Mmcfe per day.

Our interests in the Piñon Field include 331 producing wells as of June 30, 2007. We had an 84.3% working interest in the producing area of Piñon Field and were running 30 drilling rigs in the Piñon Field as of June 30, 2007. We estimate that we will drill approximately 207 wells in the field during 2007, the majority of which will be development wells. As of June 30, 2007, we have identified over 2,600 potential well locations in the Piñon Field, including 406 proved undeveloped drilling locations.

West Texas Overthrust Prospects.  Through our exploratory drilling program, we have identified two prospect areas in the WTO, the South Sabino Prospect and the Big Canyon Prospect areas on which we will drill exploratory wells in late 2007 or early 2008:

•  South Sabino Prospect Area.  The South Sabino prospect area is located approximately twelve miles east of the Piñon Field. We have drilled two wells which have encountered the Caballos chert and hydrocarbons in zones less than 7,000 feet deep. Those wells were selected using 2-D seismic and limited subsurface well control. The wells appear to be on trend with the Piñon Field and are structurally higher against one of several thrust faults that make up the WTO. We began the first phase of our 3-D seismic program in this area in 2007 and may drill additional wells in late 2007 following the integration of this data and new subsurface well control.

•  Big Canyon Prospect Area.  Located approximately 20 miles east of the Piñon Field along the WTO, this prospect area represents potential opportunities for future development. The key well, Big Canyon Ranch 106-1, was drilled by a third party to a depth of 24,075 feet and was abandoned in December 1993 after testing gas from the Tesnus sands and Caballos chert. We plan to conduct a 3-D seismic survey over the Big Canyon prospect area as part of Phase II of our 3-D seismic program in 2007. Exploratory wells may be planned in late 2007 and early 2008 to further evaluate both the Tesnus and the Caballos in a location structurally updip to the Big Canyon Ranch 106-1 well.

West Texas Overthrust Development.  The following table provides information concerning development in the WTO:

Estimated

Estimated

2007 Capital

Rigs

Net PUD

Gross PUD

Gross PUD

Total Gross

Gross 2007

Expenditures

2006 Year

Working

Reserves

Reserves

Drilling

Drilling

Drilling

Budget

End Rigs

at 2Q

(Bcfe)(1)

(Bcfe)(1)

Locations(1)

Locations(1)

Locations

(in millions)(2)

Working

2007 End

431.1

675.2

406

2,658

207

$

537

9

30

(1)	As of June 30, 2007.
(2)	Excludes capital expenditures related to land and seismic acquisitions.

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East Texas — Cotton Valley Trend

We own significant natural gas and oil interests in the natural gas bearing Cotton Valley Trend in East Texas, which covers parts of East Texas and Northern Louisiana. We held interests in 48,606 gross (32,557 net) acres in East Texas as of June 30, 2007. At June 30, 2007, our estimated net proved reserves in East Texas were 156.3 Bcfe, with net production of approximately 26.8 Mmcfe per day. We intend to target the tight sand reservoirs of the Cotton Valley, Pettit and Travis Peak formations at depths of 6,500 to 10,500 feet. These sands are typically distributed over a large area, which has led to a near 100% success rate in this area. Due to the tight nature of the reservoirs, significant hydraulic fracture stimulation is required to obtain commercial production rates and efficiently drain the reservoir. Production in this area is generally characterized as long-lived, with wells having high initial production and decline rates that stabilize at lower levels after several years. Moreover, area operators continue to focus on infill development drilling as many areas have been down spaced to 80 acres per well, with some areas down spaced to as little as 40 acres per well. Recently, operators have begun drilling horizontal wells and we are monitoring their success. Twenty-two wells have been drilled in the first half of 2007. We plan to have five rigs running in this region for the remainder of 2007 with an additional 27 wells planned.

Gulf Coast

We own natural gas and oil interests in 53,464 gross (34,765 net) acres in the Gulf Coast area as of June 30, 2007, which encompasses the large coastal plain from the southernmost tip of Texas through the southern portion of Louisiana. As of June 30, 2007, our estimated net proved reserves in the Gulf Coast area were 105.7 Bcfe, with net production of approximately 35.0 Mmcfe per day. This is a predominantly gas prone, multi-pay, geologically complex area with significant faulting and compartmentalized reservoirs where 3-D seismic and other advanced exploration technologies are critical to our efforts. This area is comprised of sediments ranging from Cretaceous through Tertiary age and is productive from very shallow depths of several thousand feet to depths in excess of 18,000 feet. We target shallower geological formations such as the Frio and the Miocene, as well as deeper horizons such as Wilcox and Vicksburg. Operations in this area are generally characterized as being higher risk and higher potential than in our other core areas, with successful wells typically having higher initial production rates with steeper declines and shorter production lives. Drilling cost per well also tends to be significantly higher than in our other areas due to the increased depth and complexity of wellbore conditions. Three wells have been drilled in the first six months of 2007. We are evaluating additional drilling opportunities for the remainder of 2007.

Other Areas

Gulf of Mexico.  We own natural gas and oil interests in 73,614 gross (36,770 net) acres in state and federal waters off the coast of Texas and Louisiana. At June 30, 2007 our estimated net proved reserves were 57.3 Bcfe, with net production of approximately 20.5 Mmcfe per day for the month of June 2007. The water depth ranges from 30 feet to 1,100 feet and activity extends from the coast to more than 100 miles offshore. The Gulf of Mexico is one of the premier producing basins in the United States and is an area where we have achieved value-added growth through exploitation and exploration. Our production will range in depth from several thousand feet to in excess of 17,000 feet. The reservoir rocks range in age from the Plio-Pleistocene through the Oligocene. Typical Gulf of Mexico reservoirs have high porosity and permeability and wells historically flow at prolific rates. Overall, the Gulf of Mexico is known as an area of high quality 3-D seismic acquisition. Our major areas of activity will include the blocks in East Breaks and High Island areas that are located off the Texas coast, and the East Cameron area located off the Louisiana coast. In most cases in this area we own non-operating interests with larger companies such as Chevron Corporation, BP plc and Apache Corporation. We are currently evaluating our future drilling plans and intend to manage our investment in this area to maximize returns without significantly increasing future capital expenditures.

Piceance Basin.  The Piceance Basin in northwestern Colorado is a sedimentary basin consisting of multiple productive sandstone formations in one of the country’s most prolific natural gas regions. We entered the Piceance Basin in 1993 with the purchase of leasehold interests predominantly located on federal lands. We acquired this position in order to utilize the experience we had gained in underbalanced drilling and foam

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fracture simulations in West Texas. Initially, development of these natural gas reserves was limited due to high drilling costs and complex completion requirements. However, new drilling and completion technologies now enable successful development in this area.

We are currently evaluating wells we have drilled, but not completed, on the western portion of our acreage block. At June 30, 2007, we had identified 828 potential drilling locations on the eastern portion of our 40,334 gross (15,686 net) acres. We will continue to evaluate our position in 2007 and intend to manage our investment in this area to maximize returns without significantly increasing future capital expenditures.

Other West Texas.  Our other non-tertiary West Texas assets include our Brooklaw field and the Goldsmith Adobe Unit in the Permian Basin. As of June 30, 2007, we own 23,059 gross (22,140 net) acres in these prospects. As of June 30, 2007, our estimated net proved reserves were 27.0 Bcfe. We have identified 68 potential drilling locations in these fields, including 56 proved undeveloped locations, and intend to drill approximately 17 development wells in 2007.

Other.  We own interests in properties in the Arkoma and Anadarko Basins and other non-strategic areas. As of June 30, 2007, we hold interests in 212,210 gross (96,798 net) leasehold and option acres in these non-strategic areas.

Tertiary Oil Recovery

Wellman Unit.  The Wellman Unit is part of our tertiary oil recovery operations. The Wellman Field, located in Terry County, was discovered in 1950 and produces from the Canyon Reef limestone formation of Permian age from an average depth of 9,500 feet. The Wellman Unit is on the western edge of the Horseshoe Atoll, a geologic feature in the northern part of the Midland Basin. There are approximately 110 separate fields that are contained within this feature, including seven existing CO₂ floods. The Wellman Unit covers approximately 2,120 acres, 1,200 of which are well-suited for both water and CO₂ floods. The Wellman Field has been partially CO₂ flooded and water flooded to produce 13.9 Mmcfe to date. We recently re-initiated injection of CO₂, and our injection rate is expected to reach 5.3 Mmcfe per day in 2007 and to average 30.9 Mmcf per day over the next 10 years. Current net proved reserves attributable to the Wellman Unit are 1.6 Mmcfe. We also own a CO₂ recycling plant at this unit with a capacity of 28 Mmcf per day. The plant includes 6,000 horsepower of CO₂ compression and 4,850 horsepower of processing compression, which is sufficient to handle the recycling of the CO₂ that will be produced in association with the production of these reserves.

George Allen Unit.  The George Allen Unit, located in Gaines County, covers 800 gross acres in the George Allen Field and produces from the San Andres formation from an average depth of 4,950 feet. An additional 320 acres adjacent to the unit to the south have also been leased. The field is located within the greater Wasson area which contains seven active CO₂ floods including the largest in the world, the Denver Unit. The George Allen Unit has produced 2.7 Mmcfe to date, but it also contains a significant transition zone which has been proven to be a tertiary oil target at the nearby Denver Unit. We are currently moving ahead with the implementation of a nine pattern pilot program which is expected to begin CO₂ injection in the third quarter of 2007. As of June 30, 2007, net proved reserves attributable to the George Allen Unit were 1.4 Mmcfe. The CO₂ injection rate is expected to reach 15 Mmcf per day by end of year 2007.

South Mallet Unit.  The South Mallet Unit, located in Hockley County, covers 3,540 gross acres in the Slaughter/Levelland Field complex and produces from the San Andres formation from an average depth of 5,000 feet. These fields are some of the largest in West Texas and currently have ten active CO₂ floods and four more at various stages of readiness. The South Mallet Unit has produced 4.6 Mmcfe to date. We plan to begin injection of CO₂ in 2009, and we expect to reach an injection rate of approximately 7,100 Mcf per day by the beginning of 2010. Current net proved reserves attributable to the South Mallet Unit are 2.5 Mmboe.

Jones Ranch Area.  Several miles west of the George Allen Unit, in Gaines County, PetroSource has acquired various leases in the Jones Ranch Area. These leases produce from various depths and formations from approximately 2,400 gross acres. We are evaluating these leases for both conventional development and tertiary potential.

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Proved Reserves

The following tables present our historical estimated net proved natural gas and oil reserves and the present value of our estimated proved reserves as of December 31, 2005 and 2006 and June 30, 2007. The PV-10 and Standardized Measure shown in the table are not intended to represent the current market value of our estimated market value or our estimated natural gas and oil reserves. At June 30, 2007 approximately 69% of our proved reserves were proved undeveloped reserves. Based on our current drilling schedule, we estimate that 97% of our current proved undeveloped reserves will be developed by 2011 and all of our current proved undeveloped reserves will be developed by 2012.

Netherland, Sewell & Associates, Inc., independent oil and gas consultants, have prepared the reports of proved reserves of natural gas and crude oil for our net interest in oil and gas properties, which constitute approximately 92% of our total proved reserves as of December 31, 2006 and 87.2% of our total proved reserves as of June 30, 2007. DeGolyer and MacNaughton prepared the reports of proved reserves for PetroSource, which constitute approximately 7% of our total proved reserves as of December 31, 2006 and 10.3% of our total proved reserves as of June 30, 2007. Netherland, Sewell & Associates, Inc. and DeGolyer and MacNaughton prepared independent engineering reports for 97.5% of our total reserves represented by SandRidge on June 30, 2007 and are included exactly as represented by the respective firms. The remaining 2.5% of the proved reserves were estimated internally by us.

	At December 31,			At December 31,			At June 30,
	2005			2006			2007
Estimated Proved Reserves(1)
Natural Gas (Bcf)(2)		237.4			850.7			967.6
Oil (MmBbls)		10.4			25.2			34.4
Total (Bcfe)		300.0			1,001.8			1,174.0
PV-10 (in millions)	$	733.3	(3)	$	1,734.3	(3)	$	2,558.8	(3)
Standardized Measure of Discounted Net Cash Flows (in millions)(4)	$	499.2		$	1,440.2			n/a	(5)

(1)

Our estimated proved reserves and the future net revenues, PV-10, and Standardized Measure of Discounted Net Cash Flows were determined using end of the period prices for natural gas and oil that we realized as of December 31, 2005, December 31, 2006 and June 30, 2007, which were $8.40 per Mcf of natural gas and $54.04 per barrel of oil at December 31, 2005, $5.64 per Mcf of natural gas and $57.75 per barrel of oil at December 31, 2006, and $6.70 per Mcf of natural gas and $63.78 per barrel of oil at June 30, 2007.

(2)

Given the nature of our natural gas reserves, a significant amount of our production, primarily in the WTO, contains natural gas high in CO2 content. These figures are net of volumes of CO2 in excess of pipeline quality specifications.

(3) PV-10 is a non-GAAP financial measure and represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using pricing assumptions in effect at the end of the period. PV-10 differs from Standardized Measure of Discounted Net Cash Flows because it does not include the effects of income taxes and other items on future net revenues. Neither PV-10 nor Standardized Measure represent an estimate of fair market value of our natural gas and oil properties. PV-10 is used by the industry and by our management as an arbitrary reserve asset value measure to compare against past reserve bases

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and the reserve bases of other business entities that are not dependent on the taxpaying status of the entity. The following tables provide a reconciliation of our Standardized Measure to PV-10:

	At December 31,
	2005		2006
	(In millions)
Standardized Measure of Discounted Net Cash Flows	$	499.2	$	1,440.2
Present value of future income tax and other discounted at 10%		234.1		294.1
PV-10	$	733.3	$	1,734.3

(4) The Standardized Measure of Discounted Net Cash Flows represents the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs, and income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. Standardized Measure differs from PV-10 because Standardized Measure includes the effect of future income taxes and other items.

(5) Standardized Measure of Discounted Net Cash Flows is only calculated at fiscal year end under applicable accounting rules.

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (i) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, and (ii) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.

Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the proved classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.

Estimates of proved reserves do not include the following:

•  oil that may become available from known reservoirs but is classified separately as indicated additional reserves;

•  crude oil, natural gas, and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors;

•  crude oil, natural gas, and natural gas liquids, that may occur in undrilled prospects; and

•  crude oil, natural gas, and natural gas liquids, that may be recovered from oil shales, coal, gilsonite and other such sources.

Production and Price History

The following tables set forth information regarding our net production of oil, natural gas and natural gas liquids and certain price and cost information for each of the periods indicated. Because of the relatively high volumes of CO₂ produced with natural gas, primarily in certain areas of the WTO, our reported sales and reserves volumes and the related unit prices received for natural gas in these areas are reported net of CO₂ volumes stripped at the gas plants. The gas plant fees for stripping CO₂ produced with natural gas have been taken into account in the disclosed average sales prices of natural gas in the WTO. In most other areas, natural

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gas sales are delivered to sales points with CO₂ levels within pipeline specifications and thus are included in sales and reserves volumes.

							Six Months Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Production Data:
Natural Gas (Mmcf)		6,708		6,873		13,410		4,219		22,292
Oil (MBbls)		37		72		322		46		906
Combined Equivalent Volumes (Mmcfe)		6,930		7,305		15,342		4,495		27,728
Average Daily Combined Equivalent Volumes (Mmcfe/d)		18.9		20.0		42.0		24.8		153.2

							Six Months Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Average Prices(1):
Natural Gas (per Mcf)	$	4.43	$	6.54	$	6.19	$	6.08	$	6.90
Oil (per Bbl)	$	34.03	$	48.19	$	56.61	$	62.99	$	58.18
Combined Equivalent (per Mcfe)	$	4.47	$	6.63	$	6.60	$	6.35	$	7.45

(1) Reported prices represent actual prices for the periods presented and do not give effect to hedging transactions.

							Six Months Ended
	Year Ended December 31,						June 30,
	2004		2005		2006		2006		2007
Expenses per Mcfe:
Lease operating expenses	$	1.48	$	2.22	$	2.29	$	3.04	$	1.77
Production taxes	$	0.36	$	0.43	$	0.30	$	0.34	$	0.29

Productive Wells

The following table sets forth information at June 30, 2007, relating to the productive wells in which we owned a working interest as of that date. Productive wells consist of producing wells and wells capable of producing, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities. Gross wells are the total number of producing wells in which we have an interest, and net wells are the sum of our fractional working interests owned in gross wells.

Area	Gross		Net
WTO		331		270
East Texas		144		134
Gulf Coast		219		135
Other:
Gulf of Mexico		58		42
Other West Texas		303		292
PetroSource		38		34
Piceance Basin		44		15
Other		332		118
Total		1,469		1,040

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Developed and Undeveloped Acreage

The following table sets forth information at June 30, 2007:

	Developed				Undeveloped
	Acreage(1)				Acreage(2)
Area	Gross(3)		Net(4)		Gross(3)		Net(4)
WTO		13,702		11,106		485,905		393,291
East Texas		29,084		25,817		19,522		6,740
Gulf Coast		39,438		24,678		14,026		10,087
Other:
Gulf of Mexico		73,614		36,770		—		—
Other West Texas		13,680		13,544		9,379		8,598
PetroSource		9,064		8,195		—		—
Piceance Basin		1,800		451		38,534		15,234
Other		81,698		39,801		130,512		56,996
Total		262,080		160,362		697,878		490,946

(1)	Developed acres are acres spaced or assigned to productive wells.
(2)	Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether such acreage contains proved reserves.
(3)	A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.
(4)	A net acre is deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

Many of the leases comprising the acreage set forth in the table above will expire at the end of their respective primary terms unless production from the leasehold acreage has been established prior to such date, in which event the lease will remain in effect until the cessation of production. We generally have been able to obtain extensions of the primary terms of our federal leases when we have been unable to obtain drilling permits due to a pending Environmental Assessment, Environmental Impact Statement or related legal challenge. The following table sets forth as of June 30, 2007 the expiration periods of the gross and net acres that are subject to leases in the acreage summarized in the above table.

	Acres Expiring
Twelve Months Ending	Gross		Net
December 31, 2007		3,953		2,507
December 31, 2008		48,443		40,593
December 31, 2009		156,894		115,566
December 31, 2010 and later		402,522		280,722
Other(1)		348,146		211,920
Total		959,958		651,308

(1) Leases remaining in effect until the cessation of development efforts or cessation of production on the developed portion of the particular lease.

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Drilling Results

The following table sets forth information with respect to wells we completed during the periods indicated. The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation between the number of productive wells drilled, quantities of reserves found or economic value. Productive wells are those that produce commercial quantities of hydrocarbons, regardless of whether they produce a reasonable rate of return.

	Year Ended				Six Months Ended
	December 31,				June 30,
	2006				2007
	Gross		Net		Gross		Net
Development:
Productive		82		50.8		104		69.4
Dry		5		2.5		1		1.0
Exploratory:
Productive		19		13.0		2		1.5
Dry		6		5.0		2		1.5
Total:
Productive		101		63.8		106		70.9
Dry		11		7.5		3		2.5

Drilling Rigs

The following table sets forth information with respect to the drilling on our acreage as of the periods indicated.

	As of December 31, 2006				As of August 15, 2007
Area	Owned(1)		Third Party		Owned(1)		Third Party
WTO		9		—		26		4
East Texas		—		2		—		5
Gulf Coast		—		1		—		—
Other		1		—		2		1
Total		10		3		28		10

(1) Includes both rigs owned by Lariat, our wholly owned subsidiary, and by Larclay, a joint venture.

Marketing and Customers

Through Integra Energy, our subsidiary, we market our natural gas production in accordance with standard industry practices. Each month we develop a portfolio of natural gas sales by arranging for a percentage of Integra Energy’s natural gas to be sold on a first of the month index price basis with the remaining volume sold on a daily swing basis at current market rates. Most of the natural gas is sold on a month-to-month basis, and any longer term or evergreen agreements that we are subject to provide pricing provisions that allow us to receive monthly market area based prices. During the year ended December 31, 2006, we sold natural gas to 20 different purchasers.

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Our top five natural gas purchasers of our WTO production for the six months ended June 30, 2007 and each company’s approximate percentage of total sales during that period are listed below:

Gas Purchasers	%
Magnus Energy Marketing, Ltd.		20.4%
Atmos Energy Corporation		19.9%
ANP Funding I, LLC		16.9%
City of Austin, Texas		11.9%
El Paso Industrial Energy, LP		10.5%

Title to Properties

As is customary in the natural gas and oil industry, we initially conduct only a cursory review of the title to our properties on which we do not have proved reserves. Prior to the commencement of drilling operations on those properties, we conduct a thorough title examination and perform curative work with respect to significant defects. To the extent title opinions or other investigations reflect title defects on those properties, we are typically responsible for curing any title defects at our expense. We generally will not commence drilling operations on a property until we have cured any material title defects on such property. In addition, prior to completing an acquisition of producing natural gas and oil leases, we perform title reviews on the most significant leases, and depending on the materiality of properties, we may obtain a title opinion or review previously obtained title opinions. To date, we have obtained title opinions on substantially all of our producing properties and believe that we have satisfactory title to our producing properties in accordance with standards generally accepted in the natural gas and oil industry. However, we have drilled wells in the Piceance Basin, which are subject to litigation that may affect that property. Please read “— Legal Proceedings.” Our natural gas and oil properties are subject to customary royalty and other interests, liens for current taxes and other burdens which we believe do not materially interfere with the use of or affect our carrying value of the properties.

Drilling and Oil Field Services Operations

We provide drilling and related oil field services to our exploration and production business and to third-parties in West Texas.

Drilling Operations

We drill for our own account in the WTO through our drilling and oil field services subsidiary, Lariat Services, Inc. In addition, we also drill wells for other natural gas and oil companies, primarily located in the West Texas region. We believe that drilling with our own rigs allows us to control costs and maintain operating flexibility. We are a party to a joint venture, Larclay, with CWEI, where we currently have eleven rigs working for our own account and CWEI. Larclay has one rig that has currently not been assembled. We believe that we are one of the largest privately held drilling contractors in the United States on a footage drilled basis. We believe that our ownership of drilling rigs and our related oil field services will continue to be a catalyst of our growth. Currently, 28 of our rigs are working on properties operated by us, and we are operating 38 rigs, including eleven of the twelve rigs owned by Larclay. Our rig fleet is designed to drill in our specific areas of operation and have an average horsepower of over 800 and an average depth capacity of greater than 10,500 feet.

In 2005, we ordered 26 rigs from Chinese manufacturers for an aggregate purchase price of $126.4 million, which include the cost of assembling and equipping the rigs in the U.S. Due in part to the shortage of experienced drilling employees and various operational challenges, we have deemed it prudent to retrofit five Chinese rigs to a conventional operation. This involves the replacement of the Chinese trailer mounted unit with the traditional box-on-box substructure, cantilever mast and hand-brake drawworks. We anticipate the retrofit will be completed in the second quarter 2008.

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The table below identifies certain information concerning our contract drilling operations:

	Year Ended									Six Months Ended
	December 31,									June 30,
	2004			2005			2006			2006			2007
Number of operational rigs owned at end of period		10			19			25			21			27	(3)
Average number of operational rigs owned during the period		8			14.3			21.9			20.3			25.5	(3)
Average number of rigs utilized		8			14.3			21.9			20.3			23.2
Utilization rate		100	%		100	%		100	%		100	%		91	%
Average drilling revenue per day(1)(2)	$	73,023		$	164,495		$	373,051		$	347,062		$	398,872
Average drilling revenue per rig per day(2)	$	9,128		$	11,503		$	17,034		$	17,071		$	17,193
Total footage drilled (feet in thousands)		635,684			1,749,700			2,124,079			1,149,342			873,861
Number of wells drilled		159			249			379			200			134

(1)	Represents the total revenues from our contract drilling operations divided by the total number of days our drilling rigs were used during the period.
(2)	Does not include revenues for related rental equipment.
(3)	Does not include five rigs being retrofitted as of June 30, 2007.

The table below identifies certain information concerning our drilling rigs as of August 15, 2007:

						Operating for		Operating for
	Owned			Operational		SandRidge		Third Parties
Lariat		32	(1)		27		21		4
Larclay		12	(2)		11		7		4
Total		44			38		28		8

(1)	Includes five rigs that were being retrofitted.
(2)	Includes one rig that has not been assembled.

Oil Field Services

Our oil field services business began in 1986 and conducts operations that complement our drilling services operation. These services include providing pulling units, coiled-tubing units, trucking, location and road construction roustabout services, mud logging and rental tools to ourselves and to third-parties. Less than 13% of our oil field services revenues are from third-parties. We also provide underbalanced drilling systems for our own wells. Our expected capital expenditures for 2007 related to our oil field services are $115 million.

Types of Drilling Contracts

We obtain our contracts for drilling natural gas and oil wells either through competitive bidding or through direct negotiations with customers. Our drilling contracts generally provide for compensation on a daywork, footage or turnkey basis. The contract terms we offer generally depend on the complexity and risk of operations, the on-site drilling conditions, the type of equipment used, the anticipated duration of the work to be performed and prevailing market rates. For a discussion of these contracts, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Overview — Drilling and Oil Field Services.”

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Our Customers

We perform approximately 67% of our drilling services in support of our exploration and production business. We also have significant customer relationships with other operators in West Texas, including Mariner Energy, Inc. For the six months ended June 30, 2007, we generated revenues of $23.3 million, for drilling services performed for third-parties, with Mariner Energy, Inc. accounting for $14.3 million of those revenues.

In addition, we began receiving delivery of rigs to our Larclay joint venture in the first quarter of 2006. Larclay began drilling wells in the first quarter of 2006. CWEI will utilize fewer Larclay rigs on its own projects than initially anticipated.

Midstream Gas Services

We provide gathering, compression, processing and treating services of natural gas in the TransPecos region of West Texas and the Piceance Basin. Our midstream operations and assets not only serve our exploration and production business, but also service other natural gas and oil companies. The following tables set forth our primary midstream assets as of June 30, 2007:

	Plant Capacity		Average			Third Party
ROC Gas Operated Plants	(Mmcf/d)		Utilization(1)			Usage
Pike’s Peak(2)		58		90.0	%		<1.0	%
Grey Ranch(3)		72		89.5	%		34.2	%
Sagebrush(4)		50		14.9	%		10.2	%

(1)	Average utilization for six months ended June 30, 2007.
(2)	A project to expand Pike’s Peak capacity to 70 Mmcf per day is planned for completion by the fourth quarter of 2007.

(3) The Grey Ranch plant is operated by Southern Union. A project to expand the plant to 90 Mmcf/d will be completed during the fourth quarter of 2007. The plant capacity can be further increased to 160 Mmcf/d with additional capital improvements.

(4) Sagebrush commenced processing operations on May 1, 2007. Current throughput is 19 Mmcf per day, increasing utilization to 37.6%.

	CO2 Compression		Average
PetroSource Facilities	Capacity (Mmcf/d)		Utilization(1)
Pike’s Peak		38		59.7	%
Mitchell		26		4.2	%
Grey Ranch		40		60.9	%
Terrell		38		54.8	%

(1) Average utilization for six months ended June 30, 2007.

West Texas

In Pecos County, we operate and own 92.5% of the Pike’s Peak gas treating plant, which has the capacity to treat 58 Mmcf per day of gas for the removal of CO₂ from natural gas produced in the Piñon Field and nearby areas. We intend to expand Pike’s Peak’s capacity to 70 Mmcf per day during the fourth quarter of 2007. We also have a 50% interest in the partnership that leases and operates the Grey Ranch CO₂ treatment plant located in Pecos County, which has the capacity to treat 85 Mmcf per day of gas. A project to increase the plant capacity to 90 Mmcf per day will be completed during the fourth quarter of 2007. Further expansion to 160 Mmcf per day may be accomplished with additional capital expenditures. The treating capacities for both the Pike’s Peak and Grey Ranch plants are dependent upon the quality of natural gas being treated. The

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above numbers for the Pike’s Peak and Grey Ranch plants are based on a natural gas stream that is about 65% CO₂.

We also operate or own approximately 275 miles of natural gas gathering pipelines and numerous dehydration units. Within the Piñon Field, we operate separate gathering systems for sweet natural gas and produced natural gas containing high percentages of CO₂. In addition to servicing our exploration and production business, these assets also service other natural gas and oil companies.

A portion of our West Texas assets, including the Pike’s Peak plant and approximately 44 miles of pipeline, was acquired from TXU Lone Star in 1999. We have since constructed or acquired approximately 231 miles of pipeline. In 2003, we entered into a 50% joint venture with Southern Union Gas Services, whose primary assets are a lease on the Grey Ranch natural gas treatment plant and a 22-mile pipeline gathering system. The term of the lease expires in mid-2010 and we will either construct our own treating facilities, purchase Grey Ranch or renegotiate a long-term lease extension. Our two West Texas plants remove CO₂ from natural gas production and deliver residue gas into the Atmos Lone Star and Enterprise Energy Services pipelines. These assets are operated on fixed fees based upon throughput of natural gas. We have also secured 50 Mmcf/d of treating capacity at Anadarko’s Mitchell Plant under a long term favorable fixed fee arrangement.

Approximately 90% of the produced natural gas gathered by our midstream assets in West Texas requires compression from the wellhead to the final sales meter. We began replacing third-party rental compression through ROC Gas in 2003. ROC Gas currently owns and operates approximately 27,000 horsepower of gas compression and that number will grow to approximately 53,000 horsepower by the end of 2007.

Other Areas

Our Piceance Basin system consists of 50 Mmcf per day of processing plants and approximately 53 miles of pipeline gathering systems. We gather and transport our natural gas and third-party natural gas to market delivery points on Colorado Interstate Gas Company, Questar and Rocky Mountain Natural Gas Pipelines.

We also own approximately 65 miles of pipeline gathering systems in East Texas and approximately 44 miles of pipeline gathering systems in the Gulf Coast area.

Capital Expenditures

The growth of our midstream assets is driven by our exploration and development operations. Historically, pipeline and facility expansions are made when warranted by the increase in production or the development of additional acreage. As a result of our increased production from the Piñon Field during 2007, we have experienced some compressor capacity limitations and relatively poor runtime during the first half of 2007. The current system does not have surplus horsepower to compensate for periods of scheduled maintenance. When units are serviced or go down unexpectedly, we lose throughput and experience higher line pressures, which impact the deliverability. Additionally, some of our compressor units in the Piñon Field have been operating at high loads, which may result in excessive wear and downtime. In order to ensure sufficient capacity for our existing and future Piñon Field production, we plan to install approximately 26,000 horsepower of additional compression by the end of 2007. These new units will provide surplus capacity and allow us to provide stable, low pressures to maximize the deliverability of our wells. We also intend to install over 40 miles of large diameter pipeline and implement treating expansions in the Piñon Field, which we expect to be operational by the fourth quarter of 2007.

Additionally, with our anticipated increase of high CO₂ gas production in the WTO over the next several years, we intend to build supplemental treating capacity, pipeline gathering infrastructure and compression facilities to accommodate our aggressive growth plans.

Marketing

Through Integra Energy, our subsidiary, we buy and sell the natural gas and oil production from SandRidge-operated wells and third-party operated wells within our West Texas operations. Through Integra

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Energy, we will purchase and sell residue gas from the Sagebrush plant into Questar and Colorado Interstate Gas pipelines. We generally buy and sell natural gas on “back-to-back” contracts using a portfolio of baseload and spot sales agreements. Identical volumes are bought and sold on monthly and daily contracts using a combination of Inside F.E.R.C. and Gas Daily pricing indices to eliminate price exposure. We market our oil and condensate production in both Texas and Colorado to Shell Trading U.S. Company at current market rates.

We do not actively seek to buy and sell third-party natural gas due to onerous credit requirements and minimal margin expectations. We conduct thorough credit checks with all potential purchasers and minimize our exposure by contracting with multiple parties each month. We do not engage in any hedging activities with respect to these contracts. We manage several interruptible natural gas transportation agreements in order to take advantage of price differentials or to secure available markets when necessary. At present, we do not have any firm transportation agreements, but we are in the process of securing firm transportation for a portion of our Piñon Field production.

Other Operations

Our CO₂ gathering, merchant sales and tertiary oil recovery operations are conducted through our wholly-owned subsidiary, PetroSource. PetroSource owns 161 miles of CO₂ pipelines in West Texas with approximately 92,000 horsepower of owned and leased CO₂ compression available with approximately 54,000 horsepower currently operational. In addition, PetroSource has exclusive long-term supply contracts to gather CO₂ from natural gas treatment plants in West Texas and is the sole gatherer of CO₂ from the four natural gas treatment plants located in the Delaware and Val Verde Basins of West Texas. The primary use of our CO₂ supply is for use in our and third-parties’ tertiary oil recovery operations. We have assembled an experienced CO₂ management team, including engineers and geologists with extensive experience in CO₂ flooding with industry leaders.

Production from most oil reservoirs includes three distinct phases: primary, secondary, and tertiary, or enhanced recovery. During primary recovery, the natural pressure of the reservoir or gravity drives oil into the wellbore and artificial lift techniques (such as pumps) produce the oil to the surface. However, only about 10% to 15% of a reservoir’s original oil in place is typically produced during primary recovery. Secondary recovery techniques, most commonly waterflooding, often increase ultimate recovery to more than 20% to 45% of the original oil in place. This technique involves injecting water to displace oil and drive it to the wellbore. Even after a water flood, the majority of the original oil in place is still un-recovered. Tertiary, or enhanced recovery techniques, such as CO₂ flooding, can recover additional oil. In CO₂ flooding, the CO₂ is injected into the reservoir. At high pressures (approximately 2,000 psi), the CO₂ is in a liquid phase and can become miscible with the oil, which means the CO₂ and oil mix together and form one fluid. This mixing changes the fluid properties of the oil and enables this trapped oil to begin to move in the reservoir again. The result is a potentially significant increase in production. CO₂ injection can recover, on average, an additional 10% to 16% of the original oil in place in a field over a period of 20 to 30 years. Mature fields that have been abandoned may still be viable candidates for CO₂ floods. CO₂ flooding typically extends the life of oil fields by 20 years.

In 2004 and 2005, we acquired West Texas waterfloods, the Wellman and South Mallet Units and the George Allen Unit for the purpose of evaluating for potential implementation of tertiary oil recovery operations utilizing our equity CO₂ supply. For a discussion of our tertiary reserves and production at the units, please read “— Exploration and Production Operations — Tertiary Oil Recovery.” We have also identified numerous other properties that are attractive candidates for implementing CO₂ projects. We believe we have a competitive advantage in identifying, acquiring and developing these properties because of our expertise and large available CO₂ supply.

PetroSource currently has approximately 101 Mmcf per day of CO₂ in available supply. We currently deliver the majority of this supply to Occidental Permian Ltd. and Pure Resources L.P. In July 2007, we captured and sold 86 Mmcf per day. Our long term contracts in place with Occidental provide for the exchange of up to 60% of the delivered volumes. We believe our current tertiary oil recovery properties will require approximately 60 Mmcf of CO₂ per day over the next five years. We intend to increase our supply of CO₂ in

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order to provide sufficient capacity as our tertiary oil recovery operations grow through additional acquisitions and expansions. We expect the supply of CO₂ to increase as additional natural gas reserves with a high CO₂ content are developed in the Piñon and surrounding fields. In addition, we intend to increase the capacity of our CO₂ treating, gathering and transportation assets which will continue to provide for our equity CO₂ needs, as well as the expansion of our merchant sales business. We recently completed the refurbishment of an additional compressor unit at the Grey Ranch plant at a cost of approximately $1.2 million. The unit added 6,350 operational horsepower and 16 Mmcf per day of capacity to our system.

In addition to gathering CO₂ for use in tertiary oil recovery operations, our CO₂ assets may create another economic benefit by generating Emissions Reduction Credits (“ERCs”). Recently, a number of states of the U.S. have passed laws, adopted regulations or undertaken regulatory initiatives to reduce the emission of “greenhouse gases,” such as CO₂ and methane. In addition, the U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases, and in light of the U.S. Supreme Court’s recent decision in Massachusetts, et al. v. EPA, the U.S. Environmental Protection Agency may be required to regulate greenhouse gas emissions from mobile sources (e.g., cars and trucks) even if Congress does not adopt new legislation specifically addressing emissions of greenhouse gases. Other nations (not including the United States) have already agreed to regulate emissions of greenhouse gases pursuant to the United Nations Framework Convention on Climate Change, also known as the “Kyoto Protocol.” We believe that we are well positioned to benefit from the developing market for trading ERCs. We currently capture approximately 1.5 million tons of CO₂ per year. Since that CO₂ would otherwise escape into the atmosphere, the resulting capture of CO₂ generates ERCs that can be sold to parties either needing or desiring to offset their own CO₂ emissions. In the past, we have sold a portion of our ERCs; however, this market is still in its infancy and has not been a material source of income. In the coming years, we expect ERCs to become a greater source of income.

Competition

We believe that our leasehold acreage position, oil field service businesses, midstream assets, CO₂ supply and technical and operational capabilities generally enable us to compete effectively. However, the natural gas and oil industry is intensely competitive, and we face competition in each of our business segments.

We believe our geographic concentration of operations and vertical integration enable us to compete effectively with our exploration and production operations. However, we compete with companies that have greater financial and personnel resources than we do. These companies may be able to pay more for producing properties and undeveloped acreage. In addition, these companies may have a greater ability to continue exploration activities during periods of low natural gas and oil market prices. Our larger or integrated competitors may be able to absorb the burden of any existing and future federal, state, and local laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing natural gas and oil properties.

We believe the type, age and condition of our drilling rigs, the quality of our crew and the responsiveness of our management generally enable us to compete effectively. However, to the extent we drill for third-parties, we encounter substantial competition from other drilling contractors. Our primary market area is highly competitive. The drilling contracts we compete for are sometimes awarded on the basis of competitive bids. We believe pricing and rig availability are the primary factors our potential customers consider in determining which drilling contractor to select. While we must be competitive in our pricing, our competitive strategy generally emphasizes the quality of our equipment, the experience of our rig crews and our willingness to drill on a turnkey basis, to differentiate us from our competitors. This strategy is less effective when demand for drilling services is weak or there is an oversupply of rigs, as these conditions usually result in increased price competition, which makes it more difficult for us to compete on the basis of factors other than price. Many of our competitors have greater financial, technical and other resources than we do. Their greater capabilities in these areas may enable them to better withstand industry downturns and better retain skilled rig personnel.

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We believe our geographic concentration of operations enables us to compete effectively in our midstream business segment. Most of our midstream assets are integrated with our production. However, with respect to third-party gas and acquisitions, we compete with companies that have greater financial and personnel resources than we do. These companies may be able to pay more for acquisitions. In addition, these companies may have a greater ability to price their services below our prices for similar services. Our larger or integrated competitors may be able to absorb the burden of any existing and future federal, state, and local laws and regulations more easily than we can, which would adversely affect our competitive position.

We believe our supply of CO₂, focus on small to mid-sized acquisitions and technical expertise enable us to compete effectively in our tertiary oil recovery business. However, we face the same competitive pressures in this business that we do in our traditional exploration and production segment.

Seasonal Nature of Business

Generally, the demand for natural gas decreases during the summer months and increases during the winter months. Seasonal anomalies such as mild winters or cool summers sometimes lessen this fluctuation. In addition, certain natural gas users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during the summer. This can also lessen seasonal demand fluctuations. Seasonal weather conditions and lease stipulations can limit our drilling and producing activities and other natural gas and oil operations in a portion of our operating areas. These seasonal anomalies can pose challenges for meeting our well drilling objectives and can increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay our operations.

Environmental Matters and Regulation

General

We are subject to various stringent and complex federal, state and local laws and regulations governing environmental protection including the discharge of materials into the environment. These laws and regulations may, among other things:

•  require the acquisition of various permits before drilling commences;

•  require the installation of expensive pollution control equipment;

•  restrict the types, quantities and concentration of various substances that can be released into the environment in connection with natural gas and oil drilling production, transportation and processing activities;

•  suspend, limit, prohibit or require approval before construction, drilling and other activities in certain lands lying within wilderness, wetlands and other protected areas; and

•  require remedial measures to mitigate pollution from historical and ongoing operations, such as the closure of pits and plugging of abandoned wells.

These laws, rules and regulations may also restrict the rate of natural gas and oil production below the rate that would otherwise be possible. The regulatory burden on the natural gas and oil industry increases the cost of doing business in the industry and consequently affects profitability.

Governmental authorities have the power to enforce compliance with environmental laws, regulations and permits, and violations are subject to injunction, as well as administrative, civil and even criminal penalties. The effects of these laws and regulations, as well as other laws or regulations that may be adopted in the future, could have a material adverse impact on our business, financial condition and results of operations.

Below is a discussion of the environmental laws and regulations that could have a material impact on the oil and gas industry.

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Comprehensive Environmental Response, Compensation and Liability Act

The Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. In the course of our operations, we generate wastes that may fall within CERCLA’s definition of hazardous substances. Further, natural gas and oil exploration, production, processing and other activities have been conducted at some of our properties by previous owners and operators, and materials from these operations remain on some of our properties and in some cases may require remediation. Therefore, governmental agencies or third-parties could seek to hold us responsible under CERCLA or similar state laws for all or part of the costs to clean up a site at which hazardous substances may have been released or deposited.

Waste Handling

The Resource Conservation and Recovery Act, or RCRA, and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the U.S. Environmental Protection Agency, or EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own more stringent requirements. Drilling fluids, produced waters, and most of the other wastes associated with the exploration, development, and production of crude oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain natural gas and oil exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change would likely increase our operating expenses, which could have a material adverse effect on our business, financial condition or results of operations.

Air Emissions

The Federal Clean Air Act, and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. These regulatory programs may require us to obtain permits before commencing construction on a new source of air emissions, and may require us to reduce emissions at existing facilities. As a result, we may be required to incur increased capital and operating costs. For instance, the Grey Ranch natural gas treatment plant currently operates under a grandfather clause, which expires, possibly in as early as September 2008. Southern Union, the operator of the Grey Ranch plant, has been in discussions with the Texas Commission on Environmental Quality concerning an extension of the grandfather clause protection until January 2011. We expect that the State of Texas will require us to obtain an air emissions permit for the plant prior to the expiration of the grandfather clause. The new air permit may impose new, lower air emissions limits for nitrogen oxides and possibly other contaminants, and we may be required to incur capital costs to upgrade the plant’s air emissions control equipment in order to achieve these new, lower air emissions limits. Based on information currently available to us, we estimate that the cost to upgrade the plant if new, lower air emissions limits are imposed by the new air permit could be approximately $7 million, of which we would be responsible for approximately $3.5 million and Southern Union would be responsible for approximately $3.5 million. Additionally, federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal Clean Air Act and analogous state laws and regulations.

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Water Discharges

The Federal Water Pollution Control Act, or the Clean Water Act, and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances into waters of the United States, including wetlands. These laws prohibit the discharge of produced waters and sand, drilling fluids, drill cuttings and other substances related to the oil and natural gas industry into onshore, coastal and offshore waters without appropriate permits. Some of the pollutant limitations have become more restrictive over the years and additional restrictions and limitations may be imposed in the future. The Clean Water Act also regulates storm water discharges from industrial and construction activities. Regulations promulgated by the EPA and state regulatory agencies require industries engaged in certain industrial or construction activities to acquire permits and implement storm water management plans and best management practices, to conduct periodic monitoring and reporting of discharges, and to train employees. Further, federal and state regulations require certain oil and natural gas exploration and production facilities to obtain permits for storm water discharges. There are costs associated with each of these regulatory requirements. In addition, federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

The Oil Pollution Act of 1990, or OPA, which amends and augments the Clean Water Act, establishes strict liability for owners and operators of facilities that are the site of a release of oil into waters of the United States. In addition, OPA and regulations promulgated pursuant thereto impose a variety of regulations on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills. For example, certain natural gas and oil operators must develop, implement and maintain facility response plans, conduct annual spill training for certain employees and provide varying degrees of financial assurance.

National Environmental Policy Act

Natural gas and oil exploration and production activities on federal lands are subject to the National Environmental Policy Act, or NEPA. NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an Environmental Assessment that assesses the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed Environmental Impact Statement that may be made available for public review and comment. All of our current exploration and production activities, as well as proposed exploration and development plans on federal lands require governmental permits that are subject to the requirements of NEPA. This process has the potential to delay or limit our development of natural gas and oil projects.

Other Laws and Regulations

Recent scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gases” and including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, the U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases. In addition, several states have declined to wait on Congress to develop and implement climate control legislation and have already taken legal measures to reduce emissions of greenhouse gases. Also, as a result of the U.S. Supreme Court’s decision on April 2, 2007 in Massachusetts, et al. v. EPA, the EPA may be required to regulate greenhouse gas emissions from mobile sources (e.g., cars and trucks) even if Congress does not adopt new legislation specifically addressing emissions of greenhouse gases. Other nations have already agreed to regulate emissions of greenhouse gases pursuant to the Kyoto Protocol, an international treaty pursuant to which participating countries (not including the United States) have agreed to reduce their emissions of greenhouse gases to below 1990 levels by 2012. Passage of climate control legislation or other regulatory initiatives by Congress or various states of the U.S., or the adoption of regulations by the EPA and analogous state agencies that restrict emissions of greenhouse gases in areas in which we conduct business could have an adverse affect on some of our operations and demand for some of our services or products.

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New and more stringent laws and regulations concerning the security of industrial facilities, including natural gas and oil facilities could be adopted in the future. Our operations may in the future be subject to such laws and regulations. Presently, it is not possible to accurately estimate the costs we could incur to comply with any such facility security laws or regulations, but such expenditures could be substantial.

Other Regulation of the Natural Gas and Oil Industry

The natural gas and oil industry is extensively regulated by numerous federal, state and local authorities, including Native American tribes. Legislation affecting the natural gas and oil industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, and Native American tribes are authorized by statute to issue rules and regulations binding on the natural gas and oil industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the natural gas and oil industry increases our cost of doing business and, consequently, affects our profitability, these burdens generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.

Drilling and Production

Our operations are subject to various types of regulation at federal, state, local and Native American tribal levels. These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations. Most states, and some counties, municipalities and Native American tribes, in which we operate also regulate one or more of the following:

•  the location of wells;

•  the method of drilling and casing wells;

•  the rates of production or “allowables;”

•  the surface use and restoration of properties upon which wells are drilled and other third-parties;

•  the plugging and abandoning of wells; and

•  notice to surface owners and other third-parties.

State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of natural gas and oil properties. Some states allow forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third-parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from natural gas and oil wells, generally prohibit the venting or flaring of natural gas and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of natural gas and oil we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and natural gas liquids within its jurisdiction.

Federal, state and local regulations provide detailed requirements for the abandonment of wells, closure or decommissioning of production facilities and pipelines, and for site restoration, in areas where we operate. MMS regulations require that owners and operators plug and abandon wells and decommission and remove offshore facilities located in federal offshore lease areas in a prescribed manner. The MMS requires federal leaseholders to post performance bonds or otherwise provide necessary financial assurances to provide for such abandonment, decommissioning and removal. The Railroad Commission of Texas has financial responsibility requirements for owners and operators of facilities in state waters to provide for similar assurances. The U.S. Army Corps of Engineers, or ACOE, and many other state and local municipalities have regulations for plugging and abandonment, decommissioning and site restoration. Although the ACOE does not require bonds or other financial assurances, some other state agencies and municipalities do have such requirements.

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Natural Gas Sales Transportation

Historically, federal legislation and regulatory controls have affected the price of the natural gas we produce and the manner in which we market our production. The Federal Energy Regulatory Commission, or FERC, has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. Since 1978, various federal laws have been enacted which have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in “first sales,” which include all of our sales of our own production.

FERC also regulates interstate natural gas transportation rates and service conditions, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas. Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Today, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, unregulated, open access market for gas purchases and sales that permits all purchasers of gas to buy gas directly from third-party sellers other than pipelines. However, the natural gas industry historically has been very heavily regulated; therefore, we cannot guarantee that the less stringent regulatory approach recently pursued by FERC and Congress will continue indefinitely into the future nor can we determine what affect, if any, future regulatory changes might have on our natural gas related activities.

Under FERC’s current regulatory regime, transmission services must be provided on an open-access, non-discriminatory basis at cost-based rates or at market-based rates if the transportation market at issue is sufficiently competitive. Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and instate waters. Although its policy is still in flux, FERC recently has reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our costs of getting gas to point-of-sale locations.

Employees

As of June 30, 2007, we had approximately 2,200 full-time employees and eight part-time employees, including more than 100 geologists, geophysicists, petroleum engineers, technicians, land and regulatory professionals. Of our approximately 2,200 employees, 292 are located at our headquarters in Oklahoma City, nine in Amarillo, Texas and the remaining 1,907 employees are working in our various field offices and drilling sites.

Offices

We currently lease 67,347 square feet of office space in Oklahoma City, Oklahoma at 1601 N.W. Expressway, where our principal offices are located, and another 28,059 square feet in Enterprise Plaza, which is nearby. The term of the leases expires for our space at 1601 N.W. Expressway on August 31, 2009. For our space at Enterprise Plaza, the term of lease expires on October 31, 2009 for 18,547 square feet, and April 31, 2008 for 9,433 square feet. We also lease or sublease 37,873 square feet of office space in Amarillo, Texas at 701 S. Taylor Street, where our principal offices were previously located. The leases for our Amarillo office expire in April 2009. We also lease 6,725 square feet of office space at 16801 Greenspoint Park Drive in Houston, Texas. This lease expires in January 2014. PetroSource currently leases approximately 3,529 square feet in Midland, Texas. The PetroSource lease expires in December 2008. We also own an approximate 10,000 square foot office building in Midland, Texas. We also own 4,358 square feet of office space and 6,240 square feet of shop space in Odessa, Texas, which serves as the headquarters of Lariat Services. In addition, we have a field office located in Terry County, Texas and Rifle, Colorado. We believe that our office facilities are adequate for our short-term needs.

On July 12, 2007, we purchased several buildings in downtown Oklahoma City, Oklahoma, including the Kerr-McGee Tower, from Chesapeake Energy, Inc. for approximately $25 million and the assumption of related liabilities. These properties are located at 123 Robert S. Kerr Avenue and contain approximately

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450,000 square feet of office space. We intend to relocate our principal offices from 1601 N.W. Expressway to the Kerr-McGee Tower.

Legal Proceedings

On May 18, 2004, we commenced a civil action seeking declaratory judgment against Elliot Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P. in the District Court of Dallas County, Texas, 101st Judicial District, SandRidge Energy, Inc. and Riata Energy Piceance, LLC v. Elliot Roosevelt, Jr. et al, Cause No. 92.717-C. This suit sought a declaratory judgment relating to the rights of the parties in and to certain leases in a defined area of mutual interest in the Piceance Basin pursuant to an acquisition agreement entered into in 1989, including our 41,454 gross (16,193 net) acreage position. We tried the case to a jury in July 2006. Before the case was submitted to the jury, the trial court granted Roosevelt a directed verdict stating that he owned a 25% deferred interest in our acreage after project payout. The directed verdict is not likely to affect our proved reserves of 11.7 Bcfe, because of the requirement that project payout be achieved before the deferred interest shares in revenue. Other issues of fact were submitted to the jury. The trial court recently entered a judgment favorable to Roosevelt. We have filed a motion to modify the judgment and for a new trial. Depending on the outcome of this motion, we expect to appeal, at a minimum, from the entry of the directed verdict. If we do not ultimately prevail, the deferred interest will reduce our economic returns from the project, if project payout is achieved.

We are subject to other claims in the ordinary course of business. However, we believe that the ultimate resolution of the above mentioned claims and other current legal proceedings will not have a material adverse effect on our financial condition or results of operations.

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MANAGEMENT

The following table sets forth information regarding our executive officers, our directors and other key employees as of September 30, 2007.

Name	Age		Position
Tom L. Ward		48	Chairman, Chief Executive Officer and President
Dirk M. Van Doren		48	Executive Vice President and Chief Financial Officer
Matthew K. Grubb		43	Executive Vice President and Chief Operating Officer
Larry K. Coshow		48	Executive Vice President — Land
Todd N. Tipton		52	Executive Vice President — Exploration
Rodney E. Johnson		50	Senior Vice President — Reservoir Engineering
V. Bruce Thompson		60	Senior Vice President — Legal and General Counsel
Thomas L. Winton		60	Senior Vice President — Information Technology and Chief Information Officer
Mary L. Whitson		46	Senior Vice President — Human Resources
Randall D. Cooley		53	Vice President — Accounting
Bill Gilliland		69	Director
Dan Jordan		50	Director
Roy T. Oliver, Jr.		55	Director
D. Dwight Scott		44	Director
Jeffrey Serota		41	Director

Tom L. Ward (Chairman, Chief Executive Officer and President) Mr. Ward has served as our Chairman and Chief Executive Officer since June 2006 and as our President since December 2006. Prior to joining SandRidge, he served as President, Chief Operating Officer and a director of Chesapeake Energy Corporation (NYSE: CHK) from the time he co-founded the company in 1989 until February 2006. From February 2006 until June 2006, Mr. Ward managed his private investments. Chesapeake Energy Corporation is the second largest independent natural gas producer in the U.S. Mr. Ward graduated from the University of Oklahoma in 1981 with a Bachelor of Business Administration in Petroleum Land Management. He is a member of the Board of Trustees of Anderson University in Anderson, Indiana.

Dirk M. Van Doren (Executive Vice President and Chief Financial Officer) Mr. Van Doren has served as our Chief Financial Officer since June 2006. He served in High Yield Research at Goldman Sachs from 1999 until May 2006 and prior to that he was in Equity Research at Bear Stearns. Mr. Van Doren graduated from Colgate University in 1981 with a Bachelor of Arts in Political Science and International Relations and earned a Masters degree in Business Administration from Duke University, The Fuqua School of Business in 1985.

Matthew K. Grubb (Executive Vice President and Chief Operating Officer) Mr. Grubb has served as our Executive Vice President and Chief Operating Officer since June 2007. Prior to this, he had served as our Executive Vice President — Operations since August 2006. Mr. Grubb was employed by Samson Resources beginning in 1995 and served as Division Operations Manager of East Texas and Southeast U.S. Regions for Samson Resources from 2002 through July 2006. Prior to that he was in Business Development at Enogex Inc. and held various technical positions at ConocoPhillips. Mr. Grubb holds a Bachelor of Science degree in Petroleum Engineering in 1986 and a Master of Science degree in Mechanical Engineering in 1988, both from Texas A&M University.

Larry K. Coshow (Executive Vice President — Land) Mr. Coshow has served as our Executive Vice President — Land since September 2006. He previously worked in various land management capacities for Chesapeake Energy Corporation from 1999 through August 2006. Mr. Coshow also worked in various land management capacities at JMA Energy Company, Samson Resources and Texas Oil & Gas Corp. Mr. Coshow received a Bachelor of Business Administration in Petroleum Land Management from the University of Oklahoma in 1981 and earned his Masters degree in Business Administration from Oklahoma City University’s Meinders School of Business in 1993. A founding board member for the University of Oklahoma Football

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Lettermen’s Association, Mr. Coshow serves on the board of directors for the University of Oklahoma’s Varsity “O” Club and is also an active member of the Oklahoma state board for the Fellowship of Christian Athletes.

Todd N. Tipton (Executive Vice President — Exploration) Mr. Tipton joined us as Executive Vice President of Exploration in September 2006. Prior to this, he was Exploration Manager of the Western Division from 2001 through August 2006 for Devon Energy. His career began with Conoco in geophysical acquisition, processing and interpretation and he continued to hold corporate and management positions of increasing responsibilities until he left in 1994 to join Alberta Energy Company (EnCana). After EnCana, Mr. Tipton worked for Samson Resources and in private consulting. He received a Bachelor degree in Geology from The State University of New York at Buffalo in 1977, and completed an executive development program at The Johnson Graduate School of Management at Cornell University. Mr. Tipton is a member of the Rocky Mountain Association of Geologists and a member of the Independent Petroleum Association of Mountain States.

Rodney E. Johnson (Senior Vice President — Reservoir Engineering) Mr. Johnson joined us as Vice President of Reservoir Engineering in January 2007 and was promoted to Senior Vice President — Reservoir Engineering in June 2007. He most recently served as Manager of Reservoir Engineering over Texas and Louisiana Regions for Chesapeake Energy Corporation from October 2003 through December 2006. Prior to this, Mr. Johnson served as Manager of Technology for Aera Energy (a joint venture of Exxon/Shell) where he held positions of increasing importance from 1996 through September 2003. Mr. Johnson graduated from Wichita State University in 1980 with a Bachelor of Science degree in Mechanical Engineering; he has also been a registered Professional Engineer since 1988.

V. Bruce Thompson (Senior Vice President — Legal and General Counsel) Mr. Thompson has served as our General Counsel, Senior Vice President — Legal and Secretary since March 2007. From 2003 until joining us, he was Senior Counsel with the law firm of Brownstein Hyatt Farber Schreck, working in the firm’s Washington, D.C. and Denver offices. From July 2002 until joining Brownstein Hyatt Farber Schreck, Mr. Thompson was a self employed lobbyist and consultant for oil and gas related companies, both domestically and internationally. Mr. Thompson has also served as Senior Vice President and General Counsel of Forest Oil Corporation and Chief of Staff for then Congressman, now U.S. Senator, James Inhofe. Mr. Thompson graduated from the University of Pennsylvania Wharton School of Business with a Bachelor of Science degree in Economics in 1969 and received his Juris Doctorate from the University of Tulsa College of Law in 1974.

Thomas L. Winton (Senior Vice President — Information Technology & CIO) Mr. Winton has served as our Senior Vice President — Information Technology and Chief Information Officer since May 2006. Prior to joining us, Mr. Winton served as Senior Vice President and Chief Information Officer for Chesapeake Energy Corporation from July 1998 until retiring in July 2005. Mr. Winton obtained a Bachelor of Science degree in Mathematics from Oklahoma Christian University in 1969, a Masters degree in Mathematics from Creighton University in 1973, and Masters degree in Business Administration from the University of Houston in 1980. Mr. Winton also completed the Tuck Executive Program, Tuck School of Business, Dartmouth College in 1987.

Mary L. Whitson (Senior Vice President — Human Resources) Ms. Whitson has served as our Senior Vice President — Human Resources since September 2006. Ms. Whitson was the Vice President — Human Resources for Chesapeake Energy Corporation through August 2006, where she held human resources management positions of increasing responsibility for more than eight years. Prior to 1998, she was the Human Resources Manager for FKW, Incorporated, an architecture and government services contracting firm, where she was employed for 16 years. She attended Oklahoma State University and received a Bachelor of Science degree from the University of Central Oklahoma in 1996. Certified as a Senior Professional in Human Resources (SPHR), Ms. Whitson is a graduate of Leadership Oklahoma City Class XXIV and currently serves as a member of the board of directors for the YWCA of Oklahoma City.

Randall D. Cooley (Vice President — Accounting) Mr. Cooley has served as our Vice President, Accounting since November 2006, upon the closing of the NEG acquisition. Prior to joining SandRidge, Mr. Cooley served as the senior financial officer with National Energy Group, Inc. until the time of the NEG

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acquisition, most recently as Vice President and Chief Financial Officer. From 1989 until 2001, Mr. Cooley was Vice President, Controller and Chief Financial Officer for Shana Petroleum Company. He began his career in 1978 with Pennzoil Oil Company in Houston. From 1980 until 1984, he was employed in public accounting and from 1984 until 1989, he was controller for Rebel Drilling Company and Wildcat Well Service. Mr. Cooley earned a Bachelor of Science in Business Administration, with a major in Accounting, from the University of Southern Mississippi in 1978 and is a Certified Public Accountant.

Bill Gilliland (Director) Mr. Gilliland was appointed as a director on January 7, 2006. Mr. Gilliland has served as managing partner of several personal and family investment partnerships, including Gillco Energy, L.P. and Gillco Investments, L.P., since April 1999. Prior to this, Mr. Gilliland was the founder, Chief Executive Officer, President and Chairman of Cross-Continent Auto Retailers, Inc. Mr. Gilliland holds a Bachelor of Business Administration from North Texas State University.

Dan Jordan (Director) Mr. Jordan was appointed as a director of SandRidge in December 2005. Mr. Jordan also has served as a director of PetroSource since May 2004 and served as a Vice President and director of Symbol Underbalanced Air Services and Larco from August 2003 to September 2005. From October 2005 through August 2006, Mr. Jordan served as our Vice President, Business. Since September 2006, Mr. Jordan has been involved in private investments. Prior to joining SandRidge, Mr. Jordan founded Jordan Drilling Fluids, Inc. and served as its Chairman, President and Chief Executive Officer from March 1984 to July 2005. Mr. Jordan sold Jordan Drilling Fluids, Inc. and its wholly owned subsidiary, Anchor Drilling Fluids USA Inc., in August 2005. At that time, Anchor Drilling Fluids USA Inc. was the largest privately held domestic drilling fluids firm.

Roy T. Oliver, Jr. (Director) Mr. Oliver was appointed as a director on July 13, 2006. Mr. Oliver has served as President of R.T. Oliver Investments, Inc., a diversified investment company with interests in energy, energy services, media and real estate, since August, 2001. The company presently owns the largest portfolio of class A office properties in Oklahoma. He has served as President and Chairman of the Board of Valliance Bank, N.A. since August 2004. He founded U.S. Rig and Equipment, Inc. in 1980 and served as its President until its assets were sold in August 2003. Mr. Oliver is a graduate of The University of Oklahoma with a Bachelor of Business Administration degree. He serves on The University of Oklahoma Michael F. Price College of Business Board of Advisors.

D. Dwight Scott (Director) Mr. Scott was appointed as a director on March 20, 2007. He has been a Managing Director of GSO Capital Partners, an investment advisor specializing in the leveraged finance marketplace since September 2005. Prior to joining GSO, Mr. Scott was Executive Vice President and Chief Financial Officer for El Paso Corporation from October 2002 until August 2005. He is a member of the Board of Directors of MCV Investors, Inc., United Engines Holding Company LLC, KIPP, Inc. and the Board of Trustees of the Council on Alcohol and Drugs Houston. Mr. Scott earned a Bachelor’s degree from the University of North Carolina at Chapel Hill and a Master’s of Business Administration from the University of Texas at Austin.

Jeffrey Serota (Director) Mr. Serota was appointed as a director of SandRidge Energy, Inc. on March 20, 2007. He has served as a Senior Partner with Ares Management LLC, an independent Los Angeles based investment firm, since September 1997. Prior to joining Ares, Mr. Serota worked at Bear Stearns from March 1996 to September 1997, where he specialized in providing investment banking services to financial sponsor clients of the firm. He currently serves on the Board of Directors of Marietta Holding Corporation, Douglas Dynamics, LLC, AmeriQual Group LLC, WCA Waste Corporation and White Energy, Inc. Mr. Serota graduated magna cum laude with a Bachelor of Science degree in Economics from the University of Pennsylvania’s Wharton School of Business and received a Masters of Business Administration degree from UCLA’s Anderson School of Management.

Board of Directors

Our board of directors currently consists of six directors, Messrs. Ward, Gilliland, Jordan, Oliver, Scott and Serota. We are not currently required to comply with the corporate governance rules of any stock exchange and, as a private company, we are not currently subject to many of the provisions of the Sarbanes-

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Oxley Act of 2002 and related SEC rules (collectively, “Sarbanes-Oxley”). However, upon the effectiveness of the registration statement related to this prospectus, we will become subject to all of the provisions of Sarbanes-Oxley. If, as we anticipate, our common stock becomes listed on the New York Stock Exchange, a majority of our directors will be required to meet standards of independence. We believe that Messrs. Oliver, Scott and Serota currently meet these independence standards and intend to appoint an additional independent director in order to comply with the listing requirements of the New York Stock Exchange.

Our certificate of incorporation and bylaws provide for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, stockholders will elect a portion of our board of directors each year. Class I directors’ terms will expire at the annual meeting of stockholders to be held in 2010, Class II directors’ terms will expire at the annual meeting of stockholders to be held in 2008 and Class III directors’ terms will expire at the annual meeting of stockholders to be held in 2009. The Class I directors are Messrs. Gilliland, Scott and Serota, the Class II directors are Messrs. Ward and Oliver, and the Class III director is Mr. Jordan. At each annual meeting of stockholders held after the initial classification, the successors to directors whose terms will then expire will be elected to serve from the time of election until the third annual meeting following election. The division of our board of directors into three classes with staggered terms may delay or prevent a change of our management or a change in control. See “Description of Capital Stock — Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation and Bylaws — Classified Board; Renewal of Directors.”

In addition, our bylaws provide that the authorized number of directors, which shall constitute the whole board of directors, may be changed by resolution duly adopted by the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. Vacancies and newly created directorships may be filled by the affirmative vote of a majority of our directors then in office, even if less than a quorum.

Committees of the Board

Audit Committee.  We established an audit committee during the second quarter of 2007 consisting of Messrs. Scott, Oliver and Serota, each of whom has been determined to be independent under the rules of the SEC and the listing requirements of the New York Stock Exchange by our board of directors. Mr. Scott serves as chairman of this committee and has been determined by our board of directors to be an “audit committee financial expert” as defined under the rules of the SEC. This committee oversees, reviews, acts on and reports on various auditing and accounting matters to our board of directors, including: the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices. In addition, the audit committee oversees our compliance programs relating to legal and regulatory requirements.

Compensation Committee.  We expect our board of directors to establish a compensation committee prior to the closing of this offering. As required by the listing standards of the New York Stock Exchange, a majority of the compensation committee will be independent directors within 90 days of listing and consist of solely independent directors within one year of listing. This committee will establish salaries, incentives and other forms of compensation for officers and other employees. Our compensation committee will also administer our incentive compensation and benefit plans. Upon formation of the compensation committee, we expect to adopt a compensation committee charter defining the committee’s primary duties in a manner consistent with the rules of the New York Stock Exchange.

Nominating and Corporate Governance Committee.  We expect our board of directors to establish a nominating and corporate governance committee prior to the closing of this offering. As required by the listing standards of the New York Stock Exchange, the nominating and corporate governance committee will consist of a majority of independent directors within 90 days of listing and consist of solely independent directors within one year of listing. This committee will identify, evaluate and recommend qualified nominees to serve on our board of directors, develop and oversee our internal corporate governance processes and maintain a management succession plan. Upon formation of the nominating and corporate governance committee, we

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expect to adopt a nominating and corporate governance committee charter defining the committee’s primary duties in a manner consistent with the rules of the New York Stock Exchange.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board of directors. We do not currently have a compensation committee. During the last fiscal year, both Mr. Ward, our Chairman, Chief Executive Officer and President, and Mr. Mitchell, our former Chairman, Chief Executive Officer and President, participated in the deliberations of our board of directors concerning executive officer compensation.

Director Compensation

Directors who also serve as employees receive no compensation for serving on our board of directors. Non-employee directors receive a $50,000 retainer and $12,500 for each of the four regular meetings of the board of directors attended by such director. In addition, in 2006, each non-employee director received an annual restricted stock grant in the amount of $100,000 based on the fair market value of common stock at the date of grant, which will vest in 25% increments on each of the first four anniversaries following the date of grant.

From January 1, 2006 to July 10, 2006, each of our non-employee directors received an annual retainer of $30,000 and $1,000 per board meeting attended in person. Directors who also served as employees during this period received no compensation for serving on our board of directors.

The following table sets forth the aggregate compensation awarded to, earned by or paid to our directors during 2006.

	Fees Earned
	or Paid in			Stock
Name	Cash			Awards			Total
Bill Gilliland	$	78,000(1	)	$	14,385(3	)	$	92,385
Dan Jordan	$	50,000(2	)	$	12,259(3	)	$	62,259
Roy T. Oliver, Jr.	$	50,000(2	)	$	14,385(3	)	$	64,385

(1)	Consists of (i) $50,000 received as a retainer for one year of service as a non-employee director, and (ii) $28,000 for attending three meetings before July 10, 2006 and two regular meetings following July 10, 2006.
(2)	Consists of (i) $25,000 received as a retainer for six months of service as a non-employee director and (ii) $25,000 received for attending two regular meetings after July 10, 2006.
(3)	Includes the dollar amount of compensation expense we recognized for the fiscal year ended December 31, 2006 in accordance with FAS 123R. Pursuant to SEC rules and regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by our directors. Assumptions used in the calculation of these amounts are included in Note 18 to our audited financial statements included in this prospectus. As of December 31, 2006, the number of shares of stock held by each non-employee director was: Mr. Gilliland — 1,348,489; Mr. Jordan — 633,333 and Mr. Oliver — 400,000.

Indemnification

We intend to enter into indemnification agreements with all of our directors and executive officers. These indemnification agreements are intended to permit indemnification to the fullest extent now or hereafter permitted by the General Corporation Law of the State of Delaware. It is possible that the applicable law could change the degree to which indemnification is expressly permitted.

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The indemnification agreements will cover expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred as a result of the fact that such person, in his or her capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. The indemnification agreements will generally cover claims relating to the fact that the indemnified party is or was an officer, director, employee or agent of us or any of our affiliates, or is or was serving at our request in such a position for another entity. The indemnification agreements will also obligate us to promptly advance all reasonable expenses incurred in connection with any claim. The indemnitee will be, in turn, obligated to reimburse us for all amounts so advanced if it is later determined that the indemnitee is not entitled to indemnification. The indemnification provided under the indemnification agreements will not be exclusive of any other indemnity rights; however, double payment to the indemnitee will be prohibited.

We will not be obligated to indemnify the indemnitee with respect to claims brought by the indemnitee against:

•  us, except for:

•  claims regarding the indemnitee’s rights under the indemnification agreement;

•  claims to enforce a right to indemnification under any statute or law; and counter-claims against us in a proceeding brought by us against the indemnitee; or

•  any other person, except for claims approved by our board of directors.

We have also agreed to obtain and maintain director and officer liability insurance for the benefit of each of the above indemnitees. These policies will include coverage for losses for wrongful acts and omissions and to ensure our performance under the indemnification agreements. Each of the indemnitees will be named as an insured under such policies and provided with the same rights and benefits as are accorded to the most favorably insured of our directors and officers.

Web Access

We anticipate providing access through our website at http://www.sandridgenergy.com to current information relating to governance, including a copy of each board committee charter, our Code of Conduct, our corporate governance guidelines and other matters impacting our governance principles. You may also contact our chief financial officer for paper copies of these documents free of charge once they have been adopted.

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EXECUTIVE COMPENSATION AND OTHER INFORMATION

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis (1) provides an overview of our compensation policies and programs; (2) explains our compensation objectives, policies and practices with respect to our executive officers; and (3) identifies the elements of compensation for each of the individuals identified in the following table, whom we refer to in this Compensation Discussion and Analysis as our “named executive officers.”

Name	Principal Position
Current Officers:
Tom L. Ward	Chairman, Chief Executive Officer and President
Dirk M. Van Doren	Executive Vice President and Chief Financial Officer
Matthew K. Grubb	Executive Vice President and Chief Operating Officer
Former Officers:
N. Malone Mitchell, 3rd	Former Chairman, Chief Executive Officer and President
John Gaines	Former Chief Financial Officer
Barbara Pope	Former Vice President, Accounting
Todd Dutton	Former Chief Operating Officer and Vice President — Land
Matthew McCann	Former Senior Vice President — Legal

Since our inception through June 2006, we were controlled by Mr. Mitchell, our founder and former Chairman, Chief Executive Officer and President. During this time, Mr. Mitchell held ultimate decision making power with respect to the compensation of our executive officers. In June 2006, Mr. Ward purchased a significant portion of Mr. Mitchell’s common stock and was appointed as our Chairman and Chief Executive Officer. Mr. Ward’s initial compensation level and employment agreement were recommended by a special committee consisting of our independent directors at that time and were approved by our full board of directors. Following Mr. Ward’s appointment, we have experienced significant changes in management, including replacement of substantially all of our executive officers, as well as our compensation objectives, policies and practices as described in more detail below.

Setting Executive Compensation

Role of our Board and Executive Officers.  Our board of directors does not currently have a separate compensation committee due to the size of our existing board of directors and the lack of independent directors. Prior to June 2006, Mr. Mitchell held ultimate decision making control with respect to the compensation levels of our named executive officers, including himself. In determining compensation levels, Mr. Mitchell relied primarily on his personal experience as chief executive officer and founder of the company. Mr. Mitchell did not participate in the deliberations of the special committee or the board of directors related to the compensation of Mr. Ward.

Since Mr. Ward’s appointment in June 2006, executive compensation decisions are generally made on a semi-annual basis by our board of directors or Mr. Ward. Each December, Mr. Ward provides recommendations to our board of directors regarding the compensation levels for our existing executive officers (including himself) and our executive compensation program. After considering these recommendations, our board of directors adjusts base salary levels, determines the amounts of cash bonus awards and determines the amount and vesting of restricted stock grants for each of our executive officers. Each June, Mr. Ward reviews and may adjust the compensation levels of our executive officers, including his own compensation. In making executive compensation decisions and recommendations, Mr. Ward relies primarily on his business judgment,

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competitive practices and personal experience as co-founder and former President and Chief Operating Officer of Chesapeake. In the future, our compensation committee will adjust executive compensation levels on a semi-annual basis based on the recommendations of Mr. Ward.

No other named executive officer assumed an active role in the evaluation, design or administration of our 2006 executive officer compensation program.

Role of the Compensation Committee.  We expect to establish a compensation committee prior to the closing of this offering consisting of three directors, at least one of which will have been determined by the board of directors to be independent under the standards of the New York Stock Exchange. Our board of directors will determine the members of the compensation committee and the scope of the compensation committee’s authority. We anticipate that the authority of the committee will include, among other things:

•  approving, in advance, the compensation and employment arrangements for our executive officers;

•  reviewing all of the compensation and benefit-based plans and programs in which our executive officers participate and adjusting such plans and programs based on our current management team and in anticipation of becoming a public company;

•  administration of our Well Participation Plan; and

•  reviewing and recommending all changes to our stock plan to our board of directors, as appropriate, subject to stockholder approval as required.

In addition, we anticipate that the charter of our compensation committee will grant the committee the sole authority to retain, at our expense, outside consultants or experts to assist it in its duties.

Our board of directors did not engage the services of a compensation consultant to design, review or evaluate our executive compensation arrangements for 2006 or prior thereto.

Objectives of our Executive Compensation Program

Prior to June 2006, our primary executive compensation strategy was to retain our executive officers and reward performance in a manner consistent with similar employers in Amarillo, Texas, the former location of our headquarters. Mr. Mitchell exercised ultimate decision making with respect the compensation of all named executive officers.

Since June 2006, our primary executive officer compensation strategy has been to structure our compensation program to enable us to seek out highly qualified individuals capable of growing the size and enterprise value of our company, complete a successful initial public offering and effectively transition into the new obligations we will face as a public company. Due to our significant growth, our move from Amarillo, Texas to Oklahoma City, Oklahoma and our anticipated initial public offering, we have hired numerous new employees, including several of the named executive officers. These new hires have been made in a competitive compensation environment for highly qualified and experienced energy industry executives, frequently from larger, established public companies. Accordingly, our compensation philosophy has been to strategically and opportunistically attract executive officers by offering competitive cash compensation packages with the potential for the increased returns associated with a high-growth company.

Our board of directors has established a number of processes to assist it in ensuring that our executive compensation program supports these objectives and our company culture. Among those are competitive benchmarking and assessment of individual and company performance, which are described in more detail below.

Competitive Benchmarking.  Our board of directors compares pay practices for our executives against other companies to assist it in the review and comparison of each element of compensation for our executive officers. This practice recognizes that (1) our compensation practices must be competitive in the marketplace and (2) marketplace information is one of the many factors considered in assessing the reasonableness of our executive compensation program.

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The comparative compensation data used in our board of directors’ analysis is derived solely from competitive market analysis. For the fiscal year ended December 31, 2006, our board of directors reviewed the annual reports or similar information of Chesapeake and Devon Energy Corporation, which are public companies within our industry of comparable or greater size and in Oklahoma City, Oklahoma (collectively, “Peer Companies”). Due to our organizational structure, comparisons of survey data to the job descriptions of our executive officers is sometimes difficult. Furthermore, the complexities of our operations and the skills needed of our executive officers are, we believe, greater than those of most companies with comparable total revenues. Therefore, we at times target compensation levels of our Peer Companies, which are significantly larger or more developed. Our board of directors believes that targeting this level of compensation helps to meet our overall total rewards strategy and executive compensation objectives outlined above.

Our board of directors believes that these industry specific and general industry comparisons provide the most useful information that is reasonably assessable. The market data described above is used collectively by our board of directors to make informed decisions regarding executive compensation.

Assessment of Individual and Company Performance.  While we generally do not adhere to rigid formulas in determining the amount and mix of compensation elements, our board of directors reviews specific company performance measures when determining the size of incentive payouts for our executive officers. In addition, a portion of the incentive payouts are based on evaluations of individual performance. These performance measures are discussed in more detail below.

Elements of our Executive Compensation Program

In furtherance of our compensation objectives, our executive compensation program during 2006 consisted of three basic components:

•  base salaries;

•  discretionary semi-annual cash bonus awards; and

•  restricted stock grants.

Base Salaries.  Since June 2006, we have provided our executive officers and other employees with an annual base salary to compensate them for services rendered during the year. Our philosophy has been to establish base salaries that are competitive with our Peer Companies. In addition to providing a base salary that is competitive with the market, we target salary compensation to align each position’s salary level so that it accurately reflects the relative importance of the position within our organization. To that end, semi-annual salary adjustments are based on a number of individual factors, including:

•  the responsibilities of the officer;

•  period over which the officer has performed these responsibilities;

•  the scope, level of expertise and experience required for the officer’s position;

•  the strategic impact of the officer’s position; and

•  potential future contribution and demonstrated individual performance of the officer.

In addition, adjustments are made based on our overall performance and competitive market conditions. Although no particular weight is assigned to these factors, significant emphasis is placed on current market levels and the individual’s skills, seniority and previous industry experience, which are evaluated on a case-by-case basis. For example, when reviewing Mr. Ward’s experience, the special committee of our board of directors considered that Mr. Ward co-founded and served as President and Chief Operating Officer of Chesapeake, one of our Peer Companies, for 17 years. For our executive officers that were newly hired, significant emphasis was placed on the individual’s base salary level at their previous employer.

Prior to June 2006, base salaries were established based primarily on each executive officer’s responsibilities at the discretion of Mr. Mitchell. Base salary levels were competitive with employers of similar size in Amarillo, Texas and were adjusted from time to time at the discretion of Mr. Mitchell.

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Cash Bonus Awards.  As one way of accomplishing our compensation objectives, our board of directors rewards our executive officers for their contribution to our financial and operational success through the award of semi-annual cash bonuses intended to encourage the attainment of our near-term strategic, operational and financial goals and individual performance measures. The payment of semi-annual bonuses also facilitates the retention of our executive officers because an executive officer must be employed by us on the relevant bonus payment date in order to receive his or her bonus installment payment. In addition, we have paid several of our recently hired named executive officers cash signing bonuses. Cash bonus awards are paid in the discretion of the board of directors upon the recommendation of Mr. Ward.

The factors we consider when determining the amount of any discretionary cash bonus awards are similar to those we consider when setting and adjusting base salaries and no particular weight is assigned to these factors. Currently, the primary measures upon which we base cash bonus decisions are strategic and operational, rather than financial. For example, in 2006 we focused on the effective execution of the NEG acquisition, successful access to capital to fund our capital expenditures and the results of our drilling program. These goals were selected as the most appropriate measures upon which to base the bonus decisions because they will result in long term value to our stockholders.

Our board of directors approves the personal goals for our Chief Executive Officer and assesses his performance against those goals in determining the amount of the Chief Executive Officer’s cash bonus. Our board of directors expects our Chief Executive Officer to establish and approve personal performance goals for the other executive officers and to review and assess each officer’s performance against those goals, reporting the results to our board of directors.

The personal performance goals relate to the achievement of goals unique to the responsibilities of the individual officer, including, for example:

•  the successful completion of particular projects;

•  the attainment of productivity metrics unique to an officer’s responsibilities;

•  management of an officer’s budgetary responsibilities within specified parameters;

•  the acquisition and implementation of new technical knowledge;

•  the achievement of individual goals that further those of the company; and

•  exceptional performance of functional responsibility.

For 2006, Messrs. Ward, Van Doren, Grubb, Dutton and McCann each received a cash bonus payment as reflected in the Bonus column of the Summary Compensation Table.

We generally did not pay cash bonus awards prior to June 2006.

Restricted Stock Grants.  Our board of directors has the discretion to grant restricted stock under our stock plan pursuant to our restricted stock awards program. Our restricted stock awards, are granted on a semi-annual basis and typically vest over a four-year vesting period. We anticipate that we will continue to make grants of restricted stock awards on a semi-annual basis. We believe these awards help us to attract highly qualified individuals by providing the potential for the increased returns associated with a high growth company and better aligns the interests of our named executive officers with those of our stockholders. In addition, the gradual vesting period of these awards serves as a tool for the retention of our employees.

In determining the level of equity-based compensation, we make a subjective determination based on the same factors that are used to determine the base salary levels described above.

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Other Benefits

In addition to base salaries, cash bonus awards and restricted stock grants, we provide the following forms of compensation:

Health and Welfare Benefits.  Our executive officers are eligible to participate in medical, dental, vision, disability insurance and life insurance to meet their health and welfare needs. These benefits are provided so as to assure that we are able to maintain a competitive position in terms of attracting and retaining officers and other employees. This is a fixed component of compensation and the benefits are provided on a non-discriminatory basis to all of our employees in the United States.

Perquisites and Other Personal Benefits.  We believe that the total mix of compensation and benefits provided to our executive officers is competitive and perquisites should generally not play a large role in our executive officers’ total compensation. As a result, the perquisites and other personal benefits we provide to our executive officers are limited. Pursuant to our employment agreement with Mr. Ward, we pay the fees and expenses related to one country club membership in either Amarillo, Texas or Oklahoma City, Oklahoma. In addition, Mr. Ward receives accounting support from our employees for his personal investments and activities. We have also agreed to provide access to an aircraft at our expense for the personal travel of Mr. Ward and his family and other guests who accompany him. If Mr. Ward does not accompany his family or other guests, he will reimburse us for the variable cost of the use of such aircraft. Mr. Ward will pay all personal income taxes accruing as a result of aircraft use.

401(k) Savings Plan.  We have a defined contribution profit sharing/401(k) plan, which is designed to assist our eligible officers and employees in providing for their retirement. We match the contributions of our employees to the plan, in shares of our common stock, at the rate of 100% of up to 15% of an employee’s eligible wages or salary. Employees contributions are immediately 100% vested; however, company contributions vest in equal annual increments over a four-year period.

Well Participation Program.  Mr. Ward also has the opportunity to participate as a working interest owner in the oil and natural gas wells that we drill. The Well Participation Program (“WPP”) fosters and promotes the development and execution of our business by: (a) retaining and motivating our chief executive officer; (b) aligning the financial rewards and risks of Mr. Ward with the Company more effectively and directly than other performance incentive programs maintained by many of our peers; and (c) imposing on Mr. Ward the same risks we incur in our exploration and production operations.

Employment Agreements, Severance Benefits and Change in Control Provisions

Employment Agreement of Tom L. Ward.  We maintain an employment agreement with our Chairman, Chief Executive Officer and President, Mr. Ward, to ensure that he will perform his role for an extended period of time. This agreement is described in more detail elsewhere. Please read “— Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table — Employment Agreements — Employment Agreement of Tom L. Ward.” This agreement provides for severance compensation to be paid if the employment of Mr. Ward is terminated under certain conditions, such as a change in control and termination without cause, each as defined in the agreement.

The employment agreement between us and Mr. Ward and the related severance provisions are designed to meet the following objectives:

•  Change in Control.  In certain scenarios, the potential for merger or being acquired may be in the best interests of our stockholders. As a result, we have agreed to provide severance compensation to Mr. Ward if his employment is terminated following a change in control transaction to promote the ability of Mr. Ward to act in the best interests of our stockholders even though his employment could be terminated as a result of the transaction.

•  Termination without Cause.  If we terminate Mr. Ward’s employment without cause, we are obligated to pay him certain compensation and other benefits as described in greater detail in “— Potential Payments upon Termination or Change in Control” below. We believe these payments are appropriate

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because they represent the general market triggering events found in employment agreements of companies against whom we compete for executive-level talent at the time these provisions were negotiated. It is also beneficial for the Company and Mr. Ward to have mutually agreed to a severance package that is in place prior to any termination event. This provides us with more flexibility to make a change in senior management if such a change is in our and our stockholders’ best interests.

We believe that the triggering events and severance payments set forth under Mr. Ward’s employment agreement are appropriate for the company and fair for stockholders and represent the general market triggering events found in employment agreements of companies against whom we competed for executive-level talent at the time these provisions were negotiated.

Employment Agreement of N. Malone Mitchell, 3rd.  Prior to his resignation effective at the completion of 2006, Mr. Mitchell was party to an employment agreement with terms identical to those of the employment agreement of Mr. Ward described above. This agreement was entered into in June 2006, simultaneously with the employment agreement with Mr. Ward, and was terminated upon his resignation.

We have not entered into an employment agreement with any of our other named executive officers and there was no severance plan affecting our other named executive officers. See “Employment Agreements — Other Executive Officers.” We intend to enter into additional employment agreements and severance plans with other executive officers during 2007.

Other Matters

Stock Ownership Guidelines and Hedging Prohibition.  We do not currently have ownership requirements or a stock retention policy for our named executive officers. However, Mr. Ward’s employment agreement requires that the value of the shares of our common stock that he beneficially owns remain above 500% of his annual salary. Based on Mr. Ward’s existing salary and the offering price of our common stock, Mr. Ward must continue to beneficially own at least           shares of our common stock. Because Mr. Ward beneficially owns in excess of      million shares of our common stock and has shown no indication of reducing his holdings, we have not determined how this provision would work in practice. In the future, if we believed there was a reasonable likelihood of this provision being triggered, we anticipate that our compensation committee at that time would determine the appropriate interpretation of the employment agreement.

We do not have a policy that restricts our executive officers from limiting their economic exposure to our stock. We will continue to periodically review best practices and re-evaluate our position with respect to stock ownership guidelines and hedging prohibitions.

Tax Treatment of Executive Compensation Decisions.  Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1,000,000 paid to our principal executive officer, our principal financial officer or any of the three other most highly compensated executive officers, unless the compensation qualifies as “performance-based compensation.” In order to be deemed performance-based compensation, the compensation must be based, among other things, on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our stockholders. Our board of directors has not yet adopted a policy with respect to the limitation under Section 162(m).

Executive Compensation Changes In Fiscal 2007

During 2007, we have made the following changes and adjustments to the compensation packages of our named executive officers. We have not modified our general compensation objectives, policies or procedures.

Base Salaries.  Effective January 1, 2007, the annualized base salary levels for Messrs. Ward and Grubb increased from $900,000 to $1,050,000 and $325,000 to $400,000, respectively. In approving the increases, Mr. Ward considered the individual factors described above under “Elements of our Executive Compensation Program — Base Salaries,” the successful completion of the NEG acquisition and related financings in November 2006 and subsequent integration of the acquired business, general results of our drilling and exploration program and integration of our new management team.

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Effective July 1, 2007, the annualized base salary levels for Messrs. Ward, Van Doren and Grubb increased from $1,050,000 to $1,100,000, $450,000 to $500,000 and $400,000 to $450,000, respectively. In approving the increases, Mr. Ward considered the individual factors described above under “Elements of our Executive Compensation Program — Base Salaries,” integration of our new management team, completion of the NEG Acquisition and successful execution of our March 2007 private placement. Additionally, Mr. Grubb was promoted to Chief Operating Officer and his compensation was adjusted accordingly.

Cash Bonus Awards.  On January 10, 2007, Messrs. Ward, Van Doren and Grubb received bonus compensation in the amount of $950,000, $225,000 and $150,000, respectively. When determining the bonus amounts, our board of directors considered the factors described above under “Elements of our Executive Compensation Program — Cash Bonus Awards.” In addition, our board of directors took into account the same operational factors used in adjusting base salary levels.

On July 11, 2007, Messrs. Ward, Van Doren and Grubb received bonus compensation in the amount of $950,000, $300,000 and $200,000, respectively. When determining the bonus amounts, our board of directors and Mr. Ward considered the factors described above under “Elements of our Executive Compensation Program — Cash Bonus Awards.” In addition, our board of directors and Mr. Ward took into account the same operational factors used in adjusting base salary levels.

Restricted Stock Grants.  On January 10, 2007, Messrs. Ward, Van Doren and Grubb were issued restricted stock grants of 300,000 shares, 40,000 shares and 20,000 shares, respectively. The restricted shares vest in equal increments over a four-year period. In determining the level of equity-based compensation, our board of directors considered the factors described above under “Elements of our Executive Compensation Program — Restricted Stock Grants.” In addition, our board of directors took into account the same operational factors used in adjusting base salary levels.

On July 11, 2007, Messrs. Ward, Van Doren and Grubb were issued restricted stock grants of 325,000 shares, 60,000 shares and 25,000 shares, respectively. The restricted shares vest in equal increments over a four-year period. In determining the level of equity-based compensation, our board of directors and Mr. Ward considered the factors described above under “Elements of our Executive Compensation Program — Restricted Stock Grants.” In addition, our board of directors and Mr. Ward took into account the same operational factors used in adjusting base salary levels.

Deferred Compensation Plan.  Effective February 1, 2007, we established a non-qualified deferred compensation plan in order to provide our employees with flexibility in meeting their future income needs and assisting them in their retirement planning. Pursuant to the terms of the deferred compensation plan, eligible highly compensated employees are provided the opportunity to defer income in excess of the IRS annual limitations on qualified 401(k) retirement plans. The 2007 annual 401(k) deferral limit for employees under age 50 is $15,500. Employees turning age 50 or over in 2007 can defer up to $20,500.

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Summary Compensation

The following table sets forth the aggregate compensation awarded to, earned by or paid to our named executive officers for services rendered in all capacities during the fiscal year ended December 31, 2006.

Summary Compensation Table for the Year Ended December 31, 2006

							Stock		All Other
Name and Principal Position	Year		Salary		Bonus		Awards(9)		Compensation(10)		Total
Current Officers:
Tom L. Ward		2006	$	526,154	$	950,000		—	$	374,657	$	1,850,811
Chairman, Chief Executive Officer and President(1)
Dirk M. Van Doren		2006	$	251,923	$	225,000	$	72,512	$	7,961	$	557,396
Executive Vice President and Chief Financial Officer(2)
Matthew K. Grubb		2006	$	136,250	$	307,000	$	34,226	$	8,944	$	486,420
Executive Vice President and Chief Operating Officer(3)
Former Officers:
N. Malone Mitchell, 3rd		2006	$	611,539		—		—	$	137,692	$	749,231
Former Chairman, Chief Executive Officer and President(4)
John Gaines		2006	$	89,423		—	$	1,437,494	$	72,739	$	1,599,656
Former Chief Financial Officer(5)
Barbara Pope		2006	$	103,958		—	$	2,109,000	$	136,391	$	2,349,349
Former Vice President, Accounting(6)
Todd Dutton		2006	$	237,021	$	10,000	$	377,914	$	92,502	$	717,437
Former Chief Operating Officer and Vice President — Land(7)
Matthew McCann		2006	$	183,173	$	100,000	$	377,914	$	72,877	$	733,964
Former Senior Vice President — Legal(8)

(1) Mr. Ward was appointed as our Chairman and Chief Executive Officer on June 8, 2006. Prior to this date, he received no compensation from us. He was also appointed as our President upon the resignation of Mr. Mitchell effective at the end of 2006.

(2) Mr. Van Doren was appointed as our Executive Vice President and Chief Financial Officer on June 8, 2006 and began receiving compensation effective May 15, 2006. Prior to this date, he received no compensation from us.

(3)	Mr. Grubb became an employee on August 1, 2006. Prior to this date, he received no compensation from us.
(4)	Mr. Mitchell served as our Chairman, Chief Executive Officer and President until June 8, 2006. Following this date, Mr. Mitchell served as our President and Chief Operating Officer until his resignation as an executive officer, effective as of December 31, 2006. Mr. Mitchell continues to serve as one of our directors.
(5)	Mr. Gaines served as our Chief Financial Officer until June 8, 2006. Upon Mr. Gaines’ resignation, the board of directors elected to accelerate the vesting of 83,333 shares of restricted stock held by Mr. Gaines.

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(6)	Ms. Pope served as our Vice President, Accounting until August 31, 2006. Upon Ms. Pope’s resignation, the board of directors elected to accelerate the vesting of 111,000 shares of restricted stock held by Ms. Pope.
(7)	Mr. Dutton served as our Chief Operating Officer until June 2006 and as Vice President — Land until September 2006.
(8)	Mr. McCann served as our Senior Vice President — Legal until May 7, 2007. Mr. McCann remains our employee, but has resigned effective June 30, 2007.
(9)	This column includes the dollar amount of compensation expense we recognized for the fiscal year ended December 31, 2006 in accordance with FAS 123R. Pursuant to the Securities and Exchange Commission’s rules and regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by our named executive officers. Assumptions used in the calculation of these amounts are included in Note 18 to our audited financial statements for the fiscal year ended December 31, 2006 included in this prospectus. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” below for a description of the material features of these awards.
(10)	All Other Compensation consists of the following:

															Employee
									Company						Participation
	Club						Life		Matching		Relocation		Retention or		Plan
	Membership		Accounting		Aircraft		Insurance		Contributions to		Expenses		Severance		Participation		Reimbursement
Name	Dues		Support		Use(a)		Premiums		401(k) Plan		or Bonus		Payment		Allowance		of HSR Fees			Total
Current Officers:
Tom L. Ward	$	2,926	$	123,960	$	122,598	$	173		—		—		—		—	$	125,000	(b)	$	374,657
Dirk M. Van Doren		—		—		—	$	173	$	7,788		—		—		—		—		$	7,961
Matthew K. Grubb		—		—		—	$	173		—	$	8,771		—		—		—		$	8,944
Former Officers:
N. Malone Mitchell, 3rd	$	488		—	$	16,827	$	377		—	$	120,000		—		—		—		$	137,692
John Gaines		—		—		—	$	239		—		—	$	37,500	$	35,000		—		$	72,739
Barbara Pope		—		—		—	$	226	$	4,298	$	30,200	$	66,667	$	35,000		—		$	136,391
Todd Dutton		—		—		—	$	377	$	10,125	$	40,000			$	42,000		—		$	92,502
Matthew McCann		—		—		—	$	377		—	$	30,000	$	500	$	42,000		—		$	72,877

(a)	Value based on the incremental cost calculated per hour of use by the named executive officer.
(b)	Fees paid by Mr. Ward in connection with obtaining regulatory approval of his purchase of common stock from Mr. Mitchell on June 8, 2006 under the Hart-Scott-Rodino Act. We agreed to reimburse such fees in connection with the approval of Mr. Ward’s initial investment in the company.

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Grants of Plan-Based Awards

The following table sets forth information about each grant of an award made to our named executive officers in 2006 under our stock plan pursuant to our restricted stock awards program, including awards, if any, that have been transferred.

Grants of Plan-Based Awards for the Year Ended December 31, 2006

			All Other
			Stock Awards:
			Number of
			Shares of
Name	Grant Date		Stock or Units
Current Officers:
Tom L. Ward		—		—
Dirk M. Van Doren		July 1, 2006		10,000
		September 29, 2006		25,000
Matthew K. Grubb		August 1, 2006		20,000
Former Officers:
N. Malone Mitchell, 3rd		—		—
John Gaines		—		—
Barbara Pope		—		—
Todd Dutton		—		—
Matthew McCann		—		—

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

The following is a discussion of material factors necessary to gain an understanding of the information disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards Table.

Employment Agreements

Employment Agreement of Tom L. Ward.  Mr. Ward serves as our President and Chief Executive Officer pursuant to an employment agreement that is currently set to expire on June 30, 2009. Unless either party gives written notice to terminate the agreement, the agreement automatically renews each year on the anniversary of the effective date for a successive three-year term. Mr. Ward’s employment agreement entitles him to a base salary of not less than $950,000, subject to increase at the discretion of the board of directors, and the opportunity to earn a cash bonus in the sole discretion of the board of directors or any compensation committee thereof. The employment agreement also provides that we will pay the fees and expenses related to one country club membership in either Amarillo, Texas or Oklahoma City, Oklahoma during the term of the employment agreement. Mr. Ward receives accounting support from our employees for his personal investments and activities. He reimburses us for 50% of the salaries and bonuses paid to the employees primarily engaged in supporting Mr. Ward. We have also agreed to provide access to our aircraft at our expense for the personal travel of Mr. Ward and his family and other guests who accompany him. The employment agreement provides that Mr. Ward is entitled to participate in all of our benefit plans and programs and also contains non-compete and confidentiality provisions in the event Mr. Ward’s employment with us is terminated.

Mr. Ward’s employment agreement also includes provisions governing the payment of severance benefits if his employment is terminated by us without cause or in connection with a Change in Control. The agreement also addresses termination due to death or disability. For a description of these payments, please read “— Potential Payments Upon Termination or Change in Control” below.

Additionally, if any of the payments or benefits described above are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, then Mr. Ward is entitled to receive a gross-up payment equal to the amount of excise tax imposed plus all taxes imposed on the gross-up payment.

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Other Named Executive Officers.  Prior to his resignation effective at the end of 2006, Mr. Mitchell was party to an employment agreement with terms identical to those of the employment agreement of Mr. Ward described above. This agreement was entered into in June 2006, simultaneously with the employment agreement with Mr. Ward and terminated upon his resignation. We have not entered into an employment agreement with any of our other named executive officers. However, we have entered into an employment agreement with another executive officer. See “Employment Agreements — Other Executive Officers.” We intend to enter into additional employment agreements with other named executive officers in 2007.

Other Executive Officers.  While we have not entered into any employment agreements with any of our other named executive officers, we have entered into an employment agreement with Larry Coshow, our Executive Vice President — Land. Mr. Coshow’s employment agreement is currently set to expire on September 2, 2008. Unless we provide written notice to terminate the agreement, the agreement automatically renews each year on the anniversary of the effective date for a successive one year term. Mr. Coshow’s employment agreement entitles him to a base salary of not less than $300,000, a minimum bonus payment of $175,000 during the first year of employment, and the opportunity to earn additional bonuses in the sole discretion of the board of directors or any compensation committee thereof. The employment agreement also entitles Mr. Coshow to participate in our medical, life and disability plans.

Mr. Coshow’s employment agreement also includes provisions governing the payment of severance benefits if his employment is terminated by us without cause or in connection with a Change of Control. The agreement also addresses termination due to death or disability.

Restricted Stock Awards Program

Prior to 2006, the board of directors granted several of our named executive officers restricted stock pursuant to our restricted stock awards program which vested on the fourth and seventh anniversaries of the date of the grant. Following the resignations of Mr. Gaines and Ms. Pope, the board of directors elected to accelerate the vesting of the restricted stock that had been granted to Mr. Gaines and Ms. Pope under the program. The board of directors also accelerated the vesting of 25% of Mr. Dutton’s four-year restricted stock upon his resignation.

Following June 2006, our restricted stock award program has continued to be used to retain our named executive officers and better align their interests with those of our stockholders. In addition, the program is intended to enable us to effectively recruit highly qualified individuals by offering the potential for significant return following our initial public offering. Grants of restricted stock are made in the discretion of the board of directors. On July 1, 2006 and September 29, 2006, our board of directors approved grants of 10,000 shares of restricted stock and 25,000 shares of restricted stock, respectively, to Mr. Van Doren, 10,000 of which vest in 25% increments on each of the next four anniversaries of the date of the grant, 12,500 of which vest in 25% increments on January 1, 2008 and each of the next three anniversaries thereof, and 12,500 of which vest in 25% increments on July 1, 2008 and each of the next three anniversaries thereof. On August 1, 2006, the board of directors approved a grant of 20,000 shares of restricted stock to Mr. Grubb, 10,000 of which vest in 25% increments on January 1, 2008 and each of the next three anniversaries thereof and 10,000 of which vest in 25% increments on July 1, 2008 and each of the next three anniversaries thereof.

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Salary and Cash Bonus Awards in Proportion to Total Compensation

The following table sets forth the percentage of each named executive officer’s total compensation that we paid in the form of base salary and annual cash bonus awards during 2006.

	Percentage of Total
Name	Compensation
Current Officers:
Tom L. Ward		79.7	%
Dirk M. Van Doren		85.6	%
Matthew K. Grubb		91.1	%
Former Officers:
N. Malone Mitchell, 3rd		81.6	%
John Gaines		5.6	%
Barbara Pope		4.4	%
Todd Dutton		34.4	%
Matthew McCann		38.6	%

Outstanding Equity Awards Value Fiscal Year-End

The following table reflects all outstanding equity awards held by our named executive officers as of December 31, 2006.

Outstanding Equity Awards as of December 31, 2006

	Stock Awards
	Number of			Market Value
	Shares or			of Shares
	Units of			or Units of
	Stock That			Stock That
Name	Have Not Vested			Have Not Vested(1)
Current Officers:
Tom L. Ward		—			—
Dirk M. Van Doren		35,000	(2)	$	630,000
Matthew K. Grubb		20,000	(3)	$	360,000
Former Officers:
N. Malone Mitchell, 3rd		—			—
John Gaines		—			—
Barbara Pope		—			—
Todd Dutton		—			—
Matthew McCann		100,000	(4)	$	1,800,000

(1)	Valuation based on $18.00 per share.
(2)	Includes (a) 10,000 shares that vest in 25% increments on each of the next four anniversaries of the date of the grant (July 1, 2006), (b) 12,500 shares that vest in 25% increments on January 10, 2008 and each of the next three anniversaries thereof, and (c) 12,500 shares that vest in 25% increments on July 2, 2008 and each of the next three anniversaries thereof.
(3)	Includes (a) 10,000 shares that vest in 25% increments on January 10, 2008 and each of the next three anniversaries thereof, and (b) 10,000 shares that vest in 25% increments on July 1, 2008 and each of the next three anniversaries thereof.
(4)	Includes (a) 66,667 shares that began to vest in 25% increments beginning on January 1, 2007 and will continue to vest on each of the next three anniversaries thereof, and (b) 33,333 shares that vest June 30,

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2013. We anticipate that Mr. McCann will forfeit all unvested shares upon his resignation effective June 30, 2007.

Option Exercises and Stock Vested

The following table reflects the restricted stock of our named executive officers that vested during 2006. No stock options were outstanding in 2006.

Option Exercises and Stock Vested for the Year Ended December 31, 2006

	Stock Awards
	Number of
	Shares		Value
	Acquired on		Realized
Name	Vesting		on Vesting
Current Officers:
Tom L. Ward		—		—
Dirk M. Van Doren		—		—
Matthew K. Grubb		—		—
Former Officers:
N. Malone Mitchell, 3rd		—		—
John Gaines		83,333	$	1,437,494
Barbara Pope		111,000	$	2,109,000
Todd Dutton		26,667	$	490,006
Matthew McCann		10,000	$	190,000

Potential Payments Upon Termination or Change in Control

Severance Under Employment Agreement of Tom L. Ward

Termination Other Than For Cause.  In the event we terminate Mr. Ward’s employment other than for Cause (as defined below), Mr. Ward is entitled to receive (1) his base salary as in effect on the date of termination during the remaining term of the employment agreement or through the expiration date of the agreement and (2) any vacation pay accrued through the date of termination. If Mr. Ward was terminated other than for Cause on December 31, 2006, his severance would equal $2,250,000 (base salary for 30 months, which is the remaining term of his employment agreement), and the maximum value of his accrued vacation (assuming he took no time off during the year) would be $86,538.

For purposes of his employment agreement, the term “Cause” means (1) the willful and continued failure of Mr. Ward to perform substantially his duties after a written demand for substantial performance is delivered to him by the board of directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties or (2) the willful engaging by Mr. Ward in illegal conduct, gross misconduct or a clearly established violation of our written policies and procedures, in each case which is materially and demonstrably injurious to us. An act or failure to act, on the part of Mr. Ward, will not be considered “willful” unless it is done, or omitted to be done, by him in bad faith or without reasonable belief that the action or omission was in our best interests.

Termination in Connection with Change in Control.  In the event that Mr. Ward’s employment is terminated within one year of a Change in Control event (as defined below) other than for Cause, death or disability, Mr. Ward is entitled to receive (1) a single, lump sum severance payment within 10 days of termination equal to 3 times his base salary for the last 12 calendar months and bonus paid (based on an average of the last three years annual bonuses or such lesser number of years as he was employed) and (2) any applicable gross-up payment (as defined below). To the extent that any payment or distribution is subject to excise tax under Section 4999 of the Code or any other interest of penalties related to such excise tax (collectively “Excise Tax”), the agreement provides we will pay an additional amount (the “Gross-Up Payment”) such that after payment by Mr. Ward of all taxes on the Gross-Up Payment, he will retain an amount of the Gross-Up Payment equal to the Excise Tax. If Mr. Ward were terminated within one year of a

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Change in Control event other than for Cause, death or disability, his severance would equal $5,500,000 (3 times the sum of his base salary in 2006 of $900,000 plus his bonus of $950,000) plus a Gross-Up Payment equal to $2,508,535 for a total payment of $8,058,535.

Under the employment agreement, a “Change in Control” is defined as follows: (1) the acquisition of any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”), other than Executive or his affiliates or Malone Mitchell 3rd or his affiliates (the “Exempt persons”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of our common stock of (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); (2) the individuals who, as of the date hereof, constitute the board of directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the board of directors. Any individual becoming a director subsequent to the date hereof whose election, or nomination for election by our stockholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board as of the date hereof, but any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board will not be deemed a member of the Incumbent Board as of the date hereof; (3) the consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the company (a “Business Combination”), unless following such Business Combination: (i) the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the company or all or substantially all of our assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the company or such corporation resulting from such Business Combination) other than one or more of the Exempt Persons beneficially owns, directly or indirectly, 40% or more of, respectively, the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) the approval by our stockholders of a complete liquidation or dissolution of the company.

In addition, notwithstanding any provision to the contrary in any option agreement, restricted stock agreement, plan or other agreement relating to equity based compensation, in the event of a termination without Cause or in connection with a Change in Control, all Mr. Ward’s units, stock options, incentive stock options, performance shares, stock appreciation rights and restricted stock (collectively “awards”) will immediately become 100% vested. Further, Mr. Ward’s right to exercise any previously unexercised options will not terminate until the latest date on which such option would expire but for Mr. Ward’s termination. To the extent, we are unable to provide for one or both of the foregoing rights, we will provide in lieu thereof a lump-sum cash payment equal to the difference between the total value of such awards with the foregoing rights and the total value without the foregoing rights. Mr. Ward currently has no unvested compensatory equity awards.

Termination for Cause.  In the event Mr. Ward is terminated for Cause, we will have no further obligation to provide further payments or benefits. If Mr. Ward desires to voluntarily terminate, he must give 90 days’ notice of his intent to termination during which time he can use accrued vacation time or be paid for

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such days. If Mr. Ward was terminated for Cause on December 31, 2006, the maximum value of his accrued vacation time (assuming he took no time off during the year) would be $86,538.

Voluntary Termination.  In the event Mr. Ward voluntarily terminates with or without Cause, we have no further obligations except for any obligations expressly surviving termination of employment.

Termination due to Disability.  If Mr. Ward’s employment is terminated due to disability, then he is entitled to receive base salary through the remaining term of his employment agreement or through the Expiration Date of the agreement. If Mr. Ward was terminated due to disability on December 31, 2006, his severance would equal $2,250,000 (base salary for 30 months, which is the remaining term of his employment agreement).

Termination due to Death.  In the event Mr. Ward’s employment terminates due to death, then he will be entitled to receive (1) base salary payment for 12 months after termination and (2) any accrued benefits. If Mr. Ward was terminated due to death on December 31, 2006, his severance would equal $900,000 (12 months’ salary) plus the maximum value of his accrued vacation (assuming he took no time off during the year) equal to $86,538.

Stock Plan

Upon disability (as defined below) or death of any named executive officer, any benefits awarded under the 2005 Stock Plan will become vested to the extent that vesting would have occurred had the named executive officer remained a participant for a period of 12 months after termination. Disability is defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of 12 months. An option or stock appreciation right that is vested pursuant to disability must be exercised within 18 months or such shorter time as specified in the grant from the date on which termination occurred or the option or stock appreciation right will terminate. If a named executive officer dies who was no longer a participant at the time of death and his options or stock appreciation rights have not yet expired, those options or stock appreciation rights may be exercised within 12 months following death. Mr. Van Doren holds two separate grants of 10,000 and 25,000 shares of restricted stock respectively; only 2,500 shares of the grant of 10,000 shares of restricted stock would vest within the 12 months following his death or disability on December 31, 2006. (See “— Outstanding Equity Awards Fiscal Year-End” for vesting schedule). The value of the shares of restricted stock vesting upon the death or disability of Mr. Van Doren on December 31, 2006 is $45,000 ($18 per share times 2,500 shares). Mr. Grubb holds 20,000 shares of restricted stock; none of his shares would vest within 12 months of his death or disability occurring on December 31, 2006. (See “— Outstanding Equity Awards Fiscal Year-End” for vesting schedule).

Upon a Change in Control, the board of directors may take any action with respect to outstanding Awards under the Plan as it deems appropriate, which action may vary among Awards granted to individual participants.

Description of Stock Plan

Scope

Our board of directors and stockholders have approved our Stock Plan (the “Plan”). The Plan authorizes the granting of stock options to purchase common stock, stock appreciation rights, restricted stock, phantom stock and other stock-based awards to our employees, directors and consultants. In addition, the Plan authorizes cash-denominated awards that may be settled in cash, stock or any combination thereof. The purpose of the Plan is to attract, retain and provide incentives to our officers, other associates, directors and consultants and to thereby increase overall stockholder value.

The Plan authorizes 7,074,252 shares of common stock to be used for awards. As of June 30, 2007, approximately 1.6 million shares had been awarded as restricted stock subject to vesting periods of one, four and seven years (other than shares cancelled or forfeited), and 5.6 million shares, representing 4.2% of the outstanding shares of common stock after this offering, are available to be used for future awards. If an award

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made under the Plan expires, terminates or is forfeited, canceled, settled in cash without issuance of shares of common stock covered by the award, or if award shares are used to pay for other award shares, those shares will be available for future awards under the Plan. We have not made any awards under the Plan to date.

Eligibility

Our employees, directors and consultants may be selected by the compensation committee to receive awards under the Plan. In the discretion of the compensation committee, an eligible person may receive an award in the form of a stock option, stock appreciation right, restricted stock award, phantom stock, other stock-based award or any combination thereof, including a cash-based award, and more than one award may be granted to an eligible person.

Stock Options

The Plan authorizes the award of both non-qualified and incentive stock options (“ISO”). Under the Plan and pursuant to awards made thereunder, common stock may be purchased at a fixed exercise price during a specified time. Unless otherwise provided in the award agreement, the exercise price of each share of common stock covered by a stock option shall not be less than the fair market value of the common stock on the date of the grant of such stock option, and one-third (1/3) of the shares covered by the stock option shall become exercisable on the first anniversary of its grant and an additional one-third (1/3) of such shares shall become exercisable on each of the second and third anniversaries of its grant. A limited number of options and SARs may be granted with an exercise price below fair market value on the date of grant, but not less than 75% of fair market value.

Under the Plan, an ISO may be exercised at any time during the exercise period established by the compensation committee, except that (i) no ISO may be exercised more than three months after employment with us terminates by reason other than death or disability and (ii) no ISO may be exercised more than one year after employment with us terminates by reason of death or disability. The aggregate fair market value (determined at the time of the award) of the common stock with respect to which ISOs are exercisable for the first time by any employee during any calendar year may not exceed $100,000. The term of each ISO is determined by the compensation committee, but in no event may such term exceed 10 years from the date of grant (or five years in the case of ISOs granted to stockholders owning 10% or more of our outstanding shares of common stock). The exercise price of ISOs cannot be less than the fair market value of the common stock on the date of the grant (or 110% of the fair market value of the common stock on the date of grant in the case of ISOs granted to stockholders owning 10% or more of our outstanding shares of common stock). The exercise price of options may be paid in cash, in shares of common stock through a cashless exercise program with previously owned common stock or by such other methods as the compensation committee deems appropriate.

Stock Appreciation Rights

The Plan authorizes the grant of stock appreciation rights (“SARs”). The SARs may be granted either separately or in tandem with options. An SAR entitles the holder to receive an amount equal to the excess of the fair market value of a share of common stock at the time of exercise of the SAR over the option exercise price or other specified amount (or deemed option price in the event of an SAR that is not granted in tandem with an option), multiplied by the number of shares of common stock subject to the option or deemed option as to which the SAR is being exercised (subject to the terms and conditions of the option or deemed option). An SAR may be exercised at any time when the option or deemed option to which it related may be exercised and will terminate no later than the date on which the right to exercise the tandem option (or deemed option) terminates (or is deemed to terminate).

Restricted Stock

Restricted stock awards are grants of common stock made to eligible persons subject to restrictions, terms and conditions as established by the compensation committee. The grants of restricted stock are issued and outstanding shares from the date of grant, but subject to forfeiture. An eligible person will become the holder of shares of restricted stock free of all restrictions if he or she complies with all restrictions, terms and

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conditions. Otherwise, the shares will be forfeited. The eligible persons will not have the right to vote the shares of restricted stock until all restrictions, terms and conditions are satisfied.

Other Stock Based Awards

The compensation committee may grant other stock based awards, upon such terms as it may elect.

Dollar-Denominated Awards

The compensation committee may grant an award in terms of a specific dollar amount on such terms as it may elect. Upon the vesting of such award, the award earned may be paid in cash, stock or any combination thereof as the compensation committee may choose.

Adjustments

In the event of any changes in the outstanding shares of common stock by reason of any stock dividend, split, spinoff, recapitalization, merger, consolidation, combination, exchange of shares or other similar change, the aggregate number of shares with respect to which awards may be made under the Plan, and the terms and the number of shares of any outstanding option, restricted stock or other stock-based award, may be equitably adjusted by the compensation committee in its sole discretion.

Change of Control

Upon a change in control, which is defined in the Plan to include certain third-party acquisitions of 50% or more of our then outstanding common stock or the combined voting power of the then outstanding common stock entitled to vote generally in the election of directors, changes in the composition of the board of directors, stockholder approval of certain significant corporate transactions such as a reorganization, merger, consolidation, sale of assets or the liquidation or dissolution of the company, the board of directors may take any action with respect to outstanding Awards under the Plan as it deems appropriate, which action may vary among Awards granted to individual participants.

Administration

The Plan is administered by the board of directors or, if directed by the board of directors, the compensation committee of the board of directors or another committee designated by the board of directors (in each event, the “compensation committee”). The compensation committee makes determinations with respect to the participation of employees, directors and consultants in the Plan and, except as otherwise required by law or the Plan, the grant terms of awards, including vesting schedules, retirement and termination rights, payment alternatives such as cash, stock, contingent award or other means of payment consistent with the purposes of the Plan, and such other terms and conditions as the board or the compensation committee deems appropriate. The compensation committee has the authority at any time to provide for the conditions and circumstances under which awards shall be forfeited. The compensation committee has the authority to accelerate the vesting of any award and the time at which any award becomes exercisable.

Termination and Amendment

The board may at any time terminate the Plan or from time to time make such modifications or amendments of the Plan as it may deem advisable; provided, however, that the board shall not make any amendments to the Plan which require stockholder approval under applicable law, rule or regulation unless approved by the requisite vote of our stockholders. No termination, modification or amendment of the Plan may adversely affect the rights conferred by an award without the consent of the recipient thereof.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of September 30, 2007 and as adjusted to give effect to this offering by:

•  each stockholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock;

•  the selling stockholders;

•  our current directors;

•  our named executive officers; and

•  all of our directors and executive officers as a group.

Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

	Number of			Number of		Percentage of Shares
	Shares			Shares		Beneficially Owned
	Beneficially			Being		Prior to			After
	Owned			Offered		Offering			Offering
Tom L. Ward		37,980,542	(1)		—		34.1	%
Dirk M. Van Doren		166,000			—		*
Matthew K. Grubb		—			—		—
Bill Gilliland		1,348,489			—		1.2	%
Dan Jordan		766,666			—		*
Roy T. Oliver, Jr.		850,000	(2)		—		*
D. Dwight Scott		1,111,111	(3)		—		*
Jeffrey Serota		—	(4)		—		12.3	%
Entities affiliated with Ares Management LLC		13,333,333	(5)		—		12.3	%
N. Malone Mitchell, 3rd		22,759,482	(6)		—		20.8	%
All directors and named executive officers as a group		55,556,141			—		50.1	%

 * Less than 1%.

(1)  Includes (a) 5,076,626 shares held by TLW LLC for which Mr. Ward exercises voting and dispositive power, (b) 2,600,911 shares issuable upon conversion of convertible preferred stock, (c) 79,000 shares held through an IRA and (d) 6,535,601 shares held by a family trust.

(2)  Such shares are held by Oliver Active Investments, LLC for which Mr. Oliver exercises voting and dispositive power.

(3)  Such shares are held by GSO Capital Partners. Mr. Scott serves as a managing director of GSO Capital Partners and may be deemed to exercise voting and dispositive power with respect to such shares.

(4)  Mr. Serota is a senior partner in the Private Equity Group of Ares Management LLC (“Ares Management”), a private investment management firm that indirectly controls Ares Corporate Opportunities Fund II, L.P. (“ACOF II”), Ares SandRidge, L.P. (“Ares SandRidge”), Ares SandRidge 892 Investors, L.P. (“Ares 892 Investors”) and Ares SandRidge Co-Invest, LLC (together with Ares SandRidge and Ares 892 Investors, the “ACOF II AIVs”). Mr. Serota disclaims beneficial ownership of the shares owned by ACOF II and the ACOF II AIVs, except to the extent of any pecuniary interest therein.

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(5)  The shares of common stock listed in the table above are owned as follows: ACOF II — 7,376,636 shares; Ares SandRidge — 1,996,851 shares; Ares 892 Investors — 3,126,513 shares; and Ares SandRidge Co-Invest, LLC — 833,333 shares. The general partner of ACOF II and certain of the ACOF II AIVs is ACOF Management II, L.P. (“ACOF Management II”) and the general partner of ACOF Management II is ACOF Operating Manager II, L.P. (“ACOF Operating Manager II”). ACOF Operating Manager II is indirectly controlled by Ares Management, which, in turn, is indirectly controlled by Ares Partners Management Company LLC. Each of the foregoing entities (collectively, the “Ares Entities”) and the partners, members and managers thereof, other than ACOF II and the ACOF II AIVs, disclaims beneficial ownership of the shares of common stock owned by ACOF II and the ACOF II AIVs, except to the extent of any pecuniary interest therein. The address of each Ares Entity is 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067.

(6)  Includes (a) 485,672 shares issuable upon conversion of convertible preferred stock held by Dalea Partners for which Mr. Mitchell exercises voting and dispositive power and (b) shares held by Mr. Mitchell’s minor children.

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RELATED PARTY TRANSACTIONS

The following is a discussion of transactions between us and our officers, directors and beneficial owners of more than 5% of our common stock. We intend to adopt a written policy with respect to the review, approval and ratification of the related party transactions prior to the closing of this offering.

Well Participation Plan

On June 8, 2006, we adopted the Well Participation Program (the “WPP”) which permitted Messrs. Ward and Mitchell to participate as working interest owners in the wells that we drill in the future. The WPP was adopted at a time when Mr. Ward proposed to become a significant stockholder of the Company. Our board of directors’ view was that drilling participation by senior management with significant ownership in us was in our best interest. The payment of proportionate costs of drilling of these wells is similar to a “heads up” drilling participation that we may, from time to time, enter into with unaffiliated industry participants on specific wells. Mr. Mitchell ceased to participate in the WPP upon his resignation, effective December 31, 2006. On September 21, 2007, Mr. Mitchell agreed to sell to us all of his interests under WPP. Please see “— Other Transactions with N. Malone Mitchell, 3rd.” Mr. Ward remains a participant in the WPP.

Under the WPP, Mr. Ward is permitted to participate in all of the Program Wells, as defined in the WPP, spudded by or on behalf of SandRidge during each calendar year. In order to participate, at least 30 days prior to the beginning of each year, Mr. Ward must provide written notice to the members of the board of directors of his election to participate in the WPP and the percentage working interest which the participant proposes to participate with during the year. Mr. Ward’s working interest percentage may not exceed a 3.0% working interest. Mr. Mitchell participated for a 2.0% working interest from June 8, 2006 through December 31, 2006, his effective date of resignation as an officer of SandRidge. Mr. Ward does not participate in any well where our working interest after Mr. Ward’s participation would be reduced to below 12.5%. If Mr. Ward fails to provide notice of his election to participate or of the working interest percentage, the amount of the working interest percentage for the relevant calendar year will be deemed to be equal to the working interest percentage for the immediately preceding calendar year. Mr. Ward has participated for a 3.0% working interest in 2006 and elected to a 3.0% working interest for 2007.

The WPP is administered and interpreted by a committee of the board of directors consisting of Messrs. Gilliland and Jordan. Once a compensation committee is established, it will administer and interpret the WPP. In addition, the board of directors, in its sole discretion, may take any action with respect to the WPP that would otherwise be the responsibility of or delegated to the compensation committee. The board of directors has the right to suspend or terminate the WPP after December 31, 2015 by providing written notice of termination to Mr. Ward one year before the effective date of such termination. Mr. Ward’s right to participate in the WPP during any calendar year will terminate on the earlier of (1) December 31 of such year; (2) the termination of Mr. Ward’s employment by us for cause or death; or (3) the expiration or termination of any and all covenants not to compete subsequent to the termination of Mr. Ward for any reason not included in the foregoing clause (2).

Mr. Ward’s working interest percentage cannot be changed during any calendar year without the prior approval of the compensation committee. Participation by Mr. Ward under the WPP is conditioned on his participation in each Program Well spudded during the calendar year in an amount equal to the greater of the elected working interest percentage or his prior interest in the drilling unit for such Program Well.

The amount paid by Mr. Ward for the acreage assigned in connection with his participation in the WPP is computed as of the first day of each calendar year and is equal to the following amount computed on a per acre basis: (1) all direct third-party costs paid by the Company Entities (as defined in the WPP) and capitalized in the appropriate accounting pool in accordance with our accounting procedures (including capitalized interest, leasehold payments, acquisition costs, landman charges and seismic charges); divided by (2) the acreage in the applicable pool. The acreage charge amount is recomputed by us as of the first day of each calendar year and submitted to the compensation committee for approval. All other costs for Program Wells are billed in accordance with our accounting procedures applicable to third-party participants pursuant to any applicable joint operating agreement or exploration agreement relating to a particular Program Well.

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Notwithstanding anything to the contrary, in each case the participant’s participation in a Program Well will be on no better terms than the terms agreed to by unaffiliated third-party participants in connection with the participation in such Program Well or similar wells operated by the Company Entities.

Since the inception of the Well Participation Program in 2006, Messrs. Ward and Mitchell have participated in the drilling of 209 and 127 Program Wells, respectively. During 2006, Messrs. Ward and Mitchell were invoiced $1,951,904 and $1,592,136, respectively, for their share of costs for their interests in Program Wells, and received oil and gas revenues from their interests in Program Wells totaling $17,560 and $11,707 respectively. During the first six months of 2007, Messrs. Ward and Mitchell were invoiced $8,024,948 and $2,436,192, respectively, for their share of costs for their interests Program Wells, and received oil and gas revenues from all of their interests in all Program Wells, including Program Wells drilled in 2006, totaling $945,701 and $530,232, respectively. Mr. Mitchell has agreed to sell to us all of his interests under the WPP. Please see “— Other Transactions with N. Malone Mitchell, 3rd.”

Employee Participation Plan

We adopted an Employee Participation Plan in December 2005 that allowed certain employees to participate in the drilling of natural gas and oil wells of our company for up to 5% of our interest in the well. Before that date, a similar plan was informally administered. Our board of directors’ view was that drilling participation by these key employees was in our best interest. We provided certain employees, including our named executive officers, an allowance to participate in these wells. These allowances were funded by us and treated as compensation. Participating employees were all entitled to invest amounts in addition to the Company funded allocations under the plan. The purpose of the plan was to associate the interest of our employees with the stockholders, maintain competitive compensation levels and provide an incentive for employees to continue employment with us. The plan was terminated effective for all wells drilled on or after May 1, 2006. From January 1, 2006 through the termination of the plan, we awarded $707,000 in allowances under the plan, including $35,000 for each of Mr. Gaines and Ms. Pope and $42,000 for each of Mr. Dutton and Mr. McCann. These allowances were treated as coupons from the Company. Following the termination of the plan, all interests in the plan were assigned to the applicable participant and no further payments were made pursuant to the plan.

No current executive officers of the Company participated in the Employee Participation Plan. During 2006, the following former executive officers were invoiced or assessed compensatory allowances for costs for their interests in the plan wells: Ms. Pope — $98,399; Mr. Dutton — $83,184; Mr. Gaines — $46,902; Mr. McCann — $338,635; and each of these former executive officers received oil and gas revenues from their interests in all plan wells, including interests in plan wells drilled in prior years, in the following amounts: Ms. Pope - $65,439; Mr. Dutton — $18,491; Mr. Gaines — $9,746; Mr. McCann — $250,178.

During the first six months of 2007, the following former executive officers were invoiced for costs for their interests in the plan wells: Ms. Pope — $11,485; Mr. Dutton — $5,351; Mr. Gaines — $3,287; Mr. McCann — $43,879; and each of these former executive officers received oil and gas revenues from their interests in plan wells, including interests in wells drilled in prior years, in the following amounts: Ms. Pope — $30,826; Mr. Dutton — $10,378; Mr. Gaines — $6,539; Mr. McCann — $152,640. Following their departure from the Company in 2007, the Company purchased the interests in all plan wells from three of the former executive officers in negotiated acquisitions for the following cash payments: Ms. Pope — $201,581; Mr. Dutton — $75,394; Mr. Gaines - $53,534.

December 2005 Transactions

In December 2005, we entered into the following transactions with related parties as part of an effort to consolidate various interests in energy assets held by management, directors and independent third parties:

•  the acquisition of interests in our Piceance Basin acreage, West Texas undeveloped acreage and Larco from Mr. Jordan, a director and our former Vice President, Business, for 1,418,182 shares of common stock valued at $15 per share;

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•  the acquisition of interests in PetroSource, our Piceance Basin acreage and our Missouri and Nevada projects from Gillco Energy, L.P., an entity controlled by Mr. Gilliland, a director, for 1,406,000 shares of common stock valued at $15 per share; and

•  the acquisition of an interest in PetroSource from Mr. McCann, our former Senior Vice President — Legal, for $135,000.

The disinterested members of our board of directors reviewed and approved the terms of the transactions with Messrs. Jordan, Gilliland and McCann. Simultaneously with the consummation of these transactions, we purchased other interests in the same assets from independent third parties on substantially similar terms and at substantially similar prices.

  Private Placements

Affiliates of Mr. Ward and Mr. Mitchell purchased securities in our November 2006 and March 2007 private placements. Affiliates of Mr. Ward purchased 262,857 shares of our convertible preferred stock in our November 2006 private placement for $210 per share and 3,409,957 shares of common stock in our March 2007 private placement for $18 per share. Affiliates of Mr. Mitchell purchased 47,619 shares of our convertible preferred stock in our November 2006 private placement for $210 per share and 4,548 shares of common stock in connection with a preemptive right in our March 2007 private placement for $18 per share. These purchases were on identical terms and at identical prices as purchases made by independent third parties.

Other Transactions With N. Malone Mitchell, 3rd

Mr. Mitchell, our former Chairman, Chief Executive Officer and President, and his family, on September 30, 2005, traded 2.5% of our then outstanding common stock to us for our 100% interest in Longfellow Ranch Partners, LP (“Longfellow”). The purpose of this transaction was to separate the Longfellow ranch operations from our ongoing energy operations. While this transaction was approved by our board of directors and a majority of our stockholders, none of our directors at that time were disinterested and Mr. Mitchell controlled a majority of our outstanding common stock. Because of the unique nature of the transaction and the fact that none of our current officers or directors were officers or directors of the company at that time, we are unable to determine whether this transaction was on terms similar to those obtainable from third parties.

Longfellow owns surface or minerals or royalty under a significant amount of our exploration and development lands in West Texas, including the WTO. We have natural gas and oil leaseholds that cover all of Longfellow’s minerals. Under the leases, we will pay Longfellow royalties, based on production. The lease is for a seven-year primary term, with the option of extending the primary term another three years by paying a market value bonus. The lease royalty is 20% for wells completed before 2009, escalating to maximum of 25% in 2012. At the end of the primary term, the lease will break into approximately 3,000-acre tracts, and each tract will be subject to a 120-day continuous development clause. We also are party to a surface use agreement with Longfellow for use of the surface of the Longfellow Ranch. Under this agreement, we pay Longfellow fees, pursuant to a set schedule, for use of the surface for our natural gas and oil operations and for damages and rights of way. We believe the rates are equivalent to, or less than, the rates paid to other landowners in the area. As described below, this agreement was amended and restated on September 21, 2007. For 2003, 2004 and the nine months ended September 30, 2005, when operations were discontinued income (loss) from Longfellow’s operations were ($128,000), $683,000 and $638,000, respectively. These numbers included, among other things, royalties, damages and agricultural operations on the lands, minerals and royalties now indirectly owned by the Mitchell family. For the last three months of 2005, the year ended 2006, and the six months ended June 30, 2007, we paid Longfellow $1,019,710, $4,156,082 and $1,458,958, respectively.

On September 21, 2007, we entered into a letter agreement with Mr. Mitchell, Longfellow and certain of his affiliates, pursuant to which we agreed to purchase certain natural gas and oil interests from Mr. Mitchell for a purchase price of $32 million. These natural gas and oil interests include the interests located on the West Ranch, a ranch adjacent to Longfellow Ranch. Mr. Mitchell recently entered into an agreement to purchase the West Ranch. The natural gas and oil interests also include all other interests of Mr. Mitchell and

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his affiliates in wells and leasehold acreage owned or operated by us or our affiliates, including interests owned through our Well Participation Program. For the years 2004, 2005, 2006 and the six months ended June 30, 2007, we paid Mr. Mitchell $147,000, $170,963, $140,538 and $18,183, respectively, in connection with his ownership interest in these assets.

The transactions contemplated by the letter agreement are subject to a number of closing conditions, including Mr. Mitchell’s purchase of the West Ranch. We expect the acquisition to close within 20 days of the completion of this offering. In connection with the letter agreement, we also entered in to an amended and restated surface use and rights agreement regarding our access and use of the surface of lands owned by Mr. Mitchell in connection with our natural gas and oil interests on such lands.

The disinterested members of our board of directors determined that the transactions contemplated by the letter agreement, including the amended and restated surface use agreement, are on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction on an arms-length basis from a party that is not our affiliate and are fair to us from a financial point of view. Simultaneously with the execution of the letter agreement, Mr. Mitchell resigned as a director.

In August 2006, Mr. Mitchell acquired our interest in entities which owned Stockton Plaza, a commercial shopping center located in Fort Stockton, Texas, a restaurant franchise, and other non-core assets and investments, for an aggregate purchase price of $6,128,899. This transaction was determined to be in our best interests by the disinterested members of our board of directors and we believe it to be on terms similar to those available from unaffiliated third parties.

On May 2, 2007, we purchased additional leasehold acreage from Longfellow in return for $8.3 million in cash.

Other Transactions With Dan Jordan

Mr. Jordan, a director and our former Vice President, Business, has participated in projects since 2000. In March 2006, we acquired Mr. Jordan’s 12.5% interest in PetroSource for $5,489,401. In July 2006 we acquired Mr. Jordan’s interests in our producing natural gas and oil properties for $9,000,000. This transaction was determined to be in the best interests of the Company by the disinterested members of our board of directors. For the years 2004, 2005, 2006 and the six months ended June 30, 2007, we recognized the capital contributions from Mr. Jordan related to our drilling projects of $4,274,000, $5,670,081, $2,397,188 and $324,950, respectively. For the same periods, we paid Mr. Jordan $1,532,000, $2,113,020, $1,496,598 and $6,156, respectively. From August 2002 until October 2005, he received consulting fees from Larco of $40,000 per month. In June 2007, we purchased all of the interests in twelve producing wells and one well being drilled, which interests were owned by Wallace Jordan, LLC, a limited liability company a majority interest in is owned and controlled by Mr. Jordan (“Wallace Jordan”). In addition and as a part of this same transaction, we purchased the interest owned by Wallace Jordan in the Sabino pipeline and the West Piñon Gathering System and certain oil and gas leases covering lands in Pecos County, Texas, as well as the interest owned by Mr. Jordan individually in Integra Energy. The purchase price for these assets was $3.3 million plus the reimbursement of approximately $236,000 of costs attributable to Wallace Jordan’s 10% working interest in one of our wells.

Other Transactions With Bill Gilliland

Mr. Gilliland has served as a director since January 2006. In 2003, Mr. Gilliland assisted us in the acquisition of the PetroSource assets and acquired an approximate 18.8% interest in PetroSource through Gillco Energy, L.P. Through that same entity, he also participated in our Piceance Basin acreage, and various drilling projects in Missouri and Nevada. As described above under “ — December 2005 Transactions,” we acquired these interests in December 2005. In February 2006, we acquired an office building in Midland, Texas from a partnership affiliated with Mr. Gilliland for $950,000.

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Transaction With Roy Oliver

In September 2006, we entered into a new facilities lease with a director, Mr. Oliver. The lease extends to August 2009 with annual future rental payments of $1.1 million in 2007 and 2008 and $0.7 million in 2009. The terms of the lease were received and approved by our board of directors and we believe that the rent expense it must pay under this lease is at fair market rates. Rent expense in 2006 related to this facilities lease was $0.3 million.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 400,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, no par value. Immediately prior to the consummation of this offering, we will have 107,762,814 outstanding shares of common stock and 2,184,286 shares of convertible preferred stock outstanding. We have no outstanding options to purchase common stock, however, we have granted restricted stock awards for approximately 1.6 million shares (other than shares cancelled or forfeited). On completion of this offering, we will have 133,762,814 outstanding shares of common stock.

Common Stock

Subject to any special voting rights of any series of preferred stock that we may issue in the future, each share of common stock has one vote on all matters voted on by our stockholders, including the election of our directors. Because holders of common stock do not have cumulative voting rights, the holders of a majority of the shares of common stock can elect all of the members of the board of directors standing for election, subject to the rights, powers and preferences of any outstanding series of preferred stock.

No share of common stock affords any preemptive rights or is convertible, redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. Holders of common stock will be entitled to dividends in the amounts and at the times declared by our board of directors in its discretion out of funds legally available for the payment of dividends.

Holders of common stock will share equally in our assets on liquidation after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding. All outstanding shares of common stock are fully paid and non-assessable.

Preferred Stock

Convertible Preferred Stock

Dividends.  Each holder of our convertible preferred stock is entitled to receive a quarterly cash dividend at an annual rate of 7.75% of the accreted value of each share of convertible preferred stock held by such holder. The accreted value is currently $210 per share. In lieu of making any such quarterly cash dividend, we may, at our option, increase the accreted value of each share of convertible preferred stock by 2.3125% of the existing accreted value. We are prohibited from paying any cash dividends on any capital stock junior or equal in rank to our convertible preferred stock, including our common stock, without the consent of holders of a majority of our outstanding convertible preferred stock. In addition, each holder is entitled to any dividend or distribution made with respect to our common stock as if such holder had converted its shares of convertible preferred stock to common stock on the record date.

Voting.  Each holder of our convertible preferred stock is entitled to vote with the holders of our common stock on all matters submitted to a vote of stockholders as if such holder had converted its shares of convertible preferred stock to common stock on the record date for such vote. In addition, certain actions, including the issuance of any capital stock senior or equal in rank to our convertible preferred stock, any amendment to our Certificate of Incorporation and certain other fundamental transactions, shall require the approval of the holders of a majority of our convertible preferred stock.

Liquidation.  In the event of any voluntary or involuntary liquidation, dissolution or winding-up of SandRidge, subject to the payments of any debts or other liabilities of SandRidge and prior to any payment to the holders of our common stock, each holder of our convertible preferred stock shall receive with respect to each share an amount equal to the greater of (i) the accreted value as of the date of the liquidation and (ii) the amount that such holder would have received had it converted its shares of convertible preferred stock on the date of such liquidation, dissolution or winding-up.

Conversion at the Option of the Holders.  Each holder of our convertible preferred stock may convert any or all of its shares into common stock at any time. The shares of convertible preferred stock shall be converted into a number of shares of common stock equal to the product of the number of shares of

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convertible preferred stock being converted multiplied by the quotient of (i) the accreted value and (ii) the conversion price. The conversion price is currently $20.59 per share.

Issuances of common stock following this offering will not result in any adjustment to the conversion price.

Conversion at the Option of SandRidge.  At any time after 180 days following this offering, if the conditions described below have been satisfied, we may, at our option, cause all the shares of convertible preferred stock to be converted into a number of shares of common stock equal to the number of shares of convertible preferred stock multiplied by the quotient of (i) the accreted value and (ii) the conversion price then in effect. We may not effect such a conversion unless the following conditions have been satisfied:

•  we have completed this offering or an offering of similar size and price;

•  the shelf registration statement required by the registration rights agreement entered into in connection with the issuance of the convertible preferred stock shall be effective;

•  our common stock is listed on a national exchange and the closing price exceeds 100% of the conversion price for at least 20 trading days in any 30 consecutive trading day period; and

•  certain other conditions, including no event of default.

In connection with any conversion by us, unless the closing price of our common stock exceeds 150% of the conversion price for at least 20 trading days in any 30 consecutive trading day period, we must also make a payment to each holder of shares of convertible preferred stock equal to (i) the accreted value, multiplied by (ii) 0.0775, multiplied by (iii) the specified years. The specified years shall be determined by the following table:

Offering Price of this Offering	Specified Years
$24.39 or less		2.0
$24.40 to $26.78		1.5
$26.79 or greater		1.0

Warrant to Purchase Convertible Preferred Stock

We have issued warrants to purchase 482,381 shares of our convertible preferred stock. Generally, the warrant entitles the warrantholder to exercise the warrant by tendering a certain number of shares of common stock purchased in connection with the warrant for a number of shares of convertible preferred stock with an aggregate accreted value at the time of exercise equal the number of shares of common stock tendered as exercise consideration multiplied by $19. The accreted value of a share of convertible preferred stock is subject to increase in the event of non-payment of preferred stock dividends in cash, in which event the number of shares of convertible preferred stock that may be issued upon exercise of the Warrant and tender of common stock will be reduced.

The warrant may be exercised in whole or in part (through the tender of whole shares of common stock) commencing on the date of issue and ending at 5:00 p.m., New York time, on the earlier of (i) May 15, 2013 and (ii) the first day in which all outstanding shares of convertible preferred stock have been fully redeemed or converted (voluntarily or involuntarily) pursuant to the Certificate of Designations of the convertible preferred stock. Holders of warrants are entitled to all notices delivered to holders of convertible preferred stock and certain other notices as set forth in the warrant.

Additional Preferred Stock

Our board of directors may, without any action by holders of the common stock:

•  adopt resolutions to issue preferred stock in one or more classes or series;

•  fix or change the number of shares constituting any class or series of preferred stock; and

•  establish or change the rights of the holders of any class or series of preferred stock.

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The rights of any class or series of preferred stock may include, among others:

•  general or special voting rights;

•  preferential liquidation or preemptive rights;

•  preferential cumulative or noncumulative dividend rights;

•  redemption or put rights; and

•  conversion or exchange rights.

We may issue shares of, or rights to purchase, preferred stock the terms of which might:

•  adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock;

•  discourage an unsolicited proposal to acquire us; or

•  facilitate a particular business combination involving us.

Any of these actions could discourage a transaction that some or a majority of our stockholders might believe to be in their best interests or in which our stockholders might receive a premium for their stock over its then market price.

Amended and Restated Shareholders Agreement

In connection with the closing of the NEG acquisition, we entered into a Stockholders Agreement with certain of our shareholders, including Mr. Ward, our Chairman, Chief Executive Officer and President, Mr. Mitchell, a director, and affiliates of AREP. The Stockholders Agreement was subsequently amended and restated in connection with the sale of the shares held by AREP to other stockholders (the “New Investors”). The Amended and Restated Shareholders Agreement contains certain restrictions on transfer, tagalong rights, a selected preemptive right and registration rights, each of which is described more fully below.

Transfer Restrictions.  The Amended and Restated Shareholders Agreement prohibits the parties from transferring any of their securities prior to 180 days following the consummation of a “qualified public offering,” other than to family members and affiliates other than SandRidge or pursuant to the tagalong provisions described below. However, the Amended and Restated Shareholders Agreement allows Messrs. Ward and Mitchell to pledge their shares subject to certain conditions, in connection with a bona fide loan. The New Investors may also transfer their securities on the PORTAL market or pursuant to an exemption under the securities laws. “Qualified public offering” is defined as an underwritten, broad based public offering in excess of $100 million of common stock (which results in gross proceeds to the sellers of at least $100 million) and results in not less than 20 million shares of common stock (including common stock covered by any registration rights agreement and any shares sold pursuant to any previous public offerings) being listed for trading on a national securities exchange (including Nasdaq). We anticipate that this offering will be a qualified public offering for the purposes of the Amended and Restated Shareholders Agreement.

Tag-Along Rights.  If Messrs. Ward or Mitchell propose to sell shares of our common stock (other than to family members and affiliates other than SandRidge) prior to a qualified public offering, the New Investors have the right to elect to sell all of their shares of our common stock on the same terms. Following a qualified public offering, if Messrs. Ward or Mitchell propose to sell shares of our common stock in excess of 3% of our outstanding common stock on a fully diluted basis (other than to family members and affiliates other than SandRidge to Rule 144 or in a registered offering other than a block trade), the New Investors have the right to elect to sell their proportionate number of shares of our common stock on the same terms. The tagalong rights expire on the earlier of (i) the date upon which the New Investors cease to own at least 20% of our shares of common stock on purchased from affiliates of AREP and (ii) two years following a qualified public offering.

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Registration Rights.  The Amended and Restated Shareholders Agreement provides each of Mr. Ward, Mr. Mitchell and the affiliates of AREP certain registration rights. For a description of these rights, please read “— Registration Rights — Amended and Restated Shareholders Agreement.”

Registration Rights

December 2005 Private Placement.  In connection with our December 2005 private placement, we agreed to use commercially reasonable efforts to file a shelf registration statement with the SEC with respect to the shares sold in our December 2005 private placement for resale prior to March 21, 2006 and to cause such shelf registration statement to become effective prior to July 29, 2006. This agreement was subsequently amended to extend the effectiveness date to December 21, 2007. If we fail to meet these deadlines or to maintain such effectiveness, we may be subject to certain liquidated damage payments. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Registration Rights Agreements.” The holders of these shares have agreed not to effect any sales of such shares until the earlier of (i) 60 days following the effectiveness of the registration statement containing this prospectus and (ii) December 21, 2007.

November 2006 Private Placement.  In connection with our November 2006 private placement, we agreed to file a shelf registration statement with the SEC with respect to the shares of our common stock underlying our convertible preferred stock as promptly as practicable, but in no event later than August 31, 2007. We also agreed to use our reasonable best efforts to cause such registration statement to become effective no later than the earlier of (i) 180 days from the effectiveness of the registration statement containing this prospectus and (ii) December 31, 2007. If we fail to meet these deadlines or to maintain such effectiveness, we may be subject to certain liquidated damage payments. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Registration Rights Agreements.” In addition, we have agreed to allow the holders of the securities sold in our November 2006 private placement to offer their shares of our common stock in certain future registered offerings of our common stock, subject to our priority and customary limitations.

March 2007 Private Placement.  In connection with our March 2007 private placement, we agreed to use commercially reasonable efforts to file a shelf registration statement with the SEC with respect to the shares sold in our March 2007 private placement for resale prior to either (a) 90 days following the effectiveness of the shelf registration statement related to our December 2005 private placement and (b) a date selected by the purchasers and to cause such shelf registration statement to become effective within 90 days of the date on which it is filed. If we fail to meet these deadlines or to maintain such effectiveness, we may be subject to certain liquidated damage payments. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Registration Rights Agreements.”

Amended and Restated Shareholders Agreement.  Pursuant to a Amended and Restated Shareholders Agreement among us and certain of our stockholders, including Messrs. Ward and Mitchell and certain of their respective affiliates, we have agreed to allow such parties to offer their shares of our common stock in certain future registered offerings of our common stock, subject to our priority and customary limitations. We have also agreed to use our reasonable best efforts to cause a shelf registration statement to become effective with respect to the securities held by the stockholders party to the Amended and Restated Shareholders Agreement upon their request. Such request may not be made within 120 days of the effectiveness of a registration statement requested pursuant to the Amended and Restated Shareholders Agreement or that such stockholders are entitled to participate in pursuant to the Amended and Restated Shareholders Agreement. In addition, the stockholders party to the agreement (other than Messrs. Ward and Mitchell and their affiliates) may not request that we file a shelf registration statement prior to the date which is 201 days following the consummation of this offering. The stockholders party to the agreement (other than Messrs. Ward and Mitchell and their affiliates) may transfer their registration rights under this agreement in connection with sales in excess of 2,000,000 shares of our common stock. Each of the parties to the Amended and Restated Shareholders Agreement have agreed not to effect any sale or distribution of our common stock or securities convertible or exchangeable or exercisable for our common stock for a period of 180 days from the date of this prospectus. The Amended and Restated Shareholders Agreement does not prohibit these stockholders from

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pledging their shares in connection with a bona fide borrowing arrangement. The agreement does, however, require that the lender or other beneficiary of such pledge agree to be bound by its terms upon any foreclosure to the extent the pledged shares represent more than 25% of such stockholders shares that are subject to the agreement.

Anti-Takeover Provisions of Delaware Law, Our Certificate of Incorporation and Bylaws

Written Consent of Stockholders

Our certificate of incorporation and bylaws provide that any action required or permitted to be taken by our stockholders must be taken at a duly called meeting of stockholders and not by written consent.

Amendment of the Bylaws

Under Delaware law, the power to adopt, amend or repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon the board of directors the power to adopt, amend or repeal its bylaws. Our charter and bylaws grant our board the power to adopt, amend and repeal our bylaws on the affirmative vote of a majority of the directors then in office. Our stockholders may adopt, amend or repeal our bylaws but only at any regular or special meeting of stockholders by the holders of not less than 662/3% of the voting power of all outstanding voting stock.

Special Meetings of Stockholders

Our bylaws preclude the ability of our stockholders to call special meetings of stockholders.

Other Limitations on Stockholder Actions

Advance notice is required for stockholders to nominate directors or to submit proposals for consideration at meetings of stockholders. In addition, the ability of our stockholders to remove directors without cause is precluded.

Classified Board

Only one of three classes of directors is elected each year. See “Management — Board of Directors.”

Limitation of Liability of Officers and Directors

Our certificate of incorporation provides that no director shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability as follows:

•  for any breach of the director’s duty of loyalty to us or our stockholders;

•  for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of laws;

•  for unlawful payment of a dividend or unlawful stock purchase or stock redemption; and

•  for any transaction from which the director derived an improper personal benefit.

The effect of these provisions is to eliminate our rights and our stockholders’ rights, through stockholders’ derivative suits on our behalf, to recover monetary damages against a director for a breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above.

Business Combination Under Delaware Law

We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with

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an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Section 203 defines a “business combination” as a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholders. Section 203 defines an “interested stockholder” as a person who, together with affiliates and associates, owns, or, in some cases, within three years prior, did own, 15% or more of the corporation’s voting stock. Under Section 203, a business combination between us and an interested stockholder is prohibited unless:

•  our board of directors approved either the business combination or the transaction that resulted in the stockholders becoming an interested stockholder prior to the date the person attained the status;

•  upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding, for purposes of determining the number of shares outstanding, shares owned by persons who are directors and also officers and issued employee stock plans, under which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or

•  the business combination is approved by our board of directors on or subsequent to the date the person became an interested stockholder and authorized at an annual or special meeting of the stockholders by the affirmative vote of the holders of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder.

This provision has an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for the shares of our common stock. With approval of our stockholders, we could amend our certificate of incorporation in the future to elect not to be governed by the anti-takeover law. This election would become effective twelve months after the adoption of the amendment and would not apply to any business combination with any person who became an interested stockholder on or before the adoption of the amendment.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. The market price of our common stock could drop due to sales of a large number of shares of our common stock or the perception that these sales could occur. These factors could also make it more difficult to raise funds through future offerings of common stock.

After this offering, 134,862,112 shares of common stock will be outstanding, or           shares if the underwriters exercise their over-allotment option in full. Of these 134,862,112 shares, the           shares sold in this offering, or shares if the underwriters exercise their over-allotment option in full, will be freely tradable without restriction under the Securities Act except for any shares purchased by one of our “affiliates” as defined in Rule 144 under the Securities Act. In addition, holders of shares of our convertible may convert such shares to common stock at any time. Following the exercise of all warrants for our convertible preferred stock and the conversion of all shares of convertible preferred stock,      shares of common stock will be outstanding, or      shares if the underwriters exercise their over-allotment option in full. All of the shares outstanding other than the shares sold in this offering (a total of           shares) are “restricted securities” with the meaning of Rule 144 under the Securities Act.

In connection with this offering, we, our directors and executive officers and holders of more than     % of our outstanding common stock will enter into lock-up agreements with the underwriters under which these holders of restricted shares will agree that, subject to certain exceptions, they will not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock, or publicly announce the intention to do any of the foregoing, without the prior written consent of Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC for a period of 180 days (60 days in the case of each selling stockholder) from the date of this prospectus. The lock-up agreement that Mr. Ward, our Chairman, Chief Executive Officer and President, entered into contains an exception for approximately           restricted shares of our common stock that he pledged as a portion of the collateral for a personal loan and any additional shares of our common stock that he may purchase in this offering and which he may pledge as collateral for such loan. If Mr. Ward defaults on this loan, the lender may foreclose on and sell these shares pursuant to an exemption under the Securities Act notwithstanding the lock-up agreement. The lock-up agreement of Mr. Mitchell, one of our directors, allows him to pledge up to all of his common shares as collateral for a personal loan provided that the lender agrees to be bound by the terms of Mr. Mitchell’s lock-up with respect to any shares that are transferred to the lender as a result of foreclosure. See “Underwriting” for a description of these lock-up arrangements. There are additional restrictions on the transfer of shares by Messrs. Ward and Mitchell contained in the Amended and Restated Shareholders Agreement, dated as of April 4, 2007.

The Amended and Restated Shareholders Agreement, however, also permits Messrs. Ward and Mitchell to pledge their shares, subject to certain conditions, in connection with a bona fide loan. See “Description of Capital Stock — Amended and Restated Shareholders Agreement.” In addition, purchasers in our December 2005 private placement have agreed not to effect any sale of shares purchased in such private placement until the earlier of (i) 60 days from the date of effectiveness of the registration statement containing this prospectus and (ii) December 21, 2007. Shareholders party to the Amended and Restated Shareholders Agreement, including Mr. Ward, Mr. Mitchell, and entities affiliated with Ares Management Fund LLC, have agreed not to effect any sale or distribution of our equity securities or securities convertible into or exchangeable or exercisable for any of our equity securities for a period of 180 days from the date of effectiveness of the registration statement containing this prospectus. The Amended and Restated Shareholders Agreement does not prohibit these stockholders from pledging their shares in connection with a bona fide borrowing arrangement. The agreement does, however, require that the lender or other beneficiary of such pledge agree to be bound by its terms upon any foreclosure to the extent the pledged shares represent more than 25% of such stockholders shares that are subject to the agreement.

Giving effect to such lock-up agreements (but excluding the effect of the exclusion for Mr. Ward’s pledged shares), the           restricted shares outstanding immediately prior to this offering will be eligible for sale in the public market under Rule 144 of the Securities Act, subject to volume limitations and other

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restrictions contained in Rule 144, as follows: (i) at the date of this prospectus           shares, (ii) commencing 60 days thereafter an additional           shares, (iii) commencing 90 days thereafter an additional           shares, (iv) commencing 180 days thereafter an additional           shares and (v) thereafter an additional           shares.

On August 13, 2007, we filed a shelf registration statement to register for resale, from time to time, by certain stockholders of up to 62,036,000 shares of our common stock issued or potentially issuable upon the conversion of securities sold in our December 2005, November 2006 and March 2007 private placements. We anticipate that this registration statement will be declared effective within 90 days of the completion of this offering. Holders of           of such shares are subject to the lock up agreement related to our December 2005 private placement described above. In addition, holders of           of such shares are subject to the 180 day lock-up agreement with the underwriters described above, and holders of           of such shares are subject to the 180 day lock-up agreement contained in the Amended and Restated Shareholder Agreement described above.

As soon as practicable after this offering, we intend to file one or more registration statements with the SEC on Form S-8 providing for the registration of 7,074,252 shares of our common stock issued or reserved for issuance under our stock option plans. Subject to the exercise of unexercised options or the expiration or waiver of vesting conditions for restricted stock and the expiration of lock-ups we and certain of our stockholders have entered into, shares registered under these registration statements on Form S-8 will be available for resale immediately in the public market without restriction.

Rule 144

In general, under Rule 144 as currently in effect, any person (or persons whose shares are aggregated), including an affiliate, who has beneficially owned shares for a period of at least one year is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

•  1% of the then outstanding shares of common stock, which will equal approximately           shares after the closing of this offering; and

•  the average weekly trading volume of our common stock on the NYSE during the four calendar weeks immediately preceding the date on which the notice of the sale on Form 144 is filed with the Securities Exchange Commission.

Sales under Rule 144 are also subject to other provisions relating to notice and manner of sale and the availability of current public information about us. The SEC has a proposal pending to shorten the one-year holding period to six months.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an “affiliate,” is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, shares covered by Rule 144(k) may be sold immediately upon completion of this offering. On December 21, 2007,           shares issued in connection with our December 2005 private placement may become eligible for sale under Rule 144(k). The SEC has a proposal pending to shorten the two year holding period to one year.

Rule 701

In general under Rule 701 under the Securities Act as currently in effect, any of our employees who purchased or received shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 is eligible to resell such shares beginning 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with most of its restrictions, including the holding period.

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CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of the principal U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a non-U.S. holder. As used in this discussion, the term “non-U.S. holder” means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:

•  an individual who is a citizen or resident of the United States;

•  a corporation or partnership (including any entity treated as a corporation or partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States, or of any political subdivision of the United States (unless, in the case of a partnership, U.S. Treasury Regulations are adopted which provide otherwise);

•  an estate whose income is subject to U.S. federal income taxation regardless of its source; or

•  a trust, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or if it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person.

In any calendar year, an individual may be treated for U.S. federal income tax purposes as a resident of the United States by, among other ways, being present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of the 183-day calculation, all of the days on which such individual was present in the current year, one-third of the days in the immediately preceding year and one-sixth of the days in the second preceding year are counted. Residents are taxed for U.S. federal income tax purposes as if they were U.S. citizens. This discussion does not consider:

•  U.S. state or local or non-U.S. tax consequences;

•  all aspects of U.S. federal income and estate taxes or specific facts and circumstances that may be relevant to a particular non-U.S. holder’s tax position, including, in the case of a non-U.S. holder that is an entity treated as a partnership for U.S. federal income tax purposes, the fact that the U.S. tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner level;

•  the tax consequences for the stockholders, partners or beneficiaries of a non-U.S. holder;

•  special tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, broker-dealers, and traders in securities; or

•  special tax rules that may apply to a non-U.S. holder that holds our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment.

The following discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed U.S. Treasury Regulations and administrative and judicial interpretations, all as of the date of this prospectus, and all of which are subject to change, retroactively or prospectively. The following summary assumes that a non-U.S. holder holds our common stock as a capital asset. Each non-U.S. holder should consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

Distributions on Common Stock

We do not expect to pay any cash distributions on our common stock in the foreseeable future; however, in the event that we do make such cash distributions, these distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any amount paid in excess of such earnings and profits generally will be treated as a recovery of tax basis, to the extent thereof, and then gain from sale. Distributions

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paid to non-U.S. holders of our common stock that are not effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business generally will be subject to U.S. withholding tax at a 30% rate, or if a tax treaty applies, a lower rate specified by the treaty.

A non-U.S. holder that claims the benefit of an applicable income tax treaty generally will be required to provide an Internal Revenue Service Form W-8 BEN and meet certain other requirements. However,

•  in the case of common stock held by a foreign partnership, the certification requirement will generally be applied to the partners of the partnership and the partnership will be required to provide certain information;

•  in the case of common stock held by a foreign trust, the certification requirement will generally be applied to the trust or the beneficial owners of the trust depending on whether the trust is a “foreign complex trust,” “foreign simple trust” or “foreign grantor trust” as defined in the U.S. Treasury Regulations; and

•  look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.

A non-U.S. holder that is a foreign partnership or a foreign trust is urged to consult its own tax advisor regarding its status under these U.S. Treasury Regulations and the certification requirements applicable to it.

A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for refund with the U.S. Internal Revenue Service. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

Dividends that are effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States and, if an income tax treaty applies, are attributable to a permanent establishment in the United States, are taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons. In that case, we will not withhold U.S. federal withholding tax if the non-U.S. holder complies with applicable certification and disclosure requirements (including providing Internal Revenue Service Form W-8 ECI). In addition, a “branch profits tax” may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign corporation that are effectively connected with its conduct of a trade or business in the United States.

Disposition of Common Stock

We believe that we are a United States real property holding corporation. Generally, a corporation is a United States real property holding corporation if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. Notwithstanding our status as a United States real property holding corporation, a non-U.S. holder of our common stock generally will not be subject to U.S. federal income tax on gain recognized on a disposition of our common stock unless:

•  the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States and, if an income tax treaty applies, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; in these cases, the gain will be taxed on a net income basis at the rates and in the manner applicable to United States persons, and if the non-U.S. holder is a foreign corporation, the branch profits tax described above may also apply;

•  the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets other requirements; or

•  the non-U.S. holder actually or constructively owns more than five percent of our common stock at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock, provided that our common stock is “regularly traded on an established securities market,” within the meaning of Section 897 of the Code and applicable Treasury Regulations, during the calendar year in which the sale or other disposition occurs.

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Non-United States holders should consult their own tax advisors with respect to the application of the foregoing rules.

U.S. Federal Estate Tax

Common stock owned or treated as owned by an individual who is a non-U.S. holder for U.S. federal estate tax purposes at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise, and therefore may be subject to U.S. federal estate tax.

Information Reporting and Backup Withholding Tax

Generally, we must report annually to any non-U.S. holder and the U.S. Internal Revenue Service the amount of any dividends paid to such holder, the holder’s name and address, and the amount, if any, of tax withheld. Copies of the information returns reporting those dividends and amounts withheld also may be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of any applicable tax treaty or exchange of information agreement.

In addition to information reporting requirements, dividends paid to a non-U.S. holder may be subject to U.S. backup withholding tax. A non-U.S. holder generally will be exempt from this backup withholding tax, however, if such holder properly provides a Form W-8BEN certifying that such holder is a non-United States person or otherwise establishes an exemption and we do not know or have reason to know that the holder is a United States person.

The gross proceeds from the disposition of our common stock may be subject to information reporting and backup withholding. If a non-U.S. holder sells shares of our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to such holder outside the United States, then the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not backup withholding, generally will apply to a payment of sales proceeds, even if that payment is made outside the United States, if the non-U.S. holder sells shares of our common stock through a non-U.S. office of a broker that:

•  is a United States person;

•  derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States;

•  is a “controlled foreign corporation” for U.S. federal tax purposes; or

•  is a foreign partnership, if at any time during its tax year:

•  one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or

•  the foreign partnership is engaged in a U.S. trade or business,

unless the broker has documentary evidence in its files that the holder is not a U.S. person and certain other conditions are met, or the holder otherwise establishes an exemption.

If a non-U.S. holder receives payments of the proceeds of a sale of our common stock to or through a U.S. office of a broker, the payment will be subject to both U.S. backup withholding and information reporting unless such holder properly provides a Form W-8BEN certifying that such holder is not a United States person or otherwise establishes an exemption, and we do not know or have reason to know that such holder is a United States person.

A non-U.S. holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed such holder’s U.S. federal income tax liability by timely filing a properly completed claim for refund with the U.S. Internal Revenue Service.

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UNDERWRITING

Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC are acting as representatives of the underwriters and joint book-running managers of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us and the selling stockholders the respective number of common stock shown opposite its name below:

Underwriters	Number of Shares
Lehman Brothers Inc.
Goldman, Sachs & Co.
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
Credit Suisse Securities (USA) LLC
Deutsche Bank Securities Inc.
Howard Weil Incorporated
J.P. Morgan Securities Inc.
Raymond James & Associates, Inc.
RBC Capital Markets Corporation
Simmons & Company International
Tudor, Pickering & Co., Securities, Inc.
UBS Securities LLC
Total

In addition, we will directly offer and sell at the public offering price 4,170,000 shares to Tom L. Ward, our Chairman, Chief Executive Officer and largest shareholder. These shares are not part of the underwritten offering and the underwriters will not participate as an underwriter, placement agent or in any other offeror capacity in connection with the sale of, and will not receive any commission or discount on, these shares.

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:

•  the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased;

•  the representations and warranties made by us and the selling stockholders to the underwriters are true;

•  there is no material change in our business or the financial markets; and

•  we deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we and the selling stockholders will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting fee is the difference

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between the initial price to the public and the amount the underwriters pay to us and the selling stockholders for the shares.

	Paid by Us
	No Exercise	Full Exercise
Per Share	$	$
Total	$	$

The representatives of the underwriters have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $      per share. After the offering, the representatives may change the offering price and other selling terms.

The expenses of the offering that are payable by us and the selling stockholders are estimated to be $      (excluding underwriting discounts and commissions). We have agreed to pay expenses incurred by the selling stockholders in connection with the offering, other than the underwriting discounts and commission.

Option to Purchase Additional Shares

We have granted the underwriters an option exercisable for 30 days after the date of the underwriting agreement, to purchase, from time to time, in whole or in part, up to an aggregate of           shares at the public offering price less underwriting discounts and commissions. This option may be exercised if the underwriters sell more than the number of shares on the cover of this prospectus in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting Section.

Lock-Up Agreements

We, all of our directors and executive officers, each of the selling stockholders and holders of more than     % of our outstanding stock have agreed that, subject to certain exceptions, without the prior written consent of each of Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC, we and they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus. The lock-up agreement that Mr. Ward, our Chairman, Chief Executive Officer and President, entered into contains an exception for approximately           restricted shares of our common stock that he pledged as a portion of the collateral for a personal loan and any additional shares of our common stock he may pledge as collateral for such loan. If Mr. Ward defaults on this loan, the lender may foreclose on and sell these shares pursuant to an exemption under the Securities Act notwithstanding the lock-up agreement. The lock-up agreement of Mr. Mitchell, one of our directors, allows him to pledge up to all of his common shares as collateral for a personal loan provided that the lender agrees to be bound by the terms of Mr. Mitchell’s lock-up with respect to any shares that are transferred to the lender as a result of foreclosure. Please see “Risk Factors — Risks Related to this Offering and Our Common Stock — Certain stockholders’ shares are restricted from immediate resale but may be sold in the market in the near future. This could cause the market price of our common stock to drop significantly.”

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There are additional restrictions on the transfer of shares by Messrs. Ward and Mitchell contained in the Amended and Restated Shareholders Agreement, dated as of April 4, 2007. The Amended and Restated Shareholders Agreement, however, also permits Messrs. Ward and Mitchell to pledge their shares, subject to certain conditions, in connection with a bona fide loan. See “Description of Capital Stock — Amended and Restated Shareholders Agreement.”

The 180-day restricted period described in the preceding paragraph will be extended if:

•  during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or

•  prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC.

Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.

Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America Securities LLC have no present intent or understanding to release all or any portion of the securities subject to these arrangements.

As described below under “Directed Share Program,” any participants in the Directed Share Program will be subject to a 180-day lock up with respect to any shares sold to them pursuant to that program. This lock up will include an identical extension provision with respect to an earnings release, material news or event as the lock-up agreement described above. Any shares sold in the Directed Share Program to our directors or officers will be subject to the lock-up agreement described above.

In addition, purchasers in our December 2005 private placement have agreed not to effect any sale of shares purchased in such private placement until the earlier of (i) 60 days from the date of effectiveness of the registration statement containing this prospectus and (ii) December 21, 2007.

Shareholders party to the Amended and Restated Shareholders Agreement, including Mr. Ward, Mr. Mitchell and entities affiliated with Ares Management Fund LLC, have agreed not to effect any sale or distribution of our equity securities or securities convertible into or exchangeable or exercisable for any of our equity securities for a period of 180 days from the date of effectiveness of the registration statement containing this prospectus. The Amended and Restated Shareholders Agreement does not prohibit these stockholders from pledging their shares in connection with a bona fide borrowing arrangement. The agreement does, however, require that the lender or other beneficiary of such pledge agree to be bound by its terms upon any foreclosure to the extent the pledged shares represent more than 25% of such stockholders shares that are subject to the agreement.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives will consider:

•  the history and prospects for the industry in which we compete;

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•  our financial information;

•  the ability of our management and our business potential and earning prospects;

•  the prevailing securities markets at the time of this offering; and

•  the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities incurred in connection with the directed share program referred to below, and to contribute to payments that the underwriters may be required to make for these liabilities.

Directed Share Program

At our request, the underwriters have reserved for sale at the initial public offering price up to           shares offered hereby for officers, directors, employees and certain other persons associated with us. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. Any participants in this program will be prohibited from selling, pledging or assigning any shares sold to them pursuant to this program for a period of 180 days after the date of this prospectus. This 180-day lock up period will be extended with respect to our issuance of an earnings release, or if a material news or a material event relating to us occurs, in the same manner as described above under “Lock-Up Agreements.”

Stabilization, Short Positions and Penalty Bids

The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934:

•  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•  A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•  Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

•  Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

New York Stock Exchange

We have applied to have our shares of common stock listed for quotation on the New York Stock Exchange under the symbol “SD.” The underwriters have undertaken to sell the shares of common stock in this offering to a minimum of 400 beneficial owners in round lots of 100 or more units to meet the New York Stock Exchange distribution requirements for trading.

Discretionary Sales

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts without the prior written approved of the customers.

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

United Kingdom

To the extent that any offer of the common stock is made in the United Kingdom, this document is only being distributed to and is only directed at (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 492(a) to (e) of the Order (all such persons together being referred to as “relevant persons”). The shares of common stock are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such common stock will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

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Each of the underwriters has represented and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 or FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to us, and

(b) it has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

European Economic Area

To the extent that the offer of the common stock is made in any Member State of the European Economic Area that has implemented the Prospectus Directive before the date of publication of a prospectus in relation to the common stock which has been approved by the competent authority in the Member State in accordance with the Prospectus Directive (or, where appropriate, published in accordance with the Prospectus Directive and notified to the competent authority in the Member State in accordance with the Prospectus Directive), the offer (including any offer pursuant to this document) is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive or has been or will be made otherwise in circumstances that do not require us to publish a prospectus pursuant to the Prospectus Directive.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities,

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; 2 a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts,

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer, or

(d) in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of

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Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; 2 where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

France

No prospectus (including any amendment, supplement or replacement thereto) has been prepared in connection with the offering of the common stock that has been approved by the Autorité des marchés financiers or by the competent authority of another State that is a contracting party to the Agreement on the European Economic Area and notified to the Autorité des marchés financiers; no Securities have been offered or sold and will be offered or sold, directly or indirectly, to the public in France except to permitted investors (“Permitted Investors”) consisting of persons licensed to provide the investment service of portfolio management for the account of third parties, qualified investors (investisseurs qualifiés) acting for their own account and/or investors belonging to a limited circle of investors (cercle restreint d’investisseurs) acting for their own

139

account, with “qualified investors” and “limited circle of investors” having the meaning ascribed to them in Articles L. 411-2, D. 411-1, D. 411-2, D. 411-4, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code Monétaire et Financier and applicable regulations thereunder; none of this prospectus or any other materials related to the offering or information contained therein relating to the Securities has been released, issued or distributed to the public in France except to Permitted Investors; and the direct or indirect resale to the public in France of any Securities acquired by any Permitted Investors may be made only as provided by Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code Monétaire et Financier and applicable regulations thereunder.

Italy

The offering of the common stock has not been cleared by the Italian Securities Exchange Commission (Commissione Nazionale per le Società e la Borsa, the “CONSOB”) pursuant to Italian securities legislation and, accordingly, the common stock may not be offered, sold or delivered, nor may copies of this prospectus or any other documents relating to the common stock be distributed in Italy, except (i) to professional investors (operatori qualificati), as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of July 1, 1998, as amended, (the “Regulation No. 11522”), or (ii) in other circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of Legislative Decree No. 58 of February 24, 1998 (the “Financial Service Act”) and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended.

Any offer, sale or delivery of the common stock or distribution of copies of this prospectus or any other document relating to the common stock in Italy may and will be effected in accordance with all Italian securities, tax, exchange control and other applicable laws and regulations, and, in particular, will be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of September 1, 1993, as amended (the “Italian Banking Law”), Regulation No. 11522, and any other applicable laws and regulations; (ii) in compliance with Article 129 of the Italian Banking Law and the implementing guidelines of the Bank of Italy; and (iii) in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy.

Any investor purchasing the common stock in the offering is solely responsible for ensuring that any offer or resale of the common stock it purchased in the offering occurs in compliance with applicable laws and regulations.

This prospectus and the information contained therein are intended only for the use of its recipient and, unless in circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of the “Financial Service Act” and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended, is not to be distributed, for any reason, to any third party resident or located in Italy. No person resident or located in Italy other than the original recipients of this document may rely on it or its content.

Italy has only partially implemented the Prospectus Directive, the provisions under the heading “European Economic Area” above shall apply with respect to Italy only to the extent that the relevant provisions of the Prospectus Directive have already been implemented in Italy.

Insofar as the requirements above are based on laws which are superseded at any time pursuant to the implementation of the Prospectus Directive, such requirements shall be replaced by the applicable requirements under the Prospectus Directive.

Relationships/NASD Conduct Rules

The underwriters have in the past performed and may in the future perform investment banking and advisory services for us from time to time for which they received and may in the future receive customary fees and expenses. In particular, Lehman Brothers Inc., Goldman, Sachs & Co. and Banc of America

140

Securities LLC hold shares of our convertible preferred stock. Affiliates of Banc of America Securities LLC and Credit Suisse Securities (USA) LLC are lenders under our senior credit facility, which we intend to repay with the net proceeds of this offering. Because of this relationship, this offering is being conducted in accordance with Rule 2720 of the National Association of Securities Dealers, Inc. This rule requires that the initial public offering price for our shares cannot be higher than the price recommended by a “qualified independent underwriter,” as defined by the NASD. Lehman Brothers Inc. is serving as a qualified independent underwriter and will assume the customary responsibilities of acting as a qualified independent underwriter in pricing the offering and conducting due diligence. We have agreed to indemnify Lehman Brothers Inc. against any liabilities arising in connection with its role as a qualified independent underwriter, including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for us by Vinson & Elkins L.L.P. Certain legal matters in connection with the offering will be passed upon for the underwriters by Davis Polk & Wardwell.

EXPERTS

The financial statements of SandRidge Energy, Inc. as of December 31, 2005 and 2006 and for each of the three years in the period ended December 31, 2006 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The combined financial statements of NEG Oil & Gas LLC and subsidiaries, excluding National Energy Group, Inc. and the 103/4% Senior Notes due from National Energy Group Inc., but including National Energy Group Inc.’s 50% membership interest in NEG Holding LLC as of December 31, 2004 and 2005 and for each of the three years in the period ended December 31, 2005 included in this prospectus and elsewhere in the registration statement have been audited by Grant Thornton LLP, independent registered public accounting firm, as indicated in their report with respect thereto, and is included herein in reliance upon the authority of said firm as experts in giving said report.

The estimated reserve evaluations and related calculations for our WTO properties as of December 31, 2005 and PetroSource properties as of December 31, 2005 and 2006 and June 30, 2007 have been included in this prospectus in reliance upon the report of DeGolyer and MacNaughton, independent petroleum engineering consultants, given upon their authority as experts in petroleum engineering. The estimated reserve evaluations and related calculations for our Piceance Basin properties as of December 31, 2005 and our WTO, East Texas, Gulf of Mexico, Gulf Coast and certain other properties as of December 31, 2006 and June 30, 2007 have been included in this prospectus in reliance upon the report of Netherland, Sewell & Associates, Inc., independent petroleum engineering consultants, given upon their authority as experts in petroleum engineering. The estimated reserve evaluations for certain of our other properties as of December 31, 2005 have been included in this report in reliance upon the report of Harper & Associates, Inc., independent petroleum engineering consultants, given upon their authority as experts in petroleum engineering.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock being sold in this offering. This prospectus, which forms part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock being sold in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any

141

other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed as an exhibit and is qualified in all respects by the filed exhibit. The registration statement, including exhibits and schedules filed, may be inspected without charge at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, and copies of all or any part of it may be obtained from that office after payment of fees prescribed by the SEC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. The other information we file with the SEC is not part of the registration statement of which this prospectus forms a part.

After we have completed this offering, we will file annual, quarterly and current reports, proxy statements and other information with the SEC. We intend to make these filings available on our website at http://www.sdrge.com once the offering is completed. Information on, or accessible through, this website is not a part of, and is not incorporated into, this prospectus. In addition, we will provide copies of our filings free of charge to our stockholders upon request.

142

FINANCIAL STATEMENTS

SandRidge Energy, Inc. Audited Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2005 and 2006	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2004, 2005, and 2006	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2004, 2005, and 2006	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005, and 2006	F-6
Notes to Consolidated Financial Statements	F-7
SandRidge Energy, Inc. Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 2006 and June 30, 2007	F-44
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2006 and 2007	F-45
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30 2007	F-46
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2007	F-47
Notes to Condensed Consolidated Financial Statements	F-48
NEG Oil & Gas LLC Audited Financial Statements
Report of Independent Registered Public Accounting Firm	F-61
Combined Balance Sheets as of December 31, 2004 and 2005	F-62
Combined Statements of Operations for the Years Ended December 31, 2003, 2004 and 2005	F-63
Combined Statements of Cash Flows for the Years Ended December 31, 2003, 2004, and 2005	F-64
Combined Statements of Changes in Total Member’s Equity for the Years Ended December 31, 2003, 2004, and 2005	F-65
Notes to Combined Financial Statements	F-66
NEG Oil & Gas LLC Unaudited Financial Statements
Combined Balance Sheets as of December 31, 2005 and September 30, 2006	F-91
Combined Statements of Operations for the Nine Months Ended September 30, 2005 and 2006	F-92
Combined Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2006	F-93
Combined Statement of Changes in Total Member’s Equity for the Nine Months Ended September 30, 2006	F-94
Notes to Combined Financial Statements	F-95

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors

and Stockholders of SandRidge Energy, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of SandRidge Energy, Inc. and its subsidiaries at December 31, 2005 and 2006, and the results of their operations and their cash flows for each of the three years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the financial statements, the Company changed the manner in which it accounts for oil and gas operations from the successful efforts method to the full cost method in 2006, and accordingly, the financial statements have been retroactively restated. Also, as discussed in Note 1, the 2006 consolidated financial statements have been restated to correct the fair value of derivative contracts.

PricewaterhouseCoopers LLP

Houston, Texas

March 30, 2007, except for Restatement section of Note 1 to the consolidated financial statements, as to which the date is May 11, 2007.

F-2

SandRidge Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

	As of December 31,
	2005			2006
	(Restated)			(Restated)
	(In thousands except per share amount)
ASSETS
Current assets:
Cash and cash equivalents	$	45,731		$	38,948
Restricted cash		2,373			—
Accounts receivable, net:
Trade		59,180			89,774
Related parties		5,376			5,731
Inventories		1,606			2,544
Deferred income taxes		1,323			6,315
Other current assets		3,244			31,494
Total current assets		118,833			174,806
Oil and natural gas properties, using full cost method of accounting
Proved		160,789			1,636,832
Unproved		33,974			282,374
Less: accumulated depreciation and depletion		(35,029	)		(60,752	)
		159,734			1,858,454
Other property, plant and equipment, net		178,147			276,264
Goodwill		—			26,198
Investments		1,614			3,584
Restricted deposits		—			33,189
Other assets		355			15,889
Total assets	$	458,683		$	2,388,384
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	12,997		$	26,201
Accounts payable and accrued expenses:
Trade		95,435			129,799
Related parties		78			1,834
Derivative contracts		2,132			958
Total current liabilities		110,642			158,792
Long-term debt		30,136			1,040,630
Derivative contracts		—			3,052
Other long-term obligations		—			21,219
Asset retirement obligation		6,979			45,216
Deferred income taxes		13,747			24,922
Total liabilities		161,504			1,293,831
Commitments and contingencies (Note 16)
Minority interest		8,177			5,092
Redeemable convertible preferred stock, $0.001 par value, 2,650 shares authorized, 2,137 shares issued and outstanding at December 31, 2006		—			439,643
Stockholders’ equity:
Preferred stock, no par; 50,000 shares authorized; no shares issued and outstanding in 2005 and 2006		—			—
Common stock, $0.001 par value, 400,000 shares authorized; 74,332 issued and 72,917 outstanding at 2005 and 93,048 issued and 91,604 outstanding at 2006		73			92
Additional paid-in capital		243,920			574,868
Deferred compensation		(14,885	)		—
Treasury stock, at cost		(17,335	)		(17,835	)
Retained earnings		77,229			92,693
Total stockholders’ equity		289,002			649,818
Total liabilities and stockholders’ equity	$	458,683		$	2,388,384

The accompanying notes are an integral part of these consolidated financial statements.

F-3

SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Operations

	Years Ended December 31,
	2004			2005			2006
	(Restated)			(Restated)			(Restated)
	(In thousands except per share amounts)
Revenues:
Natural gas and crude oil	$	33,685		$	49,987		$	101,252
Drilling and services		39,417			80,343			139,049
Midstream and marketing		98,906			147,133			122,896
Other		3,987			10,230			25,045
Total revenues		175,995			287,693			388,242
Expenses:
Production		10,230			16,195			35,149
Production taxes		2,497			3,158			4,654
Drilling and services		26,442			52,122			98,436
Midstream and marketing		96,180			141,372			115,076
Depreciation, depletion and amortization — natural gas and crude oil		4,909			9,313			26,321
Depreciation, depletion and amortization — other		7,765			14,893			29,305
General and administrative		6,554			11,908			55,634
Loss (gain) on derivative contracts		878			4,132			(12,291	)
Loss (gain) on sale of assets		(210	)		547			(1,023	)
Total expenses		155,245			253,640			351,261
Income from operations		20,750			34,053			36,981
Other income (expense):
Interest income		56			206			1,109
Interest expense		(1,678	)		(5,277	)		(16,904	)
Minority interest		(262	)		(737	)		(296	)
Income (loss) from equity investments		(36	)		(384	)		967
Total other income (expense)		(1,920	)		(6,192	)		(15,124	)
Income before income tax expense		18,830			27,861			21,857
Income tax expense		6,433			9,968			6,236
Income from continuing operations		12,397			17,893			15,621
Income from discontinued operations (net of tax expense of $232 and $118 in 2004 and 2005, respectively)		451			229			—
Income before extraordinary gain		12,848			18,122			15,621
Extraordinary gain on Foreland acquisition		12,544			—			—
Net income		25,392			18,122			15,621
Preferred stock dividends and accretion		—			—			3,967
Income available to common stockholders	$	25,392		$	18,122		$	11,654
Basic and Diluted Earnings Per Share:
Income from continuing operations	$	0.22		$	0.31		$	0.21
Income from discontinued operations, net of income tax		0.01			0.01			—
Extraordinary gain on Foreland acquisition		0.22			—			—
Preferred dividends		—			—			(0.05	)
Basic and diluted income per share available to common stockholders	$	0.45		$	0.32		$	0.16
Weighted average number of shares outstanding:
Basic		56,312			56,559			73,727
Diluted		56,312			56,737			74,664

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

							Additional
	Preferred			Common			Paid-In			Deferred			Treasury			Retained
	Stock			Stock			Capital			Compensation			Stock			Earnings			Total
	(Restated for 2004, 2005 and 2006)
	(In thousands)
Balance, January 1, 2004 (previously reported)	$	23		$	200		$	—		$	—		$	—		$	27,628		$	27,851
Prior period adjustments		—			—			—			—			—			6,090			6,090
Balance, January 1, 2004 (restated)		23			200			—			—			—			33,718			33,941
Net income		—			—			—			—			—			25,392			25,392
Dividends on preferred stock		—			—			—			—			—			(2	)		(2	)
Balance, December 31, 2004		23			200			—			—			—			59,108			59,331
Exchange of preferred stock for common stock		(23	)		1			22			—			—			—			—
Purchase of treasury shares		—			(5	)		—			—			(17,335	)		—			(17,340	)
Stock split (change in par value)		—			(141	)		141			—			—			—			—
Issuance of stock in acquisitions		—			4			55,281			—			—			—			55,285
Stock offering, net of $18.0 million in offering costs		—			12			173,110			—			—			—			173,122
Restricted shares		—			2			15,366			(15,366	)		—			—			2
Amortization of deferred compensation		—			—			—			481			—			—			481
Net income		—			—			—			—			—			18,122			18,122
Dividends on preferred stock		—			—			—			—			—			(1	)		(1	)
Balance, December 31, 2005		—			73			243,920			(14,885	)		(17,335	)		77,229			289,002
Stock offering		—			—			3,343			—			—			—			3,343
Change in accounting principle for stock-based compensation		—			—			(14,885	)		14,885			—			—			—
Issuance of stock in acquisitions		—			13			236,271			—			—			—			236,284
Stock offering, net of $3.9 million in offering costs		—			6			97,427			—			—			—			97,433
Stock-based compensation		—			—			8,792			—			—			—			8,792
Accretion on redeemable convertible preferred stock		—			—			—			—			—			(157	)		(157	)
Purchase of treasury shares		—			—			—			—			(500	)		—			(500	)
Net income		—			—			—			—			—			15,621			15,621
Balance, December 31, 2006	$	—		$	92		$	574,868		$	—		$	(17,835	)	$	92,693		$	649,818

The accompanying notes are an integral part of these consolidated financial statements.

F-5

SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2004			2005			2006
	(Restated)			(Restated)			(Restated)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	25,392		$	18,122		$	15,621
Income from discontinued operations, net of tax		451			229			—
Income from continuing operations		24,941			17,893			15,621
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		761			33			2,528
Depreciation, depletion and amortization		12,674			24,206			55,626
Debt issuance cost amortization		—			—			299
Deferred income taxes		6,433			9,460			348
Extraordinary gain		(12,544	)		—			—
Unrealized loss (gain) on derivatives		(1,803	)		1,296			1,878
Loss (gain) on sale of assets		(210	)		547			(1,023	)
Interest income — restricted deposits		—			—			(151	)
Loss (gain) from equity investments, net of distributions		1,066			846			(956	)
Stock-based compensation		—			481			8,792
Minority interests		262			737			296
Changes in operating assets and liabilities increasing (decreasing) cash:
Receivables		(6,950	)		(25,494	)		(2,648	)
Inventories		(481	)		(46	)		(938	)
Other current assets		(584	)		(1,146	)		(22,238	)
Other assets and liabilities, net		324			775			(2,131	)
Accounts payable and accrued expenses		14,569			33,709			12,046
Net cash provided by operating activities by continuing operations		38,458			63,297			67,349
Net cash provided by operating activities by discontinued operations		978			347			—
Net cash provided by operating activities		39,436			63,644			67,349
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property, plant and equipment		(57,926	)		(134,596	)		(306,541	)
Proceeds from sale of assets		1,443			3,327			19,742
Contributions on equity investments		(1,976	)		(1,350	)		(3,388	)
Acquisitions of assets, net of cash received of $0, $66 and $21,100		(1,169	)		(21,247	)		(1,054,075	)
Proceeds from sale of investments		220			413			2,373
Restricted deposits		—			—			(1,051	)
Restricted cash		—			(2,373	)		2,373
Net cash used in investing activities for continuing operations		(59,408	)		(155,826	)		(1,340,567	)
Net cash used in investing activities for discontinued operations		(1,931	)		(1,473	)		—
Net cash used in investing activities		(61,339	)		(157,299	)		(1,340,567	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings		41,620			247,460			1,261,910
Repayments of borrowings		(6,840	)		(301,285	)		(518,870	)
Dividends paid-preferred		(2	)		(1	)		—
Minority interests contributions (distributions)		(78	)		7,117			(618	)
Proceeds from issuance of common stock		—			173,122			100,776
Proceeds from issuance of redeemable convertible preferred stock		—			—			439,486
Purchase of treasury shares		—			—			(500	)
Debt issuance costs		—			—			(15,749	)
Net cash provided by financing activities for continuing operations		34,700			126,413			1,266,435
Net cash provided by financing activities for discontinued operations		—			—			—
Net cash provided by financing activities		34,700			126,413			1,266,435
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		12,797			32,758			(6,783	)
CASH AND CASH EQUIVALENTS, beginning of year		176			12,973			45,731
CASH AND CASH EQUIVALENTS, end of year	$	12,973		$	45,731		$	38,948
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of amounts capitalized	$	2,024		$	7,222		$	15,079
Cash paid for income taxes		—			—			1,599
Supplemental Disclosure of Noncash Investing and Financing Activities:
Common stock issued in connection with acquisitions	$	—		$	55,285		$	236,284
Assumption of restricted deposits and notes payable in connection with acquisition		—			—			313,628
Assets disposed in exchange for common stock		—			17,335			—
Insurance premium financed		1,137			2,133			5,023
Accretion on redeemable convertible preferred stock		—			—			157

The accompanying notes are an integral part of these consolidated financial statements.

F-6

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Restated)

1.   Summary of Significant Accounting Policies

Nature of Business.  SandRidge Energy, Inc. and its subsidiaries (formerly known as Riata Energy, Inc.) (collectively, the “Company” or “SandRidge”) is an oil and gas company with its principal focus on exploration, development and production related to oil and gas activities. SandRidge also owns and operates drilling rigs and provides related oil field services, midstream gas services operations, and CO₂ and tertiary oil recovery operations. SandRidge’s primary exploration, development and production areas are concentrated in West Texas. The Company also operates significant interests in the Cotton Valley Trend in East Texas and Gulf Coast area.

On November 21, 2006, the Company acquired all of the outstanding membership interests of NEG Oil & Gas LLC (“NEG”) (See Note 3).

Principles of Consolidation.  The consolidated financial statements include the accounts of SandRidge Energy, Inc. and its wholly owned or majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications.  Certain reclassifications have been made in prior period financial statements to conform with current period presentation.

Restatement.  The Company has restated the consolidated financial statements for the year ended December 31, 2006. The restatement relates to the loss (gain) on derivative contracts in the statement of operations. In 2006, the Company recognized an unrealized gain on change in fair value of derivatives related to mark-to-market adjustments of derivative contracts with a counterparty for approximately $3.0 million. The Company recently discovered that the mark-to-market adjustments booked in 2006 for the derivative contracts with this counterparty were recorded incorrectly. As part of its normal closing procedures, the Company requests from the counterparty the Company’s mark-to-market position. Historically, the Company’s counterparties have sent the statement in terms of SandRidge’s position. During the fourth quarter of 2006, the Company entered into derivative contracts with a new counterparty. The new counterparty confirmed to the Company the mark-to-market loss (gain) in their position, not the Company’s. The position terms of the statement were not specified on the report and recorded in error during the 2006 year end closing process. As part of the first quarter 2007 closing process, the Company discovered the error.

F-7

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The restatement affects Note 12 — Derivatives, Note 14 — Income Taxes, and Note 21 — Industry Segment Information. The restatement had no effect on the Company’s previously presented net cash provided by (used in) operating activities, investing activities, or financing activities for any period presented. A comparison of the Company’s previously presented deferred tax assets, derivative contracts — current assets, derivative contracts — non current assets, derivative contracts — current liabilities, derivative contracts — non current liabilities, deferred tax liabilities, and retained earnings to its restated financial position disclosed herein are as follows (in thousands):

	December 31,		December 31,
	2006		2006
	(As originally		(As restated)
	presented)
Deferred tax assets	$	5,244	$	6,315
Derivative contracts — current assets	$	279	$	—
Derivative contracts — non current assets	$	1,736	$	—
Derivative contracts — current liabilities	$	—	$	958
Derivative contracts — non current liabilities	$	—	$	3,052
Deferred tax liabilities	$	26,020	$	24,922
Retained earnings	$	96,549	$	92,693

A comparison of the Company’s previously presented net income, income available to common stockholders, and earnings per share to its results of operations disclosed herein are as follows (in thousands, except per share amounts):

	Year Ended
	December 31,
	2006		2006
	(As originally		(As restated)
	presented)
Net income	$	19,477	$	15,621
Income available to common stockholders	$	15,510	$	11,654
Basic and diluted earnings per share available to common stockholders	$	0.21	$	0.16

Change in Method of Accounting for Oil and Gas Operations.  In the fourth quarter of 2006, the Company changed from the successful efforts method to the full cost method of accounting for its oil and gas operations. All prior year’s financial statements presented herein have been restated to reflect the change.

Management believes that the full cost method is preferable for a company more actively involved in the exploration and development of oil and gas reserves. The full cost method was also utilized by NEG prior to the acquisition, and the assets acquired from NEG constitute more than SandRidge’s total oil and gas assets.

SandRidge’s financial results have been retroactively restated to reflect the conversion to the full cost method. As prescribed by full cost accounting rules, all costs associated with property acquisition, exploration, and development activities are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding oil and gas reserves.

In accordance with full cost accounting rules, SandRidge is subject to a limitation on capitalized costs. The capitalized cost of oil and gas properties, net of accumulated depreciation, depletion, and amortization,

F-8

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

may not exceed the estimated future net cash flows from proved oil and gas reserves discounted at 10%, plus the lower of cost or fair market value of unproved properties as adjusted for related tax effects. If capitalized costs exceed this limit (the “ceiling limitation”), the excess must be charged to expense. SandRidge did not have any adjustment to earnings due to the ceiling limitation for the periods presented herein.

A comparison of the Company’s previously presented property, plant and equipment, net, deferred income taxes and retained earnings under the successful efforts method of accounting to its financial position disclosed herein are as follows (in thousands):

	December 31,		December 31,
	2005		2005
	(As originally		(As restated)
	presented)
Property, plant and equipment, net	$	318,284	$	337,881
Deferred tax liabilities	$	6,857	$	13,747
Retained earnings	$	64,522	$	77,229

A comparison of the Company’s previously presented income from continuing operations, net income, and earnings per share under the successful efforts method of accounting to its results of operations disclosed herein are as follows (in thousands, except per share amounts):

	Year Ended December 31,
	2004		2005
Income from continuing operations, as originally presented	$	8,327	$	15,346
Net income, as originally presented	$	21,322	$	15,575
Basic and diluted earnings per share, as originally presented	$	0.38	$	0.28
Income from continuing operations, as restated	$	12,397	$	17,893
Net income, as restated	$	25,392	$	18,122
Basic and diluted earnings per share, as restated	$	0.45	$	0.32

Use of Estimates.  The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Estimates of oil and natural gas reserves and their values, future production rates and future costs and expenses are inherently uncertain for numerous reasons, including many factors beyond the Company’s control. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploitation and development activities, prevailing commodity prices, operating cost and other factors. These revisions may be material and could materially affect the Company’s future depletion, depreciation and amortization expenses.

The Company’s revenue, profitability, and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which are dependent upon numerous factors beyond its control such as economic, regulatory developments and competition from other energy sources. The energy markets have

F-9

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

historically been volatile and there can be no assurance that oil and natural gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil and natural gas prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced.

Cash and Cash Equivalents.  The Company considers all highly-liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Those securities are readily convertible to known amounts of cash and bear insignificant risk of changes in value due to their short maturity period.

Restricted Cash.  Restricted cash of approximately $2.4 million at December 31, 2005 was pledged as collateral on certain bank debt and is classified as restricted cash on the consolidated balance sheets. The restriction was released in April 2006.

Accounts Receivable, net.  The Company has receivables for sales of oil, gas and natural gas liquids, as well as receivables related to the exploration and extraction services for oil, gas and natural gas liquids. Management has established an allowance for doubtful accounts. The allowance is evaluated by management and is based on management’s periodic review of the collectibility of the receivables in light of historical experience, the nature and volume of the receivables, and other subjective factors.

Inventories.  Inventories consist of oil field services supplies and are stated at the lower of cost or market with cost determined on an average cost basis.

Goodwill.  Goodwill represents the amount by which the total purchase price SandRidge has paid to acquire businesses accounted for as purchases exceeds the estimated fair value of the net assets acquired. The Company tests goodwill for impairment annually and charges income for any impairment recognized, but goodwill is not otherwise amortized.

Debt Issue Costs.  The Company amortizes debt issue costs related to its senior credit facility and senior bridge facility as interest expense over the scheduled maturity period of the debt. Unamortized debt issuance costs were $0 as of December 31, 2005 and approximately $15.5 million as of December 31, 2006. The Company includes those unamortized costs in other assets.

Revenue Recognition and Gas Balancing.  Oil and natural gas revenues are recorded when title passes to the customer, net of royalties, discounts and allowances, as applicable. The Company accounts for oil and natural gas production imbalances using the sales method, whereby the Company recognizes revenue on all oil and natural gas sold to its customers notwithstanding the fact that its ownership may be less than 100% of the oil and natural gas sold. Liabilities are recorded by the Company for imbalances greater than the Company’s proportionate share of remaining estimated oil and natural gas reserves. The Company did not have significant gas imbalance positions at December 31, 2005. The Company has recorded a liability for gas imbalance positions related to gas properties with insufficient proved reserves of $0.9 million at December 31, 2006. The Company includes the gas imbalance positions in other long-term obligations.

The Company recognizes revenues and expenses generated from “daywork” drilling contracts as the services are performed, since the Company does not bear the risk of completion of the well. Under “footage” and “turnkey” contracts, the Company bears the risk of completion of the well; therefore, revenues and expenses are recognized when the well is substantially completed. Under this method, substantial completion is determined when the well bore reaches the negotiated depth as stated in the contract. The duration of all three types of contracts range typically from 20 to 90 days. The entire amount of a loss, if any, is recorded when the loss is determinable. The costs of uncompleted drilling contracts include expenses incurred to date on “footage” or “turnkey” contracts, which are still in process at the end of the period.

The Company may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees received and costs incurred to mobilize a rig from one market to another are recognized over the term of the related drilling contract. The contract terms are typically from 20 to 90 days.

F-10

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

Revenues from the midstream gas services segment are derived from providing supply, transportation, balancing and sales services for producers and wholesale customers on natural gas pipelines, as well as other interconnected pipeline systems. Midstream gas services are primarily undertaken to realize incremental margins on gas purchased at the wellhead, and provide value-added services to customers. In general, natural gas purchased and sold by the midstream gas business is priced at a published daily or monthly index price. Sales to wholesale customers typically incorporate a premium for managing their transmission and balancing requirements. Revenues are recognized upon delivery of natural gas to customers and/or when services are rendered, pricing is determinable and collectibility is reasonably assured.

Revenue from sales of CO₂ is recognized when the product is delivered to the customer. The Company recognizes service fees related to the transportation of CO₂ as revenue when the related service is provided.

Environmental Costs.  Environmental expenditures are expensed or capitalized, as appropriate, depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations, and that do not have future economic benefit, are expensed. Liabilities related to future costs are recorded on an undiscounted basis when environmental assessments and/or remediation activities are probable and costs can be reasonably estimated. Environmental costs accrued at December 31, 2005 and 2006 were not material.

Oil and Natural Gas Operations.  The Company uses the full cost method to account for its natural gas and oil properties. Under full cost accounting, all costs directly associated with the acquisition, exploration and development of natural gas and oil reserves are capitalized into a “full cost pool.” These capitalized costs include costs of all unproved properties, internal costs directly related to the Company’s acquisition, exploration and development activities and capitalized interest. These costs are amortized using a unit-of-production method. Under this method, the provision for depreciation, depletion and amortization is computed at the end of each quarter by multiplying total production for such quarter by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base by net equivalent proved reserves at the beginning of the quarter.

Costs associated with unproved properties are excluded from the total unamortized cost base until a determination has been made as to the existence of proved reserves. Unproved properties are reviewed at the end of each quarter to determine whether the costs incurred should be reclassified to the full cost pool and, thereby, subject to amortization. Sales and abandonments of natural gas and oil properties being amortized are accounted for as adjustments to the full cost pool, with no gain or loss recognized, unless the adjustments would significantly alter the relationship between capitalized costs and proved natural gas and oil reserves. A significant alteration would not ordinarily be expected to occur upon the sale of reserves involving less than 25% of the reserve quantities of a cost center.

Under full cost accounting, total capitalized costs (net of accumulated depreciation, depletion and amortization) less related deferred taxes may not exceed an amount equal to the present value of future net revenues from proved reserves, discounted at 10% per annum, plus the lower of cost or fair value of unevaluated properties, plus estimated salvage value, less income tax effects (the “ceiling limitation”). A ceiling limitation calculation is performed at the end of each quarter. If total capitalized costs (net of accumulated depreciation, depletion and amortization) less related deferred taxes are greater than the ceiling limitation, a write-down or impairment of the full cost pool is required. A write-down of the carrying value of the full cost pool is a non-cash charge that reduces earnings and impacts stockholders’ equity in the period of occurrence and typically results in lower depreciation, depletion and amortization expense in future periods. Once incurred, a write-down is not reversible at a later date.

The ceiling test is calculated using natural gas and oil prices in effect as of the balance sheet date, as adjusted for “basis” or location differentials as of the balance sheet date and held constant over the life of the reserves (“net wellhead prices”). If applicable, these net wellhead prices would be further adjusted to include the effects of any fixed price arrangements for the sale of natural gas and oil. The Company may, from time-

F-11

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

to-time, use derivative financial instruments to hedge against the volatility of natural gas prices. Derivative contracts that qualify and are designated as cash flow hedges and, are included in estimated future cash flows. Historically, the Company has not designated any of its derivative contracts as cash flow hedges. In addition, the future cash outflows associated with future development wells are included in the computation of the discounted present value of future net revenues for the purposes of the ceiling test calculation.

The costs associated with unproved properties are not initially included in the amortization base and relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs of seismic data are allocated to various unproved leaseholds and transferred to the amortization base with the associated leasehold costs on a specific project basis. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry holes are transferred to the amortization base immediately upon determination that the well is unsuccessful. The Company capitalized exploration expense of $3.7 million in 2004, $2.1 million in 2005 and $13.7 million in 2006.

All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization.

Property, Plant and Equipment, net.  Other capitalized costs, including drilling equipment, natural gas gathering and processing equipment, transportation equipment and other property and equipment are carried at cost. Renewals and improvements are capitalized while repairs and maintenance are expensed. Depreciation of drilling equipment is recorded using the straight-line method based on estimated useful lives. Depreciation of other property and equipment is computed using the straight-line method over the estimated useful lives of the assets ranging from 3 to 39 years.

Realization of the carrying value of property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset including disposal value if any, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. An estimate of fair value is based on the best information available, including prices for similar assets. Changes in such estimates could cause the Company to reduce the carrying value of property and equipment.

When property and equipment components are disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is generally reflected in operations.

Investments.  Investments in affiliated companies are accounted for under the cost or equity method, based on the Company’s ability to exercise significant influence.

Asset Retirement Obligation.  The Company owns oil and natural gas properties which require expenditures to plug and abandon the wells when the oil and natural gas reserves in the wells are depleted. These expenditures are recorded in the period in which the liability is incurred (at the time the wells are drilled or acquired). Asset retirement obligations are recorded as a liability at their estimated present value at the asset’s

F-12

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

inception, with the offsetting charge to property cost. Periodic accretion expense of the estimated liability is recorded in the statement of operations.

The asset retirement obligations primarily represent the Company’s estimate of fair value to plug, abandon and remediate the oil and natural gas properties at the end of their productive lives, in accordance with applicable state laws. The Company has determined the asset retirement obligations by calculating the present value of estimated expenses related to the liability. Estimating the future asset retirement obligations requires management to make estimates and judgments regarding timing, existence of a liability, and what constitutes adequate restoration. Inherent in the present value calculation rates, are the timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligations liability, a corresponding adjustment is made to the related asset. The following is a reconciliation of the asset retirement obligation for the years ended December 31, (in thousands).

	2004		2005			2006
Asset retirement obligation, January 1	$	3,883	$	4,394		$	6,979
Liability incurred upon acquiring and drilling wells		372		2,779			2,996
NEG acquisition		—		—			40,343
Revisions in estimated cash flows		—		—			(5,700	)
Liability settled in current period		—		(512	)		—
Accretion of discount expense		139		318			598
Asset retirement obligation, December 31	$	4,394	$	6,979		$	45,216

Income Taxes.  Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns.

Minority Interest.  As of December 31, 2006, minority interest in the Company’s consolidated subsidiaries consisted of the following:

•  the 15.00% interest in Integra Energy;

•  the 30.38% interest in Sagebrush Pipeline; and

•  the 46.71% interest in Cholla Pipeline.

Concentration of Risk.  The Company maintains cash balances at several banks. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. From time to time, the Company may have balances in these accounts that exceed the federally insured limit. The Company does not anticipate any loss associated with balances in excess of the federally insured limit.

Fair Value of Financial Instruments.  For certain of the Company’s financial instruments, including cash, accounts receivable and accounts payable, the carrying value approximates fair value because of their short maturity. The carrying value of borrowings under the senior credit facility and the notes payable approximates fair value because their interest rates are based on fair value indexes. The fair value of the Company’s senior bridge facility and convertible preferred stock approximate book value based on current material transactions completed by the Company subsequent to year end.

F-13

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

Derivative Financial Instruments.  To manage risks related to increases in interest rates and changes in oil and gas prices, the Company occasionally enters into interest rate swaps and oil and gas futures contracts.

The Company recognizes all of its derivative instruments as either assets or liabilities at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company designates the hedging instrument, based on the exposure being hedged, as either a fair value hedge or a cash flow hedge. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change. None of the Company’s derivatives were designated as hedging instruments during 2004, 2005 and 2006.

Stock-Based Compensation.  Effective January 1, 2006, the Company adopted SFAS No. 123-R, “Share-Based Payment” (“SFAS 123R”). SFAS 123R establishes the accounting for equity instruments exchanged for employee services. Under SFAS 123R, share-based compensation cost is measured at the grant date based on the calculated fair value of the award. The expense is recognized over the employees’ requisite service period, generally the vesting period of the award. SFAS 123R also requires the related excess tax benefit received upon exercise of stock options or vesting of restricted stock, if any, to be reflected in the statement of cash flows as a financing activity rather than an operating activity. The Company does not have any excess tax benefits.

Recent Accounting Pronouncements.  In July 2006, the Financial Accounting Standards Board (“FASB”) issued FIN 48, “Accounting for Uncertainty in Income Taxes,” or FIN 48, which is effective for the Company as of the interim reporting period beginning January 1, 2007. The validity of any tax position is a matter of tax law, and generally there is no controversy about recognizing the benefit of a tax position in a company’s financial statements when the degree of confidence is high that the tax position will be sustained upon examination by a taxing authority. The tax law is subject to varied interpretation, and whether a tax position will ultimately be sustained may be uncertain. Under FIN 48, the impact of an uncertain income tax position on the income tax provision must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. A benefit based on an uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. FIN 48 also requires additional disclosures about unrecognized tax benefits associated with uncertain income tax positions and a reconciliation of the change in the unrecognized benefit. In addition, FIN 48 requires interest to be recognized on the full amount of deferred benefits for uncertain tax positions. An income tax penalty is recognized as expense when the tax position does not meet the minimum statutory threshold to avoid the imposition of a penalty. The Company continues to evaluate the impact of FIN 48 on the consolidated financial statements. At this time, the Company is evaluating the impact of FIN 48.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which establishes a formal framework for measuring fair values of assets and liabilities in financial statements that are already required by U.S. generally accepted accounting principles (“GAAP”) to be measured at fair value. SFAS No. 157 clarifies guidance in FASB Concepts Statement (“CON”) No. 7 which discusses present value techniques in measuring fair value. Additional disclosures are also required for transactions measured at fair value. No new fair value measurements are prescribed, and SFAS No. 157 is intended to codify the several definitions of fair value included in various accounting standards. However, the application of this Statement may change current practices for certain companies. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS No. 157 on the financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option For Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), which permits an entity to choose to measure certain financial assets and liabilities at fair value. SFAS No. 159 also revises provisions of SFAS No. 115 that apply to available-for-sale and trading securities. This statement is

F-14

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

effective for fiscal years beginning after November 15, 2007. The Company has not yet evaluated the potential impact of this standard.

2.   Goodwill

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company performs an annual impairment test (or more frequently if impairment indicators arise) for goodwill and other intangibles with indefinite lives. The Company allocates goodwill to various reporting units to perform its impairment test. SFAS No. 142 requires that the implied fair value of the reporting unit be compared with its carrying amount on an annual basis to determine if there is a potential impairment. If the fair value of the reporting unit is less than its carrying value, the Company would record an impairment loss to the extent of that difference. The Company bases the fair values of its reporting units on a combination of valuation approaches, including discounted cash flows, multiples of sales and earnings before interest, taxes, depreciation, depletion and amortization and comparisons of recent transactions. In the fourth quarter of 2006, the Company conducted its annual valuation test and determined it was not required to recognize any goodwill impairment. As of December 31, 2005, the Company had no intangible assets and goodwill. As of December 31, 2006, the Company had no intangible assets.

The change in the carrying amount of goodwill for 2006 was as follows (in thousands):

	2006
Balance at January 1, 2006	$	—
Acquisition		26,198
Balance at December 31, 2006	$	26,198

3.   Acquisitions and Dispositions

2005 Acquisitions

The Company closed the following acquisitions in 2005:

•  The acquisition of additional equity interests in PetroSource, which increased the Company’s ownership from 22.4% to 86.5%, resulting in the consolidation of PetroSource in the Company’s financial statements;

•  The acquisition from an executive officer and director of the remaining 50% equity interest in the Company’s compression services subsidiary, Larco, resulting in it becoming a wholly-owned subsidiary;

•  The acquisition from an executive officer and director of approximately 7,400 net acres of additional leasehold interest in West Texas in properties in which the Company previously held interests;

•  The acquisition of approximately 2,503 net acres of additional leasehold interest in property in the Piceance Basin in which the Company previously held interests;

•  The acquisition from a director of additional working interests in Missouri and Nevada leases in which the Company previously held interests;

•  The acquisition of an additional 19.5% before pay-out interest in the Company’s subsidiary, Sagebrush Pipeline LLC; and

•  The acquisition of certain interests in several oil and natural gas properties in West Texas from Carl E. Gungoll Exploration, LLC and certain other parties. The purchase price was approximately $8.0 million, comprised of $5.4 million in cash, and 174,833 shares of common stock (valued at $2.6 million).

F-15

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The acquisitions were financed with approximately $21.3 million in cash and the issuance of 3,685,690 shares of common stock with an aggregate value of approximately $55.3 million. Details are set forth below for each of the acquisition transactions (in thousands):

	Addition to											Consideration Paid
	Property,								Change in			Common		Common		Cash, Net
	Plant &		Addition to Net			Elimination of			Minority			Stock No.		Stock at		of Cash
Acquisition Transaction	Equipment		Assets(1)			Investments			Interest			of Shares		$15/Share		Acquired
PetroSource additional interests	$	73,744	$	(37,381	)	$	(3,052	)	$	3,253			958	$	14,372	$	15,686
Piceance Basin additional interests		17,565		—			—			—			1,164		17,456		109
West Texas additional lease interests		10,000		—			—			—			667		10,000		—
Larco remaining interest		5,054		—			—			(2,446	)		500		7,500		—
Gungoll lease interests		8,074		—			—			—			176		2,622		5,452
Various additional lease interests		268		—			—			—			17		268		—
Sagebrush additional interests		689		—			—			(2,378	)		204		3,067		—
Totals	$	115,394	$	(37,381	)	$	(3,052	)	$	(1,571	)		3,686	$	55,285	$	21,247

(1) The purchase price for additional interests in PetroSource was approximately $30.1 million, comprised of $15.7 million in cash (net of $0.1 million in cash acquired), and approximately 958,000 shares of SandRidge common stock (valued at $14.4 million). The purchase price has been allocated to accounts receivable of $4.5 million, other current assets of $0.1 million, other assets of $0.4 million, accounts payable and accrued expenses of $2.6 million, long-term debt of $37.4 million, and asset retirement obligations of $2.4 million in the accompanying consolidated balance sheet as of December 31, 2005.

The Company completed its purchase accounting allocations for the 2005 acquisitions in 2006 and recorded an additional $3.8 million deferred tax liability related to the Larco stock acquisition.

2006 Acquisitions and Dispositions

The Company closed the following acquisitions and dispositions in 2006:

•  On March 15, 2006, the Company acquired from an executive officer and director, an additional 12.5% interest in PetroSource Energy Company, a consolidated subsidiary. The acquisition consisted of the retirement of subordinated debt of approximately $1.0 million and a $4.5 million cash payment for the ownership interest acquired for a total acquisition price of approximately $5.5 million.

•  On May 1, 2006, the Company purchased certain leases in developed and undeveloped properties from an oil and gas company. The purchase price was approximately $40.9 million in cash. The cash consideration was paid in July 2006.

•  On May 26, 2006, the Company purchased several oil and natural gas properties from an oil and gas company. The purchase price was approximately $12.9 million, comprised of $8.2 million in cash, and 251,351 shares of SandRidge Energy, Inc. common stock (valued at $4.7 million). The cash and equity consideration was paid in July 2006.

F-16

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

•  On June 1, 2006, the Company purchased certain producing well interest from an executive officer and director. The purchase price was approximately $9.0 million in cash. The cash consideration was paid in July 2006.

•  On June 7, 2006, the Company acquired subordinated debt plus accrued interest of approximately $0.1 million and the remaining 1% interest in PetroSource Energy Company, a consolidated subsidiary, from an oil and gas company. The purchase price was 27,749 shares of SandRidge Energy, Inc. common stock (valued at $0.5 million). The Company now owns 100% of PetroSource Energy Company.

The preceding 2006 acquisitions were financed with approximately $63.7 million in cash and the issuance of 279,100 shares of common stock with an aggregate value of approximately $5.1 million. Details are set forth below for each of the acquisition transactions (in thousands):

	Addition to					Consideration Paid
	Property,		Change in			Retirement of			Common
	Plant &		Minority			Subordinated			Stock No. of		Common
Acquisition Transaction	Equipment		Interest			Debt(1)			Shares		Stock		Cash
PetroSource additional interests — March 15, 2006	$	2,116	$	(2,370	)	$	(1,003	)		—	$	—	$	5,489
Purchased leases — May 1, 2006		40,960		—			—			—		—		40,960
Oil and natural gas properties — May 26, 2006		12,850		—			—			251		4,650		8,200
Producing well interest from an executive officer and director — June 1, 2006		9,000		—			—			—		—		9,000
PetroSource additional interest (remaining 1% interest) — June 7, 2006		85		(393	)		—			28		478		—
Totals	$	65,011	$	(2,763	)	$	(1,003	)		279	$	5,128	$	63,649

(1) Includes retirement of subordinated debt of $972,000 and accrued interest of $31,000.

•  In July 2006, the Company sold leaseholds and lease and well equipment for $16.0 million. The book basis of the assets at the time of the sale transaction was $3.7 million. The sale was accounted for as an adjustment to the full cost pool, with no gain recognized.

•  In August 2006, the Company sold certain assets (Stockton Plaza, Authentix Investment and certain other assets) to the Company’s former President and Chief Operating Officer, N. Malone Mitchell, 3rd, for approximately $6.1 million in cash. These investments had been accounted for under the cost method and reflected as investments in the consolidated balance sheet as of December 31, 2005. The sale transaction resulted in a $0.8 million gain recognized in earnings by the Company in August 2006. The gain is included in loss (gain) on sale of assets in the consolidated statements of operations.

•  On November 21, 2006, the Company acquired all of the outstanding membership interests of NEG for approximately $990.4 million in cash, the assumption of $300 million in debt, the receipt of cash of $21.1 million, and the issuance of 12,842,000 shares of SandRidge Energy, Inc. common stock (valued at approximately $231.2 million). NEG owned core assets in the Val Verde and Permian Basins of West Texas, including overlapping or contiguous interests in the properties that the Company owns in the West Texas Overthrust. To finance the NEG acquisition, the Company entered into a new $750 million senior secured credit facility and an $850 million senior unsecured bridge loan facility. The Company also issued $550 million of redeemable convertible preferred stock and common units (consisting of

F-17

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

shares of common stock and a warrant to purchase convertible preferred stock upon the surrender of the common stock) in a private placement to certain eligible purchasers.

The accompanying balance sheet at December 31, 2006 includes the allocations of the purchase price for the NEG acquisition. The allocation of the purchase price to specific assets and liabilities were based, in part, upon an appraisal of the fair value of NEG assets. The Company continues to obtain information to refine the fair value of the assets acquired and the liabilities assumed. The Company expects that a final allocation of the purchase price will be completed in fiscal year 2007.

The following table presents the NEG acquisition purchase price allocation, including professional fees and other related acquisition costs, to the net assets acquired and liabilities assumed, based on the fair values with the balance of the purchase price, $26.2 million, included in goodwill at the acquisition date (in thousands):

Cash and cash equivalents	$	21,100
Accounts receivable		30,840
Other current assets		6,025
Property, plant and equipment		1,497,874
Goodwill		26,198
Restricted deposits		31,987
Other assets		270
Total assets acquired		1,614,294
Accounts payable and other current liabilities		46,082
Deferred income taxes		2,189
Long-term debt		281,641
Other long-term obligations		1,357
Asset retirement obligation		40,343
Net assets acquired		1,242,682
Less: Cash and cash equivalents acquired		(21,100	)
Net amount paid for acquisition	$	1,221,582

The Company has assigned all of the NEG goodwill to the Exploration and Production segment. Goodwill in the amount of $24.0 million is deductible for tax purposes.

F-18

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

Pro Forma Information

The unaudited financial information in the table below summarizes the combined results of operations of SandRidge and NEG, on a pro forma basis, as though the companies had been combined as of January 1, 2005. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2005 or of results that may occur in the future. The pro forma adjustments include estimates and assumptions based on currently available information. The Company believes the estimates and assumptions are reasonable, and the significant effects of the transactions are properly reflected. However, actual results may differ materially from this pro forma financial information. The following table presents the actual results for the years ended December 31, 2005 and 2006 and the respective unaudited pro forma information to reflect the NEG acquisition (in thousands, except per share amounts):

	Year Ended December 31,
	2005					2006
	Actual		Pro Forma			Actual		Pro Forma
Revenues	$	287,693	$	560,235		$	388,242	$	565,256
Income (loss) from continuing operations		17,893		(49,594	)		15,621		36,337
Net income (loss)		18,122		(49,594	)		15,621		36,337
Basic and diluted earnings per share available (applicable) to common stockholders:
Income (loss) from continuing operations	$	0.31	$	(0.96	)	$	0.21	$	0.40
Net income (loss) available to common stockholders	$	0.32	$	(0.96	)	$	0.16	$	0.04

4.   Discontinued Operations

On September 30, 2005, the Company exchanged substantially all of its land and agriculture operations with its majority stockholder. The majority stockholder exchanged 1,414,849 shares of the Company’s common stock for these operations. The shares were exchanged at their historical basis and the exchange was reflected as a treasury share transaction. The net book value of assets exchanged were $23.6 million. There was no gain (loss) recognized in this transaction. The land and agriculture operations are presented as discontinued operations, net of income taxes in the consolidated statements of operations.

The following table summarizes net revenue and net income (loss) from discontinued operations for the years ended December 31, 2004, 2005 and 2006 (in thousands):

	2004			2005			2006
Revenues	$	1,968		$	1,683		$	—
Operating expenses		(1,285	)		(1,336	)		—
Income from discontinued operations		683			347			—
Income tax expense		(232	)		(118	)		—
Net income from discontinued operations	$	451		$	229		$	—

No assets were classified as held for sale at December 31, 2005 or 2006.

F-19

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

5.   Accounts Receivable

A summary of accounts receivable is as follows (in thousands):

	December 31,
	2005			2006
Oil and gas service	$	12,809		$	8,489
Oil and gas sales		29,113			57,458
Joint interest billing		18,109			26,553
Other		—			299
		60,031			92,799
Less allowance for doubtful accounts		(851	)		(3,025	)
Total accounts receivable, net	$	59,180		$	89,774

The following tables show the balance in the allowance for doubtful accounts and activity for the years ended December 31, 2004, 2005 and 2006 (in thousands).

			Additions
	Balance at		Charged to					Balance at
	Beginning		Costs and					End of
Allowance for Doubtful Accounts	of Period		Expenses		Deductions(1)			Period
Year ended December 31, 2004	$	602	$	761	$	(289	)	$	1,074
Year ended December 31, 2005	$	1,074	$	33	$	(256	)	$	851
Year ended December 31, 2006	$	851	$	2,528	$	(354	)	$	3,025

(1) Deductions represent the write-off/recovery of receivables.

6.   Other Current Assets

Other current assets consist of the following (in thousands):

	December 31,
	2005		2006
Prepaid insurance	$	2,369	$	7,604
Prepaid drilling		407		2,207
Materials and supplies		83		6,244
Post closing receivable — NEG acquisition		—		15,232
Other		385		207
Total other current assets	$	3,244	$	31,494

F-20

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

7.   Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

	December 31,
	2005			2006
	(Restated)
Oil and natural gas properties:
Proved	$	160,789		$	1,636,832
Unproved		33,974			282,374
Total oil and natural gas properties		194,763			1,919,206
Less accumulated depreciation and depletion		(35,029	)		(60,752	)
Net oil and natural gas properties capitalized costs		159,734			1,858,454
Land		852			738
Non oil and gas equipment		210,380			337,294
Buildings and structures		4,708			6,564
Construction in progress		267			—
Total		216,207			344,596
Less accumulated depreciation, depletion and amortization		(38,060	)		(68,332	)
Net capitalized costs		178,147			276,264
Total property, plant and equipment	$	337,881		$	2,134,718

The amount of capitalized interest in 2006 was approximately $1.4 million and is included in the above non oil and gas equipment balance. The Company did not capitalize any interest in 2004 or 2005.

Costs Excluded

Costs associated with unproved properties related to continuing operations of $282.4 million as of December 31, 2006 are excluded from amounts subject to amortization. The majority of the evaluation activities are expected to be completed within a four-year period. In addition, the Company’s internal engineers evaluate all properties on an annual basis. The average composite rates used for depreciation, depletion and amortization were $0.69 per Mcfe in 2004, $1.23 per Mcfe in 2005 and $1.68 per Mcfe in 2006.

Costs Excluded by Year Incurred (in thousands)

									Excluded
	Year Cost Incurred								Costs at
	Prior								December 31,
	Years		2004		2005		2006		2006
Property acquisition	$	—	$	—	$	—	$	251,839	$	251,839
Exploration		—		—		—		30,535		30,535
Development		—		—		—		—		—
Capitalized interest		—		—		—		—		—
Total costs incurred	$	—	$	—	$	—	$	282,374	$	282,374

F-21

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

8.   Investment in Affiliated Companies

The Company has certain investments that it accounts for under the equity method of accounting because its owns more than 20% and has significant influence but does not control. Additionally, the Company had various investments in other companies in which it did not have the ability to exercise significant influence and accounted for these investments under the cost method. The carrying values of these other investments were approximately $790,000 as of December 31, 2005 and were sold in 2006 (Note 3).

The equity method investments include the following:

Grey Ranch, L.P. Grey Ranch is primarily engaged in process and transportation of gas and natural gas liquids. The Company purchased its investment during 2003. At December 31, 2005 and 2006, the Company owned 50% of Grey Ranch, L.P. and had approximately $824,000 and $2,201,000, respectively, recorded in the consolidated balance sheets relating to this investment. The Company contributed a disproportionate amount of capital into the Partnership, amounting to approximately $217,000 and $750,000, respectively, as of December 31, 2005 and 2006. The excess amount contributed is being amortized over the average life of the partnership’s long-lived assets.

Larclay, L.P. Larclay is a joint venture between the Company and Clayton Williams Energy, Inc. (“CWEI”) and was formed to acquire drilling rigs and provide land drilling services. The Company purchased its investment in 2006 and accounts for it under the equity method of accounting. The Company and CWEI each own 50% interest in the joint venture. The Company serves as the operations manager of the joint venture. CWEI is responsible for financing and purchasing of the rigs. At December 31, 2006, the Company had approximately $1,383,000 recorded in the consolidated balance sheet relating to this investment.

9.   Restricted Deposits

Restricted deposits represent bank trust and escrow accounts required (by the U.S. Department of Interior’s Minerals Management Service) to be set up to provide satisfaction of the Company’s eventual responsibility to plug and abandon wells and remove structures when certain offshore fields are no longer in use. These restricted deposits were acquired as part of the NEG acquisition in November 2006 (See Note 3).

The restricted deposits include the following:

•  A $4.4 million escrow account for the East Breaks 109 and 110 fields set up in favor of the surety bond underwriter who provides a surety bond to the MMS. The escrow account is fully funded as of December 31, 2006.

•  A $7.2 million escrow account for the East Breaks 165 and 209 fields set up in favor of the surety bond underwriter who provides a surety bond to the former owners of the fields and the MMS. The escrow account is fully funded as of December 31, 2006.

•  A $6.6 million escrow account set up in favor of a major oil company. The Company is required to make additional deposits to the escrow account in an amount equal to 10% of the net cash flow (as defined in the escrow agreement) from the properties that were acquired from the major oil company.

•  A $6.2 million escrow account that was required to be set up by the bankruptcy settlement proceedings of NEG. The Company is required to make monthly deposits based on cash flows from certain wells, as defined in the agreement.

•  A $8.8 million escrow account required to be set up by the MMS relating to East Breaks properties. The Company is required to make quarterly deposits to the escrow account of $0.8 million. Additionally, for some of the East Break properties, the Company will be required to deposit additional funds in the East Break escrow accounts, representing the difference between the required escrow deposit under

F-22

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

the surety bond and actual escrow deposit balance at various points in time in the future. Aggregate payments to the East Breaks escrow accounts are as follows (in thousands):

Years Ended December 31:
2007	$	3,200
2008		3,200
2009		3,200
2010 and none thereafter		1,657

10.   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	December 31,		December 31,
	2005		2006
Accounts payable-trade	$	69,937	$	103,683
Payroll and benefits		1,091		10,718
Drilling advances		6,286		5,318
Legal (current)		15,643		5,000
Accrued interest		287		3,850
Other		2,191		1,230
Total accounts payable and accrued expenses	$	95,435	$	129,799

11.   Long-Term Debt

Long-term obligations consist of the following (in thousands):

	December 31,		December 31,
	2005		2006
Senior credit facility	$	—	$	140,000
Senior bridge facility		—		850,000
Other notes payable:
Drilling rig fleet and related oil field services equipment		34,710		61,105
Sagebrush		4,000		4,000
Insurance financing		1,450		7,240
Other equipment and vehicles		2,973		4,486
Total debt		43,133		1,066,831
Less: Current maturities of long-term debt		12,997		26,201
Long-term debt	$	30,136	$	1,040,630

Senior Credit Facility.  On November 21, 2006, the Company entered into a $750 million senior secured revolving credit facility (the “senior credit facility”). The senior credit facility matures on November 21, 2011.

The proceeds of the senior credit facility were used to (i) partially finance the NEG acquisition, (ii) refinance the existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and the existing credit facility. Future borrowings under the senior credit facility will be available for capital expenditures, working capital and general corporate purposes and to finance permitted acquisitions of oil and gas properties and other assets related to the exploration, production and development of oil and gas properties. The senior credit facility will be available to be drawn

F-23

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

on and repaid without restriction so long as the Company is in compliance with its terms, including certain financial covenants.

The senior credit facility contains various covenants that limit the Company and certain of its subsidiaries’ ability to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of the Company’s assets. Additionally, the senior credit facility limits the Company and certain of its subsidiaries’ ability to incur additional indebtedness with certain exceptions, including under the senior unsecured bridge facility (as discussed below).

The senior credit facility also contains financial covenants, including maintenance of agreed upon levels for the ratio of (i) total funded debt to EBITDAX (as defined in the senior credit facility), (ii) EBITDAX to interest expense plus current maturities of long-term debt, and (iii) current ratio.

The obligations under the senior credit facility are secured by first priority liens on all shares of capital stock of each of the Company’s present and future subsidiaries; all intercompany debt of the Company and its subsidiaries; and substantially all of the Company assets and the assets of its subsidiaries, including proven oil and gas reserves representing at least 80% of the present discounted value (as defined in the senior credit facility) of proven oil and gas reserves reviewed in determining the borrowing base for the senior credit facility. Additionally, the obligations under the senior credit facility will be guaranteed by certain Company subsidiaries.

The borrowing base of proved reserves was initially set at $300.0 million. As of December 31, 2006, the Company had $140.0 million of outstanding indebtedness on the senior credit facility.

At the Company’s election, interest under the senior credit facility is determined by reference to (i) the British Bankers Association LIBOR rate, or LIBOR, plus an applicable margin between 1.25% and 2.00% per annum or (ii) the higher of the federal funds rate plus 0.5% or the prime rate plus, in either case, an applicable margin between 0.25% and 1.00% per annum. Interest will be payable quarterly for prime rate loans and at the applicable maturity date for LIBOR loans, except that if the interest period for a LIBOR loan is six months, interest will be paid at the end of each three-month period.

If an event of default exists under the senior credit facility, the lenders may accelerate the maturity of the obligations outstanding under the senior credit facility and exercise other rights and remedies. Each of the following will be an event of default:

•  failure to pay any principal when due or any interest, fees or other amount within certain grace periods;

•  failure to perform or otherwise comply with the covenants in the credit agreement or other loan

•  documents, subject, in certain instances, to certain grace periods;

•  bankruptcy or insolvency events involving the Company or its subsidiaries;

•  a change of control (as defined in the senior credit facility).

Senior Bridge Facility.  On November 21, 2006, the Company also entered into a $850.0 million senior unsecured bridge facility (the “senior bridge facility”).

Together with borrowings under the senior credit facility, the proceeds from the senior bridge facility were used to (i) partially finance the NEG acquisition, (ii) refinance existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and the existing credit facility. The obligations under the senior bridge facility are general unsecured obligations of the company and certain of its subsidiaries.

F-24

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The senior bridge facility will nominally mature 12 months from the closing date for the facility (the “Bridge Maturity Date”), or November 21, 2007, subject to the automatic conversion described below. Any outstanding term loans on the Bridge Maturity Date will automatically be converted into new term loans with a five year term from the date of conversion (the “Rollover Loans”). On and after the Bridge Maturity Date, each bridge lender may elect to exchange its Rollover Loans for senior unsecured exchange notes (the “Exchange Notes”). Concurrent with the senior bridge facility, the Company entered into an Exchange Notes registration rights agreement whereby the Company is required to file a shelf registration with respect to resales of the Exchange Notes and have it declared effective no later than the Bridge Maturity Date and to keep such registration statement effective for as long as required by the holders to resell the Exchange Notes. If the Company fails to comply with the terms of the registration rights agreement the Company is required to pay liquidated damages of 0.5% per annum on the principal amount of Exchange Notes held for the first 90-day period, increasing 0.5% per annum for each 90-day period that the Company is in noncompliance, up to a maximum of 1.5% per annum.

The senior bridge facility contains customary restrictive covenants pertaining to management and operations of the Company and its subsidiaries similar to those contained in the senior credit facility. Generally, amounts outstanding under the senior bridge facility will bear interest at a base rate equal to the greater of (i) three-month LIBOR plus an applicable margin initially equal to 4.50% per annum or (ii) 9.0% per annum plus an applicable margin initially equal to 0% per annum; provided that the applicable margin for the senior bridge facility will increase by 0.5% at the end of the period that is six months after the closing date for the senior bridge facility and an additional 0.25% per quarter thereafter for as long as the senior bridge facility, Rollover Loans or Exchange Notes remain outstanding subject to a cap of 11% (subject to certain additional interest rate increases in certain circumstances). In addition, the senior bridge facility includes a covenant that obligates the Company to use commercially reasonable efforts to refinance the senior bridge facility as promptly as practicable. If the senior bridge facility is not refinanced or repaid within 12 months, the senior bridge facility will convert to a Rollover Loan described above on the same terms and interest rate as the senior bridge facility. The senior bridge facility also requires net proceeds from any new debt or equity offering to be applied to reduce indebtedness outstanding on the senior bridge facility. Generally, these covenants can be waived by lenders under the senior bridge facility that hold a majority of the indebtedness outstanding.

The senior bridge facility also includes events of default similar to those contained in the senior credit facility. If an event of default under the senior bridge facility shall occur and be continuing, the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

The Company repaid the senior bridge facility in March 2007 (See Note 20).

Other Indebtedness.  The Company has financed a portion of its drilling rig fleet and related oil field services equipment through notes. At December 31, 2006, the aggregate outstanding balance of these credit agreements was $61.1 million, with a fixed interest rate ranging from 7.64% to 8.87%. The notes have a final maturity date of November 1, 2010, aggregate monthly installments for principal and interest in the amount of $1.2 million and are secured by the equipment. The notes have a prepayment penalty (currently 1-3%) in the event the Company repays the notes prior to maturity.

The Company has financed the purchase of various vehicles, oil field services equipment and other equipment. The aggregate outstanding balance of these notes as of December 31, 2006 was $4.5 million. Additionally, the Company has financed its insurance payment made in 2006. The aggregate outstanding balance of these notes as of December 31, 2006 was $7.2 million.

On October 14, 2005, Sagebrush Pipeline, LLC borrowed $4.0 million from Bank of America, N.A. for the purpose of completing the gas processing plant and pipeline in Colorado. This loan matures in July 2007,

F-25

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

and the interest rate is LIBOR plus 215 basis points. The Company guaranteed this loan, and could be required to repay this debt in full. The Company owns approximately 70% of Sagebrush Pipeline, LLC. The Company anticipates that the Sagebrush members will make additional equity investments to Sagebrush to retire the debt when the loan matures.

Prior Senior Credit Facility.  As of December 31, 2005, we had a $90 million revolving credit facility (the “prior senior credit facility”). The prior senior credit facility included a $20 million sub-limit for letters of credit. The prior senior credit facility was replaced by the senior credit facility as of November 21, 2006. Advances under the prior senior credit facility were subject to a borrowing base based on the Company’s proved developed producing reserves, proved developed nonproducing reserves and proved undeveloped reserves. It was subject to re-determination semi-annually at the sole discretion of the lender based on the reports of independent petroleum engineers in accordance with normal and customary oil and gas lending practices.

The prior senior credit facility bore interest at the Company’s option at either LIBOR plus 2.15% or the Bank of America, N.A. prime rate. The Company paid a commitment fee on the unused portion of the borrowing base amount equal to 1/8% per annum. The prior senior credit facility was collateralized by natural gas and oil properties representing at least 80% of the present discounted value of the Company’s proved reserves and by a negative pledge on any of the Company’s nonmortgaged properties.

As of December 31, 2005, the borrowing base under the Company’s prior senior credit facility was $90 million and no amounts were outstanding.

Aggregate maturities of long-term debt during the next five years are as follows (in thousands):

Years Ended:
2007	$	26,201
2008		15,818
2009		16,863
2010		11,819
2011		146,130
Thereafter		850,000
Total debt	$	1,066,831

12.   Derivatives

The Company has entered into various derivative contracts including collars and fixed price swaps with a financial institution. The contracts expire on various dates through December 31, 2008.

F-26

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

At December 31, 2006, the Company’s open commodity derivative contracts consisted of the following:

			Weighted Avg.
Period	Commodity	Notional	Fix Price
Fixed price swap
May 2007 - September 2007	Natural gas	3,060,000 MmBtu	$	7.75
January 2008 - June 2008	Natural gas	3,640,000 MmBtu	$	7.987
January 2008 - June 2008	Natural gas	3,640,000 MmBtu	$	7.99
Collars
January 2007 - December 2007	Crude oil	60,000 Bbls	$	50.00 - $84.50
January 2008 - June 2008	Crude oil	42,000 Bbls	$	50.00 - $83.35
July 2008 - December 2008	Crude oil	54,000 Bbls	$	50.00 - $82.60
Waha basis swap
January 2007 - December 2007	Natural gas	14,600,000 MmBtu	$	(0.70	)
January 2007 - December 2007	Natural gas	7,300,000 MmBtu	$	(0.5925	)
May 2007 - September 2007	Natural gas	3,060,000 MmBtu	$	(0.65	)
January 2008 - December 2008	Natural gas	7,320,000 MmBtu	$	(0.6525	)
January 2008 - December 2008	Natural gas	7,320,000 MmBtu	$	(0.635	)
January 2008 - December 2008	Natural gas	7,320,000 MmBtu	$	(0.59	)

These derivatives have not been designated as hedges.

The Company records all derivatives on the balance sheet at fair value. Changes in derivative fair values are recognized in earnings. Cash settlements and valuation gains and losses are included in loss (gain) on derivative contracts in the consolidated statements of operations. The following summarizes the cash settlements and valuation gains and losses for the years ended December 31, 2004, 2005 and 2006 (in thousands):

	2004			2005		2006
						(Restated)
Realized loss (gain)	$	2,681		$	2,836	$	(14,169	)
Unrealized loss (gain)		(1,803	)		1,296		1,878
Loss (gain) on derivative contracts	$	878		$	4,132	$	(12,291	)

13.   Retirement Plan

The Company maintains a 401(k) retirement plan for its employees. Under the plan, eligible employees may elect to defer a portion of their earnings up to the maximum allowed by regulations promulgated by the Internal Revenue Service. Prior to August 2006, the Company made matching contributions equal to 50% on the first 6% of employee deferred wages (maximum 3% matching). The Company modified the 401(k) retirement plan in August 2006 to change the matching contributions to equal a match of 100% on the first 15% of employee deferred wages (maximum 15% matching). The plan was also modified to make the matching contributions payable in Company common stock. As of December 31, 2006, the Company has issued no shares related to the matching contribution. An accrued payable in the amount of $1.3 million is reflected in the consolidated balance sheet related to the matching contributions. For 2004, 2005 and 2006, retirement plan expense was approximately $0.2 million, $0.3 million and $1.5 million, respectively.

F-27

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

14.   Income Taxes

Significant components of the Company’s deferred tax assets (liabilities) as of December 31 are as follows (in thousands):

	2005			2006
	(Restated)			(Restated)
Deferred tax assets (liabilities):
Current:
Accrued liabilities	$	953		$	4,451
Other		370			1,864
Total current deferred tax assets	$	1,323		$	6,315
Noncurrent:
Property, plant and equipment	$	(33,262	)	$	(25,692	)
Net operating loss carryforwards		19,130			—
Other		385			770
Total noncurrent deferred tax liabilities	$	(13,747	)	$	(24,922	)

The provisions for income taxes for continuing operations consisted of the following components (in thousands):

	2004		2005		2006
	(Restated)		(Restated)		(Restated)
Current:
Federal	$	—	$	508	$	3,235
State		—		—		2,653
		—		508		5,888
Deferred:
Federal		6,433		9,460		345
State		—		—		3
Total provision for income taxes	$	6,433	$	9,460	$	348

A reconciliation of the provision for income taxes from continuing operations at the statutory federal tax rates to the Company’s actual provision for income taxes is as follows for the year ended December 31 (in thousands):

	2004		2005		2006
	(Restated)		(Restated)		(Restated)
Computed at federal statutory rates	$	6,412	$	9,543	$	7,650
State taxes, net of federal benefit		—		390		1,724
Nondeductible expenses		21		35		84
Percentage depletion deduction		—		—		(3,488	)
Change in rate		—		—		326
Other		—		—		(60	)
Total provision for income taxes	$	6,433	$	9,968	$	6,236

F-28

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

As of December 31, 2006, the Company has fully utilized its net operating loss carryforwards during 2006. The Company, as of December 31, 2006, has approximately $770,000 of alternative minimum tax credits that do not expire.

15.   Earnings Per Share

Basic earnings per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted average shares outstanding during the year, but also include the dilutive effect of awards of restricted stock. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share, for the years ended December 31, 2004, 2005, and 2006 (in thousands).

	2004		2005		2006
Weighted average basic common shares outstanding		56,312		56,559		73,727
Effect of dilutive securities:
Restricted stock		—		178		937
Weighted average diluted common and potential common shares outstanding		56,312		56,737		74,664

In computing diluted earnings per share, the Company evaluated the if-converted method. Under this method, the Company assumes the conversion of the outstanding redeemable convertible preferred stock to common stock and determines if this is more dilutive than including the preferred stock dividends (paid and unpaid) in the computation of income available to common stockholders. The Company determined the if-converted method is not more dilutive and has included preferred stock dividends in the determination of income available to common stockholders.

16.   Commitments and Contingencies

The Company has obligations under noncancelable operating leases, primarily for the use of office space and equipment. Total rental expense under operating leases for the years ended December 31, 2004, 2005, and 2006, was approximately $0.8 million, $1.1 million and $1.1 million, respectively.

Future minimum lease payments under noncancelable operating leases (with initial lease terms in excess of one year) as of December 31, 2006, are as follows (in thousands):

Years Ended:
2007	$	2,180
2008		2,109
2009		1,337
2010		235
2011		235
Thereafter		384
	$	6,480

Liquidated Damages Under Registration Rights Agreements

December 2005 Private Placement.  In connection with the Company’s private placement of common stock in December 2005, the Company entered into a registration rights agreement that requires the Company to use commercially reasonable efforts to register the shares of common stock sold in the private placement prior to April 15, 2007 and to maintain effectiveness after registration until December 21, 2007. In April 2007,

F-29

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

the Company amended the registration rights agreement to require the Company to use commercially reasonable efforts to register the shares of common stock no later than December 21, 2007 and to maintain effectiveness until December 21, 2009.

Generally, if the Company fails to have a registration statement declared effective by December 21, 2007 or fails to maintain an effective registration statement, the Company will be subject to liquidated damages payments equal to a percentage of the gross proceeds of the offering for each day the Company is not in compliance. The payments increase every 90 days, up to a maximum as specified in the registration rights agreement as follows:

Non-Compliance Period
1-90 Days	91-180 Days	181-270 Days	270+ Days
$1.2 million plus	1.0% per annum	1.5% per annum	2.0% per annum
0.5% per annum ($3,300 per day)	($6,600 per day)	($9,900 per day)	($13,200 per day)

The liquidated damages for initial failure to have a registration statement declared effective by December 21, 2007 is retroactive to April 15, 2007. For purposes of calculating the liquidated damages for failure to have the initial registration statement declared effective by December 21, 2007, retroactive payment would be approximately $2.8 million and December 21, 2007 would be considered the 250th day of non-compliance.

November 2006 Private Placement.  In connection with the Company’s private placement of convertible preferred stock and common stock units, the Company entered into a registration rights agreement that requires the Company to use commercially reasonable efforts to file a registration statement with respect to the shares of common stock underlying the Company’s convertible preferred stock prior to August 31, 2007 and use commercially reasonable efforts to cause such registration statement to become effective prior to the earlier of (i) 181 days following the effectiveness of the registration statement related to the Company’s December 2005 private placement, or (ii) December 31, 2007. In general, if the Company fails to meet these deadlines or maintain effectiveness, the Company will be subject to liquidated damage payments equal to a percentage of the purchase price of the securities sold in the November 2006 private placement.

During the first nine months following any failure to meet the deadlines described above, the payments will be equal to a percentage of the purchase price of $550 million on a per month basis until the default is cured. During the first month following a default, the payment shall be equal to 0.25% of the purchase price and shall increase by 0.25% per month to a maximum of 0.75%. If the default has not been cured within eight months, the payments will become equal to 2.0% per annum paid on a monthly basis until such default is cured.

March 2007 Private Placement.  In connection with the Company’s private placement of common stock in March 2007, the Company entered into a registration rights agreement that requires the Company to use commercially reasonable efforts to register the shares of common stock sold in the private placement prior to 90 days following the effectiveness of the registration statement related to the Company’s December 2005 private placement. Generally, if the Company fails to have a registration statement declared effective within 90 days of filing or fails to maintain an effective registration statement, the Company will be subject to liquidated damages payments equal to a percentage of the gross proceeds of the offering for each day that we are not in compliance. The payments increase every 90 days, up to a maximum as specified in the registration rights agreement as follows:

Non-Compliance Period
1-90 Days	91-180 Days	181-270 Days	270+ Days
$1.6 million plus	1.0% per annum	1.5% per annum	2.0% per annum
0.5% per annum ($4,400 per day)	($8,800 per day)	($13,200 per day)	($17,600 per day)

F-30

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The Company has not recorded any amount related to liquidated damages and does not believe any amounts will be paid.

The Company is a defendant in certain lawsuits from time to time in the normal course of business. In management’s opinion, the Company is not currently involved in any legal proceedings other than those specifically identified below, which individually or in the aggregate, could have a material effect on the financial condition, operations and/or cash flows of the Company.

Litigation with Conoco, Inc.  In January 2007, the Company settled outstanding litigation with Conoco, Inc. for alleged unpaid overriding royalties on production by the Company on certain leases in Pecos County, Texas. Conoco, Inc. alleged that it was entitled to 12.5% of the proceeds from production and the Company alleged that Conoco, Inc., at most, was only entitled to a 5.0% overriding royalty on production. At December 31, 2006, as a result of the settlement whereby the Company will pay approximately $25.0 million plus interest to settle the outstanding litigation, the Company had approximately $25.0 million recorded as an accrual to reflect the settlement amount. Interest accrues from the settlement date in January 2007. The settlement payments are to be made in $5.0 million increments on April 1, 2007, July 1, 2008, July 1, 2009, July 1, 2010, and July 1, 2011. The settlement amount is included in accrued expenses ($5.0 million) and other long-term obligations ($20.0 million) in the Company’s consolidated balance sheet as of December 31, 2006.

Roosevelt Litigation.  On May 18, 2004, the Company commenced a civil action seeking declaratory judgment against Elliot Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P. in the District Court of Dallas County, Texas, 101st Judicial District, SandRidge Energy, Inc. and Riata Energy Piceance, LLC v. Elliot Roosevelt, Jr. et al, Cause No. 92.717-C. This suit sought a declaratory judgment relating to the rights of the parties in and to certain leases in a defined area of mutual interest in the Piceance Basin pursuant to an acquisition agreement entered into in 1989, including the Company’s 41,454 gross (16,193 net) acreage position. The Company tried the case to a jury in July 2006. Before the case was submitted to the jury, the trial court granted Roosevelt a directed verdict stating that he owned a 25% deferred interest in the Company’s acreage after project payout. The directed verdict is not likely to affect the Company’s proved reserves of 11.7 Bcfe, because of the requirement that project payout be achieved before the deferred interest shares in revenue. Other issues of fact were submitted to the jury. The trial court recently entered a judgment favorable to Roosevelt. The Company has filed a motion to modify the judgment and for a new trial. Depending on the outcome of this motion, the Company expects to appeal, at a minimum, from the entry of the directed verdict. If the Company does not ultimately prevail, the deferred interest will reduce the Company’s economic returns from the project, if project payout is achieved.

Yates Litigation.  On April 29, 2005, Harvey E. Yates Company (“Heyco”), filed a trespass to try title suit against us in the District Court for Pecos County, Texas, 112th Judicial District, Harvey E. Yates Company v. Riata Energy, Inc., Cause No. 10376. In February 2006, additional parties joined the case as plaintiffs. The plaintiffs seeks title to a 44.57% working interest in a lease covering three sections of land and a 18.66% working interest in a lease covering 1.5 sections of land, each located in West Texas, as well as unspecified damages based on production attributable to these working interests. The plaintiffs’ claims stem from the alleged failure of the Company’s predecessors in title to assign the disputed working interest in 1994. The Company believes that it has record title to the interest claimed by plaintiffs. Further, the Company believes the claims are barred by the four year statute of limitations, which the Company believes ran in 1998. If the plaintiffs prevail, any recovery would not be expected to have a material impact on proved reserves. The Company is currently in the preliminary stages of discovery.

The Company is subject to other claims in the ordinary course of business. However, the Company believes that the ultimate resolution of the above mentioned claims and other current legal proceedings will not have a material adverse effect on its results of operations or its financial condition.

F-31

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

17.   Redeemable Convertible Preferred Stock

In November 2006, the Company sold 2,136,667 shares of redeemable convertible preferred stock as part of the NEG acquisition and received net proceeds from this sale of approximately $439.5 million after deducting offering expenses of approximately $9.3 million (See Note 3). Each holder of the redeemable convertible preferred stock is entitled to quarterly cash dividends at the annual rate of 7.75% of the accreted value of its redeemable convertible preferred stock. The accreted value is $210 per share as of December 31, 2006. The redeemable convertible preferred stock is mandatorily redeemable at a future determinable date and thus classified as mezzanine equity. Each share of convertible preferred stock is initially convertible into ten shares of common stock at the option of the holder, subject to certain anti-dilution adjustments.

On January 31, 2007, the Company’s Board of Directors declared a dividend on the outstanding shares of redeemable convertible preferred stock. The dividend of $3.21 per share was paid in cash on February 15, 2007. The dividend covered the time period from November 21, 2006, when the shares were issued, through February 1, 2007. Approximately $3.8 million of dividends (pro rata amount from November 21, 2006 through December 31, 2006) has been included in the Company’s earnings per share calculation in the accompanying consolidated statement of operations.

18.   Stockholders’ Equity

On June 8, 2006, Tom L. Ward purchased approximately 29 million shares of common stock from the Company’s founder, N. Malone Mitchell, 3rd, and other existing stockholders for $500 million at $17.25 per share. The purchase made Mr. Ward the Company’s largest stockholder. He joined the Company as Chairman of the Board of Directors and Chief Executive Officer. Mr. Mitchell retained approximately 22 million shares and continues to serve as a member of the Board of Directors.

The following table presents information regarding SandRidge’s common stock (in thousands):

	December 31,
	2005		2006
Shares authorized		400,000		400,000
Shares outstanding at end of period		72,917		91,604
Shares held in treasury		1,415		1,444

The Company is authorized to issue 50,000,000 shares of preferred stock, no par value, of which no shares were outstanding as of December 31, 2005 and 2006. On September 23, 2005, 1,000 shares of preferred stock were converted into common stock.

Stock Split.  On December 19, 2005, the Company entered into a 281.562 for 1 stock split. All references in the accompanying financial statements have been restated to reflect this stock split. The Company also authorized 400,000,000 shares of common stock with a par value of $0.001 per share.

Common Stock Issuance.  In December 2005, the Company sold 12.5 million shares of common stock in a private placement and received net proceeds from this sale of approximately $173.1 million after deducting the initial purchasers’ discount of $16.8 million and offering expenses of approximately $1.2 million. Approximately $105.5 million of the proceeds of the offering were used to repay outstanding bank debt and finance the Company’s December 2005 acquisitions (See Note 3).

In January 2006, the Company issued an additional 239,630 shares of common stock upon exercise by the underwriters of an over-allotment option. The Company issued these shares at a price of $15.00 per share after deducting the purchasers’ fee of $0.3 million. The Company received net proceeds from sale of approximately $3.3 million.

F-32

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

In November 2006, the Company sold 5.3 million common units (consisting of shares of common stock ($18.00 per share) and a warrant ($1.00 per share) to purchase convertible preferred stock upon the surrender of the common stock) as part of the NEG acquisition and received net proceeds from this sale of approximately $97.4 million after deducting the offering expenses of approximately $3.9 million (See Note 3).

Treasury Stock.  Employees may elect to satisfy their tax obligations on the vesting of their restricted stock by having the Company make the required tax payments and withhold a number of vested shares having a value on the date of vesting equal to the tax obligation. As a result of such employee elections, during the year ended December 31, 2006 the Company withheld approximately 29,000 shares at a total value of $0.5 million, and those shares were accounted for as treasury stock. No shares were withheld in 2004 or 2005.

Restricted Stock.  The Company issues restricted stock awards under incentive compensation plans which vest over specified periods of time (one, four and seven years). These shares of restricted common stock are subject to restriction on transfer and certain conditions to vesting.

The Company granted restricted stock awards for approximately 1.6 million shares in December 2005. The stock awards were granted with one, four, and seven year vesting periods as follows: (i) 153,667 shares vest on the earlier of (x) December 31, 2006 or (y) the expiration of the lock-up agreement entered into by officers in connection with the Company’s December 2005 private placement, (ii) 904,833 shares vest on the earlier of (x) June 30, 2010 or (y) the fourth anniversary of the completion of a registered initial public offering, and (iii) 493,667 shares vest on the earlier of (x) June 30, 2013 or (y) the seventh anniversary of the completion of a registered initial public offering.

In June 2006, the Company modified the vesting periods of the one year period and four year period restricted stock awards. One year restricted stock awards granted under the Riata 2005 Stock Plan were modified to vest on October 1, 2006, rather than December 31, 2006. Four year restricted stock awards granted under the Riata 2005 Stock Plan were modified to vest 25% each January 1, for four years, beginning January 1, 2007 rather than cliff vesting on June 30, 2010. The modification of the four year awards was completed pursuant to a plan that all restricted stock awards, in the future, will be four year terms vesting 25% each year. The Company recognized compensation cost related to this modification of $17,250 in June 2006.

Additionally, the Company modified the vesting period related to restricted shares awarded to certain executive officers, due to the executive officers’ resignations in June 2006 and August 2006. As part of the executive officers’ separation from the Company, the Board of Directors agreed to immediately vest all of the executive officers’ restricted stock. At the time of the modification and resignation in June 2006, one of the executive officers had 83,333 restricted stock awards (6,667 one year vesting, 66,666 four year vesting, 10,000 seven year vesting). The Company recognized compensation cost related to these shares of $1.3 million in the year ended December 31, 2006. At the time of the other modifications and resignations in August 2006, these executive officers had 138,667 restricted stock awards (13,667 one year vesting, 83,334 four year vesting, 41,666 seven year vesting). The Company recognized compensation cost related to these shares of $2.3 million in the year ended December 31, 2006.

In December 2006, the Company modified the vesting period related to restricted shares for employees due to these employees’ resignations from the Company in late December 2006. As part of these employees’ separation from the Company, the Board of Directors agreed to immediately vest the restricted stock for these employees that were previously due to vest on January 1, 2007. At the time of the modification and resignations of the employees in December 2006, the number of shares that were immediately vested was 39,960. The employees forfeited the remaining amounts of their unvested restricted shares. The Company recognized additional compensation cost in December 2006 for these shares of approximately $0.1 million due to the modification.

F-33

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

Restricted stock activity for the year ended December 31, 2006 was as follows (shares in thousands):

				Weighted-Average
				Grant Date
	Number of Shares			Fair Value
Unvested restricted shares outstanding at December 31, 2005		1,552		$	15.00
Granted		240			18.49
Vested		(389	)		17.22
Canceled		(466	)		15.00
Unvested restricted shares outstanding at December 31, 2006		937		$	15.88

For the year ended December 31, the Company recognized stock-based compensation expense related to restricted stock of approximately $8.8 million in 2006 and $0.5 million in 2005. Stock-based compensation expense is reflected in general and administrative expense in the consolidated statements of operations.

As of December 31, 2006, there was approximately $11.7 million of unrecognized compensation cost related to unvested restricted stock awards which is expected to be recognized over a weighted average period of 2.6 years.

19.   Related Party Transactions

During the ordinary course of business, the Company has transactions with certain stockholders and other related parties. These transactions primarily consist of purchases of drilling equipment and sales of oil field service supplies and gas sales. Following is a summary of significant transactions with such related parties as of and for the year ended December 31 (in thousands):

	2004		2005		2006
Sales to related parties	$	306	$	12,673	$	14,102
Receivables from related parties for services rendered	$	1,116	$	5,376	$	5,731
Payables to related parties for services rendered	$	3,757	$	78	$	1,834
Purchases of services from related parties	$	9,556	$	37	$	4,811

In September 2006, the Company entered into a new facilities lease with a member of its Board of Directors. The lease extends to August 2009 with annual future rental payments of $1.1 million in 2007 and 2008 and $0.7 million in 2009. The Company believes that the rent expense it must pay under this lease is at fair market rates. Rent expense in 2006 related to this facilities lease was $0.3 million.

20.   Subsequent Events

On March 22, 2007 the Company entered into $1.0 billion in senior unsecured term loans (the “Term Loans”). The closing of the Term Loans was generally contingent upon closing the private placement of common equity described below. The Term Loans included both fixed rate term loans and floating rate term loans. Approximately $650.0 million was issued at a fixed rate of 8.625% with principal due on April 1, 2015 (the “Fixed Rate Term Loans”). Under the terms of the Fixed Rate Term Loans, interest is payable quarterly and during the first four years interest may be paid, at the Company’s option, either entirely in cash or entirely with additional Fixed Rate Term Loans. If the Company elects to pay the interest due during any period in additional Fixed Rate Term Loans, the interest rate increases to 9.375% during such period. After April 1,

F-34

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

2011 the Fixed Rate Term Loans may be prepaid in whole or in part with prepayment penalties as follows (the prepayment penalty is multiplied by the principal amount prepaid):

Period	Prepayment Penalty
April 1, 2011 to March 31, 2012		4.313	%
April 1, 2012 to March 31, 2013		2.156	%
April 1, 2013 and thereafter		—

Approximately $350.0 million of the Term Loans was issued at a variable rate with interest payable quarterly and principal due on April 1, 2014 (the “Variable Rate Term loans”). The Variable Rate Term Loans bear interest, at the Company’s option, at the British Bankers Association LIBOR rate plus 3.625% or the higher of (i) the federal funds rate, a defined, plus 3.125% or (ii) a Bank’s prime rate plus 2.625%. After April 1, 2009 the Variable Rate Term Loans may be prepaid in whole or in part with a prepayment penalty as follows (the prepayment penalty is multiplied by the principal amount prepaid):

Period	Prepayment Penalty
April 1, 2009 to March 31, 2010		3.00	%
April 1, 2010 to March 31, 2011		2.00	%
April 1, 2011 to March 31, 2012		1.00	%
April 1, 2012 and thereafter		—

After one year from the closing date, the Company is required to offer to exchange the Term Loans for senior unsecured notes with registration rights. The senior unsecured notes will have identical terms and conditions as the Term Loans. If the Company is unable to or does not offer to exchange the Term Loans for senior unsecured notes with registration rights by the specified date, the interest rate on the Term Loans will increase by 0.25% every 90 days up to a maximum of 0.50%.

Debt covenants under the Term Loans are ordinary and customary and include limitations on the incurrence of indebtedness, payment of dividends, asset sales, certain asset purchases, transactions with related parties, and consolidation or merger agreements.

On March 20, 2007, the Company sold approximately 17.8 million shares of common stock for net proceeds of $320.0 million. The stock was sold in private sales to various investors including Tom Ward, the Company’s Chairman of the Board of Directors and Chief Executive Officer, who invested $61.4 million in exchange for approximately 3.4 million shares of common stock.

A portion of the proceeds from the Term Loans was used to repay the Company’s $850.0 million senior bridge facility.

21.   Industry Segment Information

SandRidge has four business segments: Exploration and Production, Drilling and Oil Field Services, Midstream Gas Services, and Other representing its four main business units offering different products and services. The Exploration and Production segment is engaged in the development, acquisition and production of oil and natural gas properties. The Drilling and Oil Field Services segment is engaged in the land contract drilling of oil and natural gas wells, and the Midstream Gas Services segment is engaged in the purchasing, gathering, processing and treating of natural gas. The Other segment transports CO₂ to market for use by the Company and others in tertiary oil recovery operations and other miscellaneous operations.

F-35

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (Note 1). Management evaluates the performance of SandRidge’s operating segments based on operating income, which is defined as operating revenues less operating expenses and depreciation, depletion and amortization. Summarized financial information concerning the Company’s segments is shown in the following table (in thousands):

	2004			2005			2006
	(Restated)			(Restated)			(Restated)
Revenues:
Exploration and production	$	39,226		$	54,425		$	106,990
Elimination of inter-segment revenue		1,662			374			577
Exploration and production, net of inter-segment revenue		37,564			54,051			106,413
Drilling and oil field services		59,179			109,766			211,055
Elimination of inter-segment revenue		19,968			29,615			72,398
Drilling and oil field services, net of inter-segment revenue		39,211			80,151			138,657
Midstream services		132,158			192,503			192,960
Elimination of inter-segment revenue		33,114			45,004			70,068
Midstream gas services, net of inter-segment revenues		99,044			147,499			122,892
Other		176			6,164			21,411
Elimination of inter-segment revenue		—			172			1,131
Other, net of inter-segment revenue		176			5,992			20,280
Total revenues	$	175,995		$	287,693		$	388,242
Operating Income:
Exploration and production	$	14,000		$	14,886		$	17,069
Drilling and oil field services		4,206			18,295			32,946
Midstream gas services		2,636			4,096			3,528
Other		(92	)		(3,224	)		(16,562	)
Total operating income		20,750			34,053			36,981
Interest expense, net		(1,622	)		(5,071	)		(15,795	)
Other income (expense), net		(298	)		(1,121	)		671
Income before income taxes	$	18,830		$	27,861		$	21,857
Identifiable Assets(1):
Exploration and production	$	125,745		$	243,612		$	2,091,459
Drilling and oil field services		35,807			100,995			175,169
Midstream gas services		25,208			33,845			75,606
Other		10,258			80,231			46,150
Total assets	$	197,018		$	458,683		$	2,388,384

F-36

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

	2004		2005		2006
	(Restated)		(Restated)		(Restated)
Capital Expenditures:
Exploration and production	$	29,105	$	61,227	$	170,872
Drilling and oil field services		22,679		43,730		89,810
Midstream gas services		2,026		25,904		16,975
Other		4,116		3,735		28,884
Total capital expenditures	$	57,926	$	134,596	$	306,541
Depreciation, Depletion and Amortization
Exploration and production	$	4,911	$	8,796	$	28,104
Drilling and oil field services		5,932		11,851		20,268
Midstream gas services		1,270		1,652		3,180
Other		561		1,907		4,074
Total depreciation, depletion and amortization	$	12,674	$	24,206	$	55,626

(1) Identifiable assets are those used in SandRidge’s operations in each industry segment. Corporate assets are principally cash and cash equivalents, corporate leasehold improvements, furniture and equipment.

22.   Supplemental Information on Oil and Gas Producing Activities (Unaudited)

The Supplementary Information on Oil and Gas Producing Activities is presented as required by SFAS No. 69, “Disclosures about Oil and Gas Producing Activities.” The supplemental information includes capitalized costs related to oil and gas producing activities; costs incurred for the acquisition of oil and gas producing activities, exploration and development activities; and the results of operations from oil and gas producing activities. Supplemental information is also provided for per unit production costs; oil and gas production and average sales prices; the estimated quantities of proved oil and gas reserves; the standardized measure of discounted future net cash flows associated with proved oil and gas reserves; and a summary of the changes in the standardized measure of discounted future net cash flows associated with proved oil and gas reserves.

The Company’s capitalized costs consisted of the following (in thousands):

Capitalized Costs Related to Oil and Gas Producing Activities

	December 31,
Consolidated Companies(a)	2004			2005			2006
Oil and natural gas properties:
Proved	$	94,758		$	160,789		$	1,636,832
Unproved		744			33,974			282,374
Total oil and natural gas properties		95,502			194,763			1,919,206
Less accumulated depreciation and depletion		(26,034	)		(35,029	)		(60,752	)
Net oil and natural gas properties capitalized costs	$	69,468		$	159,734		$	1,858,454

(a) Amounts relate to SandRidge and Consolidated Subsidiaries. Includes capitalized asset retirement costs and associated accumulated depreciation.

F-37

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

Costs Incurred in Property Acquisition, Exploration and Development Activities

	2004		2005		2006
Acquisitions of properties
Proved	$	—	$	14,554	$	1,311,029
Unproved		1,631		21,085		268,839
Exploration		1,375		2,527		18,612
Development		27,357		60,364		115,153
Total cost incurred	$	30,363	$	98,530	$	1,713,633

The Company’s results of operations from oil and gas producing activities for each of the years 2004, 2005 and 2006 are shown in the following table (in thousands):

Results of Operations for Oil and Gas Producing Activities

	Consolidated
	Companies(a)
For the Year Ended December 31, 2004
Revenues	$	30,976
Expenses:
Production costs		12,727
Depreciation, depletion and amortization expenses		4,770
Total expenses		17,497
Income before income taxes		13,479
Provision for income taxes		4,718
Results of operations for oil and gas producing activities	$	8,761
For the Year Ended December 31, 2005
Revenues	$	48,405
Expenses:
Production costs		19,352
Depreciation, depletion and amortization expenses		8,995
Total expenses		28,347
Income before income taxes		20,058
Provision for income taxes		7,020
Results of operations for oil and gas producing activities	$	13,038

F-38

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

	Consolidated
	Companies(a)
For the Year Ended December 31, 2006
Revenues	$	101,252
Expenses:
Production costs		39,363
Depreciation, depletion and amortization expenses		25,723
Total expenses		65,086
Income before income taxes		36,166
Provision for income taxes		10,850
Results of operations for oil and gas producing activities	$	25,316

The table below represents the Company’s estimate of proved crude oil and natural gas reserves attributable to the Company’s net interest in oil and gas properties based upon the evaluation by the Company and its independent petroleum engineers of pertinent geological and engineering data in accordance with United States Securities and Exchange Commission regulations. Estimates of substantially all of the Company’s proved reserves have been prepared by the team of independent reservoir engineers and geoscience professionals and are reviewed by members of the Company’s senior management with professional training in petroleum engineering to ensure that the Company consistently applies rigorous professional standards and the reserve definitions prescribed by the United States Securities and Exchange Commission.

Netherland, Sewell & Associates, Inc., DeGolyer and MacNaughton and Harper & Associates, Inc., independent oil and gas consultants, have prepared the estimates of proved reserves of natural gas and crude oil attributable to separate portions of the Company’s net interest in oil and gas properties as of the end of one or more of 2004, 2005 and 2006. Netherland, Sewell & Associates, Inc., DeGolyer and MacNaughton and Harper and Associates, Inc. are independent petroleum engineers, geologists, geophysicists and petrophysicists and do not own an interest in us or our properties and are not employed on a contingent basis. Netherland, Sewell & Associates, Inc. prepared the estimates of proved reserves for all of our properties, other than those held by PetroSource, which constitute approximately 97% of our total proved reserves as of December 31, 2006. DeGolyer and MacNaughton prepared the estimates of proved reserves for PetroSource, which constitute approximately 2% of our total proved reserves as of December 31, 2006. The small remaining portion of estimates of proved reserves were based upon Company estimates.

The Company believes the geologic and engineering data examined provides reasonable assurance that the proved reserves are recoverable in future years from known reservoirs under existing economic and operating conditions. Estimates of proved reserves are subject to change, either positively or negatively, as additional information is available and contractual and economic conditions change.

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, that is, prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. Proved developed reserves are the quantities of crude oil, natural gas liquids and natural gas expected to be recovered through existing investments in wells and field infrastructure under current operating conditions. Proved undeveloped reserves require additional investments in wells and related infrastructure in order to recover the production.

During 2006, the Company recognized additional reserves attributable to extensions and discoveries as a result of successful drilling in the Piñon Field. Drilling expenditures of $18.6 million resulted in the addition of 10.9 Bcfe of net proved developed reserves by extending the filed boundaries as well as proving the

F-39

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

producing capabilities of formations not previously captured as proved reserves. The remaining 83.1 Bcfe of net proved reserves for 2006 are proved undeveloped reserves associated with direct offsets to the 2006 drilling program extending the boundaries of the Piñon Field and zone identification. Changes in reserves associated with the development drilling have been accounted for in revisions of previous reserve estimates.

Reserve Quantity Information

	Consolidated Companies(a)
	Crude Oil			Nat. Gas
	(MBbls)			(MMcf)(b)
Proved developed and undeveloped reserves:
As of December 31, 2003		649			121,256
Revisions of previous estimates		70			(18,955	)
Extensions and discoveries		—			48,859
Production		(37	)		(6,708	)
As of December 31, 2004		682			144,452
Revisions of previous estimates		108			11,679
Acquisitions of new reserves		9,518			32,022
Extensions and discoveries		200			56,133
Production		(72	)		(6,873	)
As of December 31, 2005		10,436			237,413
Revisions of previous estimates		1,250			19,139
Acquisitions of new reserves		13,753			514,170
Extensions and discoveries		58			93,396
Production		(322	)		(13,410	)
As of December 31, 2006		25,175			850,708
Proved developed reserves:
As of December 31, 2003		327			48,513
As of December 31, 2004		231			50,981
As of December 31, 2005		899			69,377
As of December 31, 2006		10,259			255,654

(a)	Amounts relate to SandRidge and Consolidated Subsidiaries.
(b)	Natural gas reserves are computed at 14.65 pounds per square inch absolute and 60 degrees Fahrenheit.

The standardized measure of discounted cash flows and summary of the changes in the standardized measure computation from year to year are prepared in accordance with SFAS No. 69. The assumptions that underlie the computation of the standardized measure of discounted cash flows may be summarized as follows:

•  the standardized measure includes the Company’s estimate of proved crude oil, natural gas liquids and natural gas reserves and projected future production volumes based upon year-end economic conditions;

•  pricing is applied based upon year-end market prices adjusted for fixed or determinable contracts that are in existence at year-end;

F-40

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

•  future development and production costs are determined based upon actual cost at year-end;

•  the standardized measure includes projections of future abandonment costs based upon actual costs at year-end; and

•  a discount factor of 10% per year is applied annually to the future net cash flows.

Standardized Measure of Discounted Future Net Cash Flows Related to
Proved Oil and Gas Reserves

	Consolidated Companies(a)
	(In thousands)
As of December 31, 2004
Future cash inflows from production	$	843,647
Future production costs		(227,257	)
Future development costs(b)		(77,588	)
Future income tax expenses		(183,193	)
Undiscounted future net cash flows		355,609
10% annual discount		(156,647	)
Standardized measure of discounted future net cash flows	$	198,962
As of December 31, 2005
Future cash inflows from production	$	2,558,668
Future production costs		(653,748	)
Future development costs(b)		(296,489	)
Future income tax expenses		(546,867	)
Undiscounted future net cash flows		1,061,564
10% annual discount		(562,410	)
Standardized measure of discounted future net cash flows	$	499,154
As of December 31, 2006
Future cash inflows from production	$	5,901,660
Future production costs		(1,623,216	)
Future development costs(b)		(931,947	)
Future income tax expenses		(638,599	)
Undiscounted future net cash flows		2,707,898
10% annual discount		(1,267,752	)
Standardized measure of discounted future net cash flows	$	1,440,146

(a)	Amounts relate to SandRidge and Consolidated Subsidiaries.
(b)	Includes abandonment costs.

F-41

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

The following table represents the Company’s estimate of changes in the standardized measure of discounted future net cash flows from proved reserves (in thousands):

Changes in the Standardized Measure of Discounted Future Net Cash Flows From
Proved Oil and Gas Reserves

	Consolidated
	Companies (a)
Present value as of December 31, 2003	$	157,299
Changes during the year:
Revenues less production and other costs		(18,249	)
Net changes in prices, production and other costs		5,911
Development costs incurred		21,912
Net changes in future development costs		(16,360	)
Extensions and discoveries		105,603
Revisions of previous quantity estimates		(38,234	)
Accretion of discount		25,244
Net change in income taxes		(20,720	)
Timing differences and other(b)		(23,444	)
Net change for the year		41,663
Present value as of December 31, 2004	$	198,962
Changes during the year:
Revenues less production and other costs		(29,053	)
Net changes in prices, production and other costs		225,227
Development costs incurred		56,368
Net changes in future development costs		(86,828	)
Extensions and discoveries		96,514
Revisions of previous quantity estimates		47,501
Accretion of discount		28,981
Net change in income taxes		(155,250	)
Purchases of reserves in-place		196,206
Timing differences and other(b)		(79,474	)
Net change for the year		300,192

F-42

SandRidge Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Restated) — (Continued)

	Consolidated
	Companies (a)
Present value as of December 31, 2005	$	499,154
Revenues less production and other costs		(61,889	)
Net changes in prices, production and other costs		(294,437	)
Development costs incurred		75,323
Net changes in future development costs		(75,466	)
Extensions and discoveries		126,061
Revisions of previous quantity estimates		54,313
Accretion of discount		73,643
Net change in income taxes		(36,962	)
Purchases of reserves in-place		1,135,062
Timing differences and other(b)		(54,656	)
Net change for the year		940,992
Present value as of December 31, 2006	$	1,440,146

(a)	Amounts relate to SandRidge and Consolidated Subsidiaries.
(b)	The change in timing differences and other are related to revisions in the Company’s estimated time of production and development.

F-43

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	December 31,			June 30,
	2006			2007
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	38,948		$	2,199
Accounts receivable, net:
Trade		89,774			69,629
Related parties		5,731			16,002
Derivative contracts		—			12,583
Inventories		2,544			3,452
Deferred income taxes		6,315			—
Other current assets		31,494			16,547
Total current assets		174,806			120,412
Oil and natural gas properties, using full cost method of accounting
Proved		1,636,832			2,035,735
Unproved		282,374			271,239
Less: accumulated depreciation and depletion		(60,752	)		(130,343	)
		1,858,454			2,176,631
Other property, plant and equipment, net		276,264			365,829
Derivative contracts		—			181
Goodwill		26,198			29,199
Investments		3,584			5,747
Restricted deposits		33,189			37,823
Other assets		15,889			29,526
Total assets	$	2,388,384		$	2,765,348
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	26,201		$	25,686
Accounts payable and accrued expenses:
Trade		129,799			186,033
Related parties		1,834			1,363
Deferred income taxes		—			170
Derivative contracts		958			—
Total current liabilities		158,792			213,252
Long-term debt		1,040,630			1,040,970
Derivative contracts		3,052			—
Other long-term obligations		21,219			21,219
Asset retirement obligation		45,216			55,838
Deferred income taxes		24,922			27,478
Total liabilities		1,293,831			1,358,757
Commitments and contingencies (Note 12)
Minority interest		5,092			5,772
Redeemable convertible preferred stock, $0.001 par value, 2,650 shares authorized; 2,137 and 2,184 shares issued and outstanding at December 31, 2006 and June 30, 2007, respectively		439,643			449,998
Stockholders’ equity:
Preferred stock, no par; 50,000 shares authorized; no shares issued and outstanding in 2006 and 2007		—			—
Common stock, $0.001 par value, 400,000 shares authorized; 93,048 issued and 91,604 outstanding at December 31, 2006 and 110,311 issued and 108,859 outstanding at June 30, 2007		92			109
Additional paid-in capital		574,868			886,508
Treasury stock, at cost		(17,835	)		(18,490	)
Retained earnings		92,693			82,694
Total stockholders’ equity		649,818			950,821
Total liabilities and stockholders’ equity	$	2,388,384		$	2,765,348

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-44

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

	Six Months Ended
	June 30,
	2006			2007
	(Unaudited)
	(In thousands except per share amounts)
Revenues:
Natural gas and crude oil	$	28,563		$	206,450
Drilling and services		69,971			40,244
Midstream and marketing		61,892			52,101
Other		13,404			9,332
Total revenues		173,830			308,127
Expenses:
Production		13,665			49,018
Production taxes		1,529			7,926
Drilling and services		47,685			24,126
Midstream and marketing		58,386			46,747
Depreciation, depletion and amortization — natural gas and crude oil		7,868			70,699
Depreciation, depletion and amortization — other		13,808			22,263
General and administrative		20,303			25,360
Gain on derivative contracts		(10,579	)		(15,981	)
Gain on sale of assets		—			(659	)
Total expenses		152,665			229,499
Income from operations		21,165			78,628
Other income (expense):
Interest income		397			3,626
Interest expense		(1,584	)		(60,108	)
Minority interest		(99	)		(157	)
Gain (loss) from equity investments		(697	)		2,164
Total other income (expense)		(1,983	)		(54,475	)
Income before income tax expense		19,182			24,153
Income tax expense		5,150			9,082
Net income		14,032			15,071
Preferred stock dividends and accretion		—			21,260
Income (loss) available (applicable) to common stockholders	$	14,032		$	(6,189	)
Income (loss) per share available (applicable) to common stockholders:
Basic	$	0.20		$	(0.06	)
Diluted	$	0.19		$	(0.06	)
Weighted average number of shares outstanding:
Basic		71,596			100,025
Diluted		72,540			100,025

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-45

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statement of Changes in Stockholders’ Equity

				Additional
	Common			Paid-In			Treasury			Retained
	Stock			Capital			Stock			Earnings			Total
	(Unaudited)
	(In thousands)
Balance, December 31, 2006	$	92		$	574,868		$	(17,835	)	$	92,693		$	649,818
Stock offering, net of $1.4 million in offering costs		18			318,652			—			—			318,670
Conversion of common stock to redeemable convertible preferred stock		(1	)		(9,650	)		—			—			(9,651	)
Accretion on redeemable convertible preferred stock		—			—			—			(705	)		(705	)
Purchase of treasury stock		—			—			(1,572	)		—			(1,572	)
Common stock issued under retirement plan		—			379			917			—			1,296
Stock-based compensation		—			2,259			—			—			2,259
Net income		—			—			—			15,071			15,071
Redeemable convertible preferred stock dividend		—			—			—			(24,365	)		(24,365	)
Balance, June 30, 2007	$	109		$	886,508		$	(18,490	)	$	82,694		$	950,821

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-46

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	Six Months Ended
	June 30,
	2006			2007
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,032		$	15,071
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		2,119			—
Depreciation, depletion and amortization		21,676			92,962
Debt issuance cost amortization		—			13,822
Deferred income taxes		3,897			9,082
Unrealized gain on derivatives		(10,579	)		(16,774	)
Gain on sale of assets		—			(659	)
Interest income — restricted deposits		—			(660	)
Loss (gain) from equity investments, net of distributions		708			(2,163	)
Stock-based compensation		4,484			2,259
Minority interest		99			157
Changes in operating assets and liabilities		(6,034	)		67,747
Net cash provided by operating activities		30,402			180,844
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property, plant and equipment		(114,500	)		(492,144	)
Acquisition of assets		(4,965	)		—
Proceeds from sale of assets		38			2,807
Contributions on equity investments		(2,543	)		—
Restricted deposits		—			(3,973	)
Restricted cash		2,373			—
Net cash used in investing activities		(119,597	)		(493,310	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings		58,704			1,152,772
Repayments of borrowings		(13,577	)		(1,154,443	)
Dividends paid — preferred		—			(15,409	)
Minority interest contributions (distributions)		(345	)		522
Proceeds from issuance of common stock		3,343			319,966
Purchase of treasury shares		—			(1,572	)
Debt issuance costs		—			(26,119	)
Net cash provided by financing activities		48,125			275,717
NET DECREASE IN CASH AND CASH EQUIVALENTS		(41,070	)		(36,749	)
CASH AND CASH EQUIVALENTS, beginning of year		45,731			38,948
CASH AND CASH EQUIVALENTS, end of period	$	4,661		$	2,199
Supplemental Disclosure of Noncash Investing and Financing Activities:
Insurance premiums financed	$	—		$	1,496
Accretion on redeemable convertible preferred stock	$	—		$	705
Common stock issued in connection with acquisitions	$	478		$	—
Redeemable convertible preferred stock dividends, net of dividends paid	$	—		$	8,956

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-47

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.   Basis of Presentation

The condensed consolidated balance sheet of SandRidge Energy, Inc. and its subsidiaries (formerly known as Riata Energy, Inc.) (collectively, the “Company”) at December 31, 2006 was derived from the Company’s audited consolidated financial statements as of that date. The condensed consolidated balance sheet at June 30, 2007, the condensed consolidated statements of operations for the six month periods ended June 30, 2006 and 2007, the condensed consolidated statement of changes in stockholders’ equity for the six month period ended June 30, 2007, and the condensed consolidated statements of cash flows for the six month periods ended June 30, 2006 and 2007 were prepared by the Company.

In the opinion of Company management, all adjustments, consisting of normal recurring adjustments, necessary to state fairly the consolidated financial position, results of operations and cash flows were recorded. The results of operations for the six month period ended June 30, 2007 are not necessarily indicative of the operating results for a full year or of future operations. The Company uses the equity method of accounting for all investments in which it has less than a majority interest and over which it does not exercise control. Minority interest has been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s consolidated financial statements for the year ended December 31, 2006.

The condensed consolidated financial statements include the accounts of SandRidge Energy, Inc. and its wholly owned or majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts in the unaudited condensed consolidated financial statements have been reclassified in the prior period to conform with current period presentation.

2.   Significant Accounting Policies

For a description of the Company’s accounting policies, refer to Note 1 of the 2006 consolidated financial statements, as well as Note 10 herein.

Change in Method of Accounting for Oil and Gas Operations.  In the fourth quarter of 2006, the Company changed from the successful efforts method to the full cost method of accounting for its oil and gas operations. Prior period financial statements presented herein have been restated to reflect the change.

SandRidge’s financial results have been retroactively restated to reflect the conversion to the full cost method. As prescribed by full cost accounting rules, all costs associated with property acquisition, exploration, and development activities are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding oil and gas reserves.

F-48

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

A comparison of the Company’s previously presented income tax expense, net income, and earnings per share under the successful efforts method of accounting to its results of operations disclosed herein are as follows (in thousands, except per share amounts):

	Six Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2006		2006
	(As originally		(As restated)
	presented)
Income tax expense	$	4,154	$	5,150
Net income	$	1,867	$	14,032
Basic earnings per share	$	0.03	$	0.20
Diluted earnings per share	$	0.03	$	0.19

3.   Acquisitions

On March 15, 2006, the Company acquired from an executive officer and director, an additional 12.5% interest in PetroSource Energy Company, a consolidated subsidiary. The acquisition consisted of the extinguishment of subordinated debt of approximately $1.0 million and a $4.5 million cash payment for the ownership interest acquired for a total acquisition price of approximately $5.5 million.

On May 1, 2006, the Company purchased certain leases in developed and undeveloped properties from an oil and gas company. The purchase price was approximately $40.9 million in cash. The purchase price was included in accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2006 as the consideration was not paid until July 2006.

On May 26, 2006, the Company purchased several oil and natural gas properties from an oil and gas company. The purchase price was approximately $12.9 million, comprised of $8.2 million in cash, and 251,351 shares of SandRidge Energy, Inc. common stock (valued at $4.7 million). The purchase price was included in accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2006 as the consideration was not paid until July 2006.

On June 7, 2006, the Company acquired the remaining 1% interest in PetroSource Energy Company, a consolidated subsidiary, from an oil and gas company. The purchase price was 27,749 shares of SandRidge Energy, Inc. common stock (valued at $0.5 million). As a result of this acquisition, the Company became a 100% owner of PetroSource Energy Company.

F-49

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

4.   Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

	December 31,			June 30,
	2006			2007
Oil and natural gas properties:
Proved	$	1,636,832		$	2,035,735
Unproved		282,374			271,239
Total oil and natural gas properties		1,919,206			2,306,974
Less accumulated depreciation and depletion		(60,752	)		(130,343	)
Net oil and natural gas properties capitalized costs		1,858,454			2,176,631
Land		738			751
Non oil and gas equipment		337,294			446,508
Buildings and structures		6,564			7,643
Total		344,596			454,902
Less accumulated depreciation, depletion and amortization		(68,332	)		(89,073	)
Net capitalized costs		276,264			365,829
Total property, plant and equipment	$	2,134,718		$	2,542,460

The amount of capitalized interest in the six months ended June 30, 2006 and 2007 was approximately $0.6 million and $0.9 million, respectively, and is included in the above non oil and gas equipment balance.

5.   Goodwill

The change in the carrying amount of goodwill from December 31, 2006 to June 30, 2007 was as follows (in thousands):

Balance at December 31, 2006	$	26,198
Adjustments		3,001
Balance at June 30, 2007	$	29,199

The adjustments made in the six months ended June 30, 2007 related to the preliminary purchase allocation in connection with the NEG acquisition in November 2006. The Company has assigned all of the NEG goodwill to the Exploration and Production segment.

6.   Asset Retirement Obligation

A reconciliation of the beginning and ending aggregate carrying amounts of the asset retirement obligations for the period of December 31, 2006 to June 30, 2007 is as follows (in thousands):

Asset retirement obligation, December 31, 2006	$	45,216
Liability incurred upon acquiring and drilling wells		986
Revisions in estimated cash flows		7,747
Liability settled in current period		(9	)
Accretion of discount expense		1,898
Asset retirement obligation, June 30, 2007	$	55,838

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SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

7.   Long-Term Debt

Long-term obligations consist of the following (in thousands):

	December 31,		June 30,
	2006		2007
Senior credit facility	$	140,000	$	—
Senior bridge facility		850,000		—
Senior term loan		—		1,000,000
Other notes payable:
Drilling rig fleet and related oil field services equipment		61,105		54,599
Sagebrush		4,000		4,000
Insurance financing		7,240		1,816
Other equipment and vehicles		4,486		6,241
Total debt		1,066,831		1,066,656
Less: Current maturities of long-term debt		26,201		25,686
Long-term debt	$	1,040,630	$	1,040,970

Senior Credit Facility.  On November 21, 2006, the Company entered into a $750 million senior secured revolving credit facility (the “senior credit facility”). The senior credit facility matures on November 21, 2011.

The proceeds of the senior credit facility were used to (i) partially finance the NEG acquisition, (ii) refinance the existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and the existing credit facility. Future borrowings under the senior credit facility will be available for capital expenditures, working capital and general corporate purposes and to finance permitted acquisitions of oil and gas properties and other assets related to the exploration, production and development of oil and gas properties. The senior credit facility will be available to be drawn on and repaid without restriction so long as the Company is in compliance with its terms, including certain financial covenants.

The senior credit facility contains various covenants that limit the Company and certain of its subsidiaries’ ability to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of the Company’s assets. Additionally, the senior credit facility limits the Company and certain of its subsidiaries’ ability to incur additional indebtedness with certain exceptions, including under the senior unsecured bridge facility (as discussed below).

The senior credit facility also contains financial covenants, including maintenance of agreed upon levels for the ratio of (i) total funded debt to EBITDAX (as defined in the senior credit facility), (ii) EBITDAX to interest expense plus current maturities of long-term debt, and (iii) current ratio.

The obligations under the senior credit facility are secured by first priority liens on all shares of capital stock of each of the Company’s present and future subsidiaries; all intercompany debt of the Company and its subsidiaries; and substantially all of the Company assets and the assets of its subsidiaries, including proven oil and gas reserves representing at least 80% of the present discounted value (as defined in the senior credit facility) of proven oil and gas reserves reviewed in determining the borrowing base for the senior credit facility. Additionally, the obligations under the senior credit facility will be guaranteed by certain Company subsidiaries.

At the Company’s election, interest under the senior credit facility is determined by reference to (i) the British Bankers Association LIBOR rate, or LIBOR, plus an applicable margin between 1.25% and 2.00% per

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SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

annum or (ii) the higher of the federal funds rate plus 0.5% or the prime rate plus, in either case, an applicable margin between 0.25% and 1.00% per annum. Interest will be payable quarterly for prime rate loans and at the applicable maturity date for LIBOR loans, except that if the interest period for a LIBOR loan is six months, interest will be paid at the end of each three-month period.

The borrowing base of proved reserves was initially set at $300.0 million. As of December 31, 2006, the Company had $140.0 million of outstanding indebtedness on the senior credit facility. Proceeds from the Company’s sale of common stock on March 20, 2007, as described in Note 14, were used to repay all outstanding borrowings under the Company’s senior credit facility.

On May 2, 2007, the borrowing base was increased to $400 million. There were no amounts outstanding under this facility at June 30, 2007. As of August 29, 2007, the Company had $270.0 million in outstanding indebtedness under this facility.

Senior Bridge Facility.  On November 21, 2006, the Company also entered into a $850.0 million senior unsecured bridge facility (the “senior bridge facility”).

Together with borrowings under the senior credit facility, the proceeds from the senior bridge facility were used to (i) partially finance the NEG acquisition, (ii) refinance existing senior secured revolving credit facility and NEG’s existing credit facility, and (iii) pay fees and expenses related to the NEG acquisition and the existing credit facility.

The Company repaid the senior bridge facility in March 2007. The Company expensed the remaining unamortized debt issuance costs related to the senior bridge facility of approximately $12.5 million to interest expense in March 2007.

Senior Term Loans.  On March 22, 2007 the Company entered into $1.0 billion in senior unsecured term loans (the “senior term loans”). The closing of the senior term loans was generally contingent upon closing the private placement of common equity as described in Note 14. The senior term loans include both fixed rate term loans and floating rate term loans. Approximately $650.0 million was issued at a fixed rate of 8.625% with the principal due on April 1, 2015 (the “fixed rate term loans”). Under the terms of the fixed rate term loans, interest is payable quarterly and during the first four years interest may be paid, at the Company’s option, either entirely in cash or entirely with additional fixed rate term loans. If the Company elects to pay the interest due during any period in additional fixed rate term loans, the interest rate increases to 9.375% during such period. After April 1, 2011 the fixed rate term loans may be prepaid in whole or in part with certain prepayment penalties.

Approximately $350.0 million of the senior term loans was issued at a variable rate with interest payable quarterly and principal due on April 1, 2014 (the “variable rate term loans”). The variable rate term loans bear interest, at the Company’s option, at the British Bankers Association LIBOR rate plus 3.625% or the higher of (i) the federal funds rate, as defined, plus 3.125% or (ii) a Bank’s prime rate plus 2.625%. After April 1, 2009 the variable rate term loans may be prepaid in whole or in part with certain prepayment penalties.

One year after the closing date, the Company is required to offer to exchange the senior term loans for senior unsecured notes with registration rights and with identical terms and conditions as the term loans. If the Company is unable or does not offer to exchange the senior term loans for senior unsecured notes with registration rights by the specified date, the interest rate on the senior term loans will increase by 0.25% every 90 days up to a maximum of 0.50%.

Debt covenants under the senior term loans include financial covenants similar to those of the senior credit facility and include limitations on the incurrence of indebtedness, payment of dividends, asset sales, certain asset purchases, transactions with related parties, and consolidation or merger agreements. The Company incurred $26.1 million of debt issuance costs in connection with the senior term loans. These costs

F-52

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

are included in other assets and amortized over the term of the senior term loans. A portion of the proceeds from the senior term loans was used to repay the Company’s $850.0 million senior bridge facility.

For the six months ended June 30, interest payments, net of amounts capitalized were approximately $1.9 million in 2006 and $30.1 million in 2007.

8.   Other Long-Term Obligations

The Company has recorded a long-term obligation for amounts to be paid under a settlement agreement with Conoco, Inc. (“Conoco”). During January 2007, the Company agreed to pay approximately $25.0 million plus interest to Conoco to settle outstanding litigation. Under this agreement, payments are to be made in $5.0 million increments on April 1, 2007, July 1, 2008, July 1, 2009, July 1, 2010, and July 1, 2011. On March 30, 2007, the Company made the first $5.0 million settlement payment plus accrued interest. Unpaid settlement amounts of approximately $25.0 million and $20.0 million have been included in other long-term obligations in the accompanying condensed consolidated balance sheets as of December 31, 2006 and June 30, 2007, respectively.

9.   Derivatives

The Company has entered into various derivative contracts including collars, fixed price swaps, and basis swaps with counterparties. The contracts expire on various dates through December 31, 2009.

At June 30, 2007, the Company’s open commodity derivative contracts consisted of the following:

					Weighted Avg.
Period	Commodity	Notional			Fix Price
Fixed price swap
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$7.87
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$8.05
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$7.02
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$7.50
May 2007 - September 2007	Natural gas		3,060,000	MmBtu	$7.75
May 2007 - September 2007	Natural gas		1,530,000	MmBtu	$8.16
June 2007 - August 2007	Natural gas		920,000	MmBtu	$8.18
June 2007 - August 2007	Natural gas		920,000	MmBtu	$8.30
July 2007 - September 2007	Natural gas		920,000	MmBtu	$8.25
September 2007 - December 2007	Natural gas		1,220,000	MmBtu	$8.88
October 2007 - December 2007	Natural gas		920,000	MmBtu	$8.77
October 2007 - December 2007	Natural gas		920,000	MmBtu	$9.04
October 2007 - December 2007	Natural gas		920,000	MmBtu	$8.00
November 2007 - June 2008	Natural gas		4,860,000	MmBtu	$8.05
November 2007 - June 2008	Natural gas		9,720,000	MmBtu	$8.20
November 2007 - March 2008	Natural gas		1,520,000	MmBtu	$8.505
January 2008 - June 2008	Natural gas		3,640,000	MmBtu	$7.987
January 2008 - June 2008	Natural gas		3,640,000	MmBtu	$7.99
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$9.00
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$8.48
May 2008 - August 2008	Natural gas		2,460,000	MmBtu	$8.375

F-53

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

					Weighted Avg.
Period	Commodity	Notional			Fix Price
Collars
January 2007 - December 2007	Crude oil		60,000	Bbls	$50.00 - $84.50
January 2008 - June 2008	Crude oil		42,000	Bbls	$50.00 - $83.35
July 2008 - December 2008	Crude oil		54,000	Bbls	$50.00 - $82.60
Waha basis swap
January 2007 - December 2007	Natural gas		14,600,000	MmBtu	$(0.70)
January 2007 - December 2007	Natural gas		7,300,000	MmBtu	$(0.5925)
April 2007 - September 2007	Natural gas		3,660,000	MmBtu	$(0.470)
April 2007 - October 2007	Natural gas		4,280,000	MmBtu	$(0.530)
May 2007 - September 2007	Natural gas		3,060,000	MmBtu	$(0.65)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$(0.585)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$(0.6525)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$(0.635)
January 2008 - December 2008	Natural gas		7,320,000	MmBtu	$(0.59)
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$(0.625)
January 2008 - December 2008	Natural gas		10,980,000	MmBtu	$(0.57)
January 2008 - December 2008	Natural gas		3,660,000	MmBtu	$(0.595)
May 2008 - August 2008	Natural gas		2,460,000	MmBtu	$(0.45)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$(0.47)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$(0.49)
January 2009 - December 2009	Natural gas		3,650,000	MmBtu	$(0.4975)

These derivatives have not been designated as hedges and the Company records all derivatives on the balance sheet at fair value. Changes in derivative fair values are recognized in earnings. Cash settlements and valuation gains and losses are included in gain on derivative contracts in the condensed consolidated statements of operations. The following summarizes the cash settlements and valuation gains and losses for the six month periods ended June 30, 2006 and 2007 (in thousands):

	Six Months Ended
	June 30,
	2006			2007
Realized loss	$	—		$	793
Unrealized gain		(10,579	)		(16,774	)
Gain on derivative contracts	$	(10,579	)	$	(15,981	)

10.   Income Taxes

In accordance with applicable generally accepted accounting principles, the Company estimates for each interim reporting period the effective tax rate expected for the full fiscal year and uses that estimated rate in providing income taxes on a current year-to-date basis.

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” The Company has determined that no uncertain tax positions exist where the Company would be required to make additional tax payments. As a result, the Company has not recorded any additional liabilities for any unrecognized tax benefits as of June 30, 2007. The Company

F-54

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

and its subsidiaries file income tax returns in the U.S. federal and various state jurisdictions. Tax years 1994 to present remain open for the majority of taxing authorities. The Company’s accounting policy is to recognize penalties and interest related to unrecognized tax benefits as income tax expense. The Company does not have an accrued liability for the payment of penalties and interest at June 30, 2007.

For the six months ended June 30, income tax payments were approximately $1.3 million in 2006 and 2007.

11.   Earnings Per Share

Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average shares outstanding during the year, but also include the dilutive effect of awards of restricted stock. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share, for the six month periods ended June 30, 2006 and 2007.

	Six Months Ended
	June 30,
	2006		2007
	(In thousands)
Weighted average basic common shares outstanding		71,596		100,025
Effect of dilutive securities:
Restricted stock		944		—
Weighted average diluted common and potential common shares outstanding		72,540		100,025

For the six months ended June 30, 2007, restricted stock awards covering 1.3 million shares were excluded from the computation of net loss per share because their effect would have been antidilutive.

In computing diluted earnings per share, the Company evaluated the if-converted method. Under this method, the Company assumes the conversion of the outstanding redeemable convertible preferred stock to common stock and determines if this is more dilutive than including the preferred stock dividends (paid and unpaid) in the computation of income (loss) available (applicable) to common stockholders. The Company determined the if-converted method is not more dilutive and has included preferred stock dividends in the determination of income (loss) available (applicable) to common stockholders.

12.   Commitments and Contingencies

The Company is a defendant in certain lawsuits from time to time in the normal course of business. In management’s opinion, the Company is not currently involved in any legal proceedings other than those specifically identified below, which individually or in the aggregate, could have a material effect on the financial condition, operations and/or cash flows of the Company.

Roosevelt Litigation.  On May 18, 2004, the Company commenced a civil action seeking declaratory judgment against Elliot Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P. in the District Court of Dallas County, Texas, 101st Judicial District, SandRidge Energy, Inc. and Riata Energy Piceance, LLC v. Elliot Roosevelt, Jr. et al, Cause No. 92.717-C. This suit sought a declaratory judgment relating to the rights of the parties in and to certain leases in a defined area of mutual interest in the Piceance Basin pursuant to an acquisition agreement entered into in 1989, including the Company’s 41,454 gross (16,193 net) acreage position. The Company tried the case to a jury in July 2006. Before the case was submitted to the jury, the trial court granted Roosevelt a directed verdict stating that he owned a 25% deferred interest in the Company’s acreage after project payout. The directed verdict is not likely to affect the Company’s proved reserves of 11.7 Bcfe, because of the requirement that project payout be achieved before

F-55

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

the deferred interest shares in revenue. Other issues of fact were submitted to the jury. The trial court recently entered a judgment favorable to Roosevelt. The Company has filed a motion to modify the judgment and for a new trial. Depending on the outcome of this motion, the Company expects to appeal, at a minimum, from the entry of the directed verdict. If the Company does not ultimately prevail, the deferred interest will reduce the Company’s economic returns from the project, if project payout is achieved.

Yates Litigation.  On April 29, 2005, Harvey E. Yates Company (“Heyco”), filed a trespass to try title suit against us in the District Court for Pecos County, Texas, 112th Judicial District, Harvey E. Yates Company v. Riata Energy, Inc., Cause No. 10376. In February 2006, additional parties joined the case as plaintiffs. The plaintiffs seek title to a 44.57% working interest in a lease covering three sections of land and a 18.66% working interest in a lease covering 1.5 sections of land, each located in West Texas, as well as unspecified damages based on production attributable to these working interests. The plaintiffs’ claims stem from the alleged failure of the Company’s predecessors in title to assign the disputed working interest in 1994. The Company believes that it has record title to the interest claimed by plaintiffs. Further, the Company believes the claims are barred by the four year statute of limitations, which the Company believes ran in 1998. If the plaintiffs prevail, any recovery would not be expected to have a material impact on proved reserves. The Company is currently in the preliminary stages of discovery.

The Company is subject to other claims in the ordinary course of business. However, the Company believes that the ultimate resolution of the above mentioned claims and other current legal proceedings will not have a material adverse effect on its results of operations or its financial condition.

13.   Redeemable Convertible Preferred Stock

In November 2006, the Company sold 2,136,667 shares of redeemable convertible preferred stock as part of the NEG acquisition and received net proceeds from this sale of approximately $439.5 million after deducting offering expenses of approximately $9.3 million. Each holder of the redeemable convertible preferred stock is entitled to quarterly cash dividends at the annual rate of 7.75% of the accreted value of its redeemable convertible preferred stock. The accreted value is $210 per share as of June 30, 2007. Each share of convertible preferred stock is initially convertible into ten shares of common stock at the option of the holder, subject to certain anti-dilution adjustments.

On January 31, 2007, the Company’s Board of Directors declared a dividend on the outstanding shares of redeemable convertible preferred stock. The dividend of $3.21 per share was paid in cash on February 15, 2007. The dividend covered the time period from November 21, 2006, when the shares were issued, through February 1, 2007.

On March 30, 2007, certain holders of the Company’s common units (consisting of shares of common stock and a warrant to purchase redeemable convertible preferred stock upon the surrender of common stock) exercised warrants to purchase redeemable convertible preferred stock. The holders converted 526,316 shares of common stock into 47,619 shares of redeemable convertible preferred stock.

On May 8, 2007, the Company’s Board of Directors declared a dividend on the outstanding shares of redeemable convertible preferred stock. The dividend of $3.97 per share was paid in cash on May 15, 2007. The dividend covered the time period from February 2, 2007 through May 1, 2007.

On June 8, 2007, the Company’s Board of Directors declared a dividend on the outstanding shares of redeemable convertible preferred stock. The dividend of $4.10 per share will be paid in cash on August 15, 2007. The dividend covers the time period from May 2, 2007 through August 1, 2007.

Approximately $20.6 million in paid and unpaid dividends have been included in the Company’s earnings per share calculations for the six month period ended June 30, 2007, as presented in the accompanying condensed consolidated statements of operations.

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SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

14.   Stockholders’ Equity

The following table presents information regarding SandRidge’s common stock (in thousands):

	December 31,		June 30,
	2006		2007
Shares authorized		400,000		400,000
Shares outstanding at end of period		91,604		108,859
Shares held in treasury		1,444		1,452

The Company is authorized to issue 50,000,000 shares of preferred stock, no par value, of which no shares were outstanding as of December 31, 2006 and June 30, 2007.

Common Stock Issuance.  In March 2007, the Company sold approximately 17.8 million shares of common stock for net proceeds of $318.7 million after deducting offering expenses of approximately $1.4 million. The stock was sold in private sales to various investors including Tom Ward, the Company’s Chairman of the Board of Directors and Chief Executive Officer, who invested $61.4 million in exchange for approximately 3.4 million shares of common stock.

Treasury Stock.  Employees may elect to satisfy their tax obligations on the vesting of their restricted stock by having the Company make the required tax payments and withhold a number of vested shares having a value on the date of vesting equal to the tax obligation. As a result of such employee elections, the Company withheld approximately 41,000 shares at a total value of $0.7 million during the six month period ended June 30, 2007. These shares were accounted for as treasury stock.

On June 28, 2007, the Company purchased 39,844 shares of its common stock through an open market repurchase program at a total cost of approximately $0.8 million. The purchase price of these shares is included in accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2007, as the consideration was not paid until July 2007.

On June 29, 2007, the Company transferred 72,044 shares of its treasury stock to the Company’s 401k Plan brokerage account. The transfer was made in order to satisfy the Company’s $1.3 million accrued payable to match employee contributions made to the plan during 2006. Historical cost of the shares transferred totaled approximately $0.9 million, resulting in an increase to the Company’s additional paid-in capital of approximately $0.4 million.

Restricted Stock.  The Company issues restricted stock awards under incentive compensation plans which vest over specified periods of time (one, four and seven years). These shares of restricted common stock are subject to restriction on transfer and certain conditions to vesting.

For the six months ended June 30, the Company recognized stock-based compensation expense related to restricted stock of approximately $4.5 million in 2006 and $2.3 million in 2007. Stock-based compensation expense is reflected in general and administrative expense in the condensed consolidated statements of operations.

15.   Related Party Transactions

During the ordinary course of business, the Company has transactions with certain stockholders and other related parties. These transactions primarily consist of purchases of drilling equipment and sales of oilfield

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SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

service supplies. Following is a summary of significant transactions with such related parties for the six month periods ended June 30, 2006 and 2007 (in thousands):

	Six Months Ended
	June 30,
	2006		2007
Sales to related parties	$	7,620	$	45,079
Purchases of services from related parties	$	2,263	$	10,451

On June 1, 2006, the Company purchased certain producing well interest from an executive officer and director. The purchase price was approximately $9.0 million in cash. The purchase price was included in accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2006 as the consideration was not paid until July 2006.

On May 2, 2007, the Company purchased certain leasehold acreage from a partnership controlled by a director. The purchase price was approximately $8.3 million in cash.

On June 11, 2007, the Company purchased certain producing well interests from a director. The purchase price was approximately $3.5 million in cash.

For a discussion of additional related party transactions, refer to Note 3 herein.

16.   Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which establishes a formal framework for measuring fair values of assets and liabilities in financial statements that are already required by U.S. generally accepted accounting principles (“GAAP”) to be measured at fair value. SFAS No. 157 clarifies guidance in FASB Concepts Statement (“CON”) No. 7 which discusses present value techniques in measuring fair value. Additional disclosures are also required for transactions measured at fair value. No new fair value measurements are prescribed, and SFAS No. 157 is intended to codify the several definitions of fair value included in various accounting standards. However, the application of this Statement may change current practices for certain companies. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS No. 157 on the financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option For Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), which permits an entity to choose to measure certain financial assets and liabilities at fair value. SFAS No. 159 also revises provisions of SFAS No. 115 that apply to available-for-sale and trading securities. This statement is effective for fiscal years beginning after November 15, 2007. The Company has not yet evaluated the potential impact of this standard.

17.   Industry Segment Information

SandRidge has four business segments: Exploration and Production, Drilling and Oilfield Services, Midstream Gas Services, and Other representing its four main business units offering different products and services. The Exploration and Production segment is engaged in the development, acquisition and production of oil and natural gas properties. The Drilling and Oilfield Services segment is engaged in the land contract drilling of oil and natural gas wells. The Midstream Gas Services segment is engaged in the purchasing, gathering, processing and treating of natural gas. The Other segment transports CO₂ to market for use by the Company and others in tertiary oil recovery operations and other miscellaneous operations.

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SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Management evaluates the performance of SandRidge’s operating segments based on operating income, which is defined as operating revenues less operating expenses and depreciation, depletion and amortization. Summarized financial information concerning our segments is shown in the following table (in thousands):

	Six Months Ended
	June 30,
	2006			2007
Revenues:
Exploration and production	$	30,065		$	209,201
Elimination of inter-segment revenue		(212	)		(1,896	)
Exploration and production, net of inter-segment revenue		29,853			207,305
Drilling and oilfield services		98,500			118,159
Elimination of inter-segment revenue		(28,176	)		(77,931	)
Drilling and oilfield services, net of inter-segment revenue		70,324			40,228
Midstream gas services		89,924			133,748
Elimination of inter-segment revenue		(28,034	)		(81,648	)
Midstream gas services, net of inter-segment revenue		61,890			52,100
Other		11,926			12,571
Elimination of inter-segment revenue		(163	)		(4,077	)
Other, net of inter-segment revenue		11,763			8,494
Total revenues	$	173,830		$	308,127
Operating Income:
Exploration and production	$	7,962		$	76,463
Drilling and oilfield services		17,025			8,876
Midstream gas services		1,777			2,301
Other		(5,599	)		(9,012	)
Total operating income		21,165			78,628
Interest income		397			3,626
Interest expense		(1,584	)		(60,108	)
Other income (expense)		(796	)		2,007
Income before income tax expense	$	19,182		$	24,153

F-59

SandRidge Energy, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

	Six Months Ended
	June 30,
	2006		2007
Capital Expenditures:
Exploration and production	$	51,734	$	377,120
Drilling and oilfield services		49,123		83,913
Midstream gas services		8,019		23,130
Other		5,624		7,981
Total capital expenditures	$	114,500	$	492,144
Depreciation, Depletion, Amortization and Impairment:
Exploration and production	$	8,222	$	71,686
Drilling and oilfield services		8,864		15,870
Midstream gas services		1,393		2,494
Other		3,197		2,912
Total depreciation, depletion, amortization and impairment	$	21,676	$	92,962

	December 31,		June 30,
	2006		2007
Identifiable Asset(1):
Exploration and production	$	2,091,459	$	2,380,882
Drilling and oilfield services		175,169		250,040
Midstream gas services		75,606		83,843
Other		46,150		50,583
Total	$	2,388,384	$	2,765,348

(1) Identifiable assets are those used in SandRidge’s operations in each industry segment.

18.   Subsequent Event

On July 11, 2007, the Company purchased property to serve as its future corporate headquarters. The 3.51-acre site contains four buildings and is located in downtown Oklahoma City, Oklahoma. The purchase price of the property was approximately $25 million in cash plus the assumption of an obligation to indemnify the sellers in connection with pending litigation involving the property. The Company believes the ultimate resolution of the related pending litigation will not have a material adverse effect on its results of operations or its financial condition. Payment of the purchase price was funded through a draw on the Company’s senior credit facility.

F-60

Report of Independent Registered Public Accounting Firm

To the Member

NEG Oil & Gas LLC

We have audited the accompanying combined balance sheets of NEG Oil & Gas LLC and subsidiaries excluding National Energy Group, Inc., and the 103/4% Senior Notes due from National Energy Group, Inc., but including National Energy Group Inc.’s 50% membership interest in NEG Holding LLC (collectively, the “Company”) as of December 31, 2004 and 2005 and the related statements of operations, changes in total member’s equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the combined financial statements referred to above, present fairly, in all material respects, the financial position of NEG Oil & Gas LLC and subsidiaries excluding National Energy Group, Inc. and the 103/4% Senior Notes due from National Energy Group Inc., but including National Energy Group Inc.’s 50% membership interest in NEG Holding LLC as of December 31, 2004 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 12 to the financial statements, the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations on January 1, 2003, which is considered as a change in accounting policy.

/s/  Grant Thornton LLP

Houston, Texas

October 27, 2006

F-61

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC. AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED BALANCE SHEETS

	December 31,
	2004			2005
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	30,846		$	102,322
Accounts receivable, net		36,613			53,378
Accounts receivable — affiliates		907			—
Notes receivable		489			10
Drilling prepayments		3,460			3,281
Deferred tax assets, net		1,943			—
Other		4,993			9,798
Total current assets		79,251			168,789
Oil and gas properties, at cost (full cost method)		929,088			1,229,923
Accumulated depreciation, depletion and amortization		(397,870	)		(488,560	)
Net oil and gas properties		531,218			741,363
Other property and equipment		5,595			6,029
Accumulated depreciation		(4,593	)		(4,934	)
Net other property and equipment		1,002			1,095
Note receivable		3,090			—
Equity investment		2,379			—
Restricted deposits		23,519			24,267
Deferred tax asset, net		592			—
Other assets		1,245			4,842
Total assets	$	642,296		$	940,356
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Accounts payable	$	28,914		$	18,105
Accounts payable revenue		6,265			11,454
Accounts payable — affiliates		2,574			1,660
Current portion of notes payable		1,761			2,503
Current portion of note payable to affiliate		10,429			—
Advance from affiliate		—			39,800
Prepayments from partners		749			121
Accrued interest		23			162
Accrued interest — affiliates		1,204			2,194
Income tax payable — affiliate		3,151			2,749
Derivative financial instruments		8,911			68,039
Total current liabilities		63,981			146,787
Commitments and contingencies
Credit facility		51,834			300,000
Notes payable, net of current maturities		2,642			—
Note payable to affiliate — net of current maturities		55,071			—
Gas balancing		898			1,108
Derivative financial instruments		7,766			17,893
Other liabilities		250			250
Deferred income tax liability		12,799			—
Asset retirement obligation		56,524			41,228
Total liabilities		251,765			507,266
Member’s equity		390,531			433,090
Total liabilities and member’s equity	$	642,296		$	940,356

The accompanying notes are an integral part of these combined financial statements.

F-62

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENTS OF OPERATIONS

	For the Years Ended December 31,
	2003			2004			2005
	(In thousands)
Revenues:
Oil and gas sales — gross	$	100,777		$	144,430		$	261,398
Unrealized derivative losses		(2,987	)		(9,179	)		(69,254	)
Oil and gas revenues — net		97,790			135,251			192,144
Plant revenues		2,119			2,737			6,711
Total revenues		99,909			137,988			198,855
Costs and expenses:
Lease operating		11,517			14,912			27,437
Transportation and gathering		1,418			3,144			4,978
Plant and field operations		2,069			3,918			3,769
Production and ad valorem taxes		8,144			10,883			16,560
Depreciation, depletion and amortization		39,409			60,394			91,100
Accretion of asset retirement obligation		339			593			3,019
General and administrative		7,703			11,650			14,152
Total costs and expenses		70,599			105,494			161,015
Operating income		29,310			32,494			37,840
Interest expense		(2,034	)		(3,428	)		(8,198	)
Interest expense — affiliate		(971	)		(3,054	)		(3,047	)
Interest income and other		524			930			810
Interest income from related parties		115			150			—
Equity in loss on investment		(102	)		(519	)		(1,118	)
Severance tax refund		—			4,468			—
Commitment fee income		125			—			—
(Loss) gain on sale of assets		(8	)		1,686			9
Gain on sale of equity investment		—			—			5,512
Loss on marketable securities		(954	)		—			—
Income before income taxes		26,005			32,727			31,808
Income tax benefit (expense)		12,615			(260	)		2,932
Income before minority interest and cumulative effect of accounting change		38,620			32,467			34,740
Minority interest		(1,741	)		(812	)		—
Income before cumulative effect of accounting change		36,879			31,655			34,740
Cumulative effect of accounting change		1,912			—			—
Net income	$	38,791		$	31,655		$	34,740

The accompanying notes are an integral part of these combined financial statements.

F-63

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2003			2004			2005
	(In thousands)
Operating activities:
Net income	$	38,791		$	31,655		$	34,740
Noncash adjustments:
Deferred income tax benefit		(14,953	)		(144	)		(2,935	)
Depreciation depletion and amortization		39,409			60,394			91,100
Minority interest		1,741			812			—
Unrealized derivative losses		2,987			9,179			69,254
(Gain) loss on sale of assets		8			(1,686	)		(9	)
Accretion of asset retirement obligation		339			593			3,019
Equity in loss on investment		102			519			1,118
Gain on sale of equity investment		—			—			(5,512	)
Provision for doubtful accounts		—			790			470
Cumulative effect of accounting change		(1,912	)		—			—
Interest income-restricted deposits		—			—			(494	)
Amortization of note discount		—			281			81
Amortization of note costs		793			494			1,148
Changes in operating assets and liabilities:
Accounts receivable		2,677			(6,340	)		(13,496	)
Drilling prepayments		(1,138	)		249			179
Derivative deposit		100			1,700			—
Other assets		820			(1,030	)		(4,883	)
Note receivable		(1,832	)		(1,258	)		3,098
Accounts payable and accrued liabilities		237			12,014			(8,545	)
Net cash provided by operating activities		68,169			108,222			168,333
Investing activities:
Acquisition, exploration, and development costs		(40,962	)		(114,974	)		(315,880	)
Proceeds from sales of oil and gas properties		1,436			4,981			1,329
Purchases of furniture, fixtures and equipment		(227	)		(289	)		(511	)
Proceeds from sale of furniture, fixtures and equipment		—			—			12
Equity investment		(1,800	)		(1,200	)		(454	)
Investment in restricted deposits		—			—			(4,973	)
Proceeds from sale of equity investment		—			—			7,227
Net cash used in investing activities		(41,553	)		(111,482	)		(313,250	)
Financing activities:
Debt issuance costs		(952	)		(440	)		(4,666	)
Net cash contributed by member		15,312			23,753			—
Repurchase of membership interest		—			(4,136	)		—
Proceeds from affiliate borrowings		—			—			161,800
Repayment of affiliate borrowings		—			—			(98,357	)
Guaranteed payment to member		(18,229	)		(15,978	)		(15,978	)
Priority distribution		(40,506	)		—			—
Equity Contribution		—			—			5,326
Dividend payment to member		—			—			(78,000	)
Proceeds from credit facility		91,625			8,000			379,100
Principal payments on debt		(55,514	)		(9,365	)		(1,898	)
Repayment of credit facility		(1,090	)		—			(130,934	)
Net cash provided (used) by financing activities		(9,354	)		1,834			216,393
Increase in cash and cash equivalents		17,262			(1,426	)		71,476
Cash and cash equivalents at beginning of period		15,010			32,272			30,846
Cash and cash equivalents at end of period	$	32,272		$	30,846		$	102,322
Supplemental cash flow information:
Cash paid for interest	$	1,681		$	5,471		$	8,483
Cash paid for income taxes	$	800		$	50		$	—
Distribution of member note payable	$	10,940		$	—		$	—

The accompanying notes are an integral part of these combined financial statements.

F-64

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENT OF CHANGES IN TOTAL MEMBER’S EQUITY

	(In thousands)
Total equity — December 31, 2002	$	199,842
Contribution from member — National Onshore		116,253
Guaranteed payment to member		(18,229	)
Payment of priority amount to member		(51,446	)
Net income		38,791
Total member’s equity — December 31, 2003		285,211
Contribution from member — National Offshore		91,561
Contribution from member — National Onshore minority interest		2,218
Purchase of minority membership interest		(4,136	)
Guaranteed payment to member		(15,978	)
Net income		31,655
Total member’s equity — December 31, 2004		390,531
Contribution of Notes Payable to AREP		89,143
Equity Contribution		5,326
Contribution of deferred tax assets		(5,471	)
Contribution of deferred tax liabilities		12,799
Guaranteed payment to member		(15,978	)
Dividend distribution		(78,000	)
Net income		34,740
Total member’s equity — December 31, 2005	$	433,090

The accompanying notes are an integral part of these combined financial statements.

F-65

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2003, 2004, 2005

1.   Organization and Background

The accompanying combined financial statements present NEG Oil & Gas LLC and subsidiaries, excluding National Energy Group, Inc. and the 103/4% Senior Notes due from National Energy Group, but including National Energy Group’s 50% membership interest in NEG Holding LLC (collectively, “the Company”). The Company is an oil and natural gas exploration and production company engaged in the exploration, development, production and operations of natural gas and oil properties, primarily located in Texas, Oklahoma, Arkansas and Louisiana (both onshore and in the Gulf of Mexico).

NEG Oil & Gas LLC is wholly-owned by American Real Estate Holdings Limited Partnership (“AREH”). AREH is 99% owned by American Real Estate Partners, L.P. (“AREP”). AREP is a publicly traded limited partnership that is majority owned by Mr. Carl C. Icahn.

NEG Oil & Gas LLC was formed on December 2, 2004 to hold the oil and gas investments of the Company’s ultimate parent company, AREP and, as of December 31, 2005 had the following assets and operations:

•  A 50.01% ownership interest in National Energy Group, Inc (National Energy Group), a publicly traded oil and gas management company. National Energy Group’s principal asset consists of its 50% membership interest in NEG Holding LLC (Holding, LLC).

•  $148.6 million principal amount of 103/4% Senior Notes due from National Energy Group (the “103/4% Senior Notes”).

•  A 50% managing membership interest in Holding, LLC.

•  The oil and gas operations of National Onshore LP (formerly TransTexas Gas Corporation); and

•  The oil and gas operations of National Offshore LP (formerly Panaco, Inc.)

All of the above assets initially were acquired by entities owned or controlled by Mr. Icahn and subsequently acquired by AREP (through subsidiaries) in various purchase transactions. In accordance with generally accepted accounting principles, assets transferred between entities under common control are accounted for at historical cost similar to a pooling of interest and the financial statements are combined from the date of acquisition by an entity under common control. The financial statements include the combined results of operations, financial position and cash flows of each of the above entities since its initial acquisition by entities owned or controlled by Mr. Icahn (the “Period of Common Control”).

On September 7, 2006, AREP signed a letter of intent to sell NEG Oil & Gas LLC and subsidiaries, excluding National Energy Group, Inc. and the 103/4% Senior Notes due from National Energy Group, but including National Energy Group’s 50% membership interest in Holding LLC to Riata Energy, Inc., DBA SandRidge Energy, Inc. (“Riata Energy”) The combined financial statements include the entities to be sold to Riata Energy.

Background

National Energy Group, Inc. — In February, 1999 National Energy Group was placed under involuntary, court ordered bankruptcy protection. Effective August 4, 2000 National Energy Group emerged from involuntary bankruptcy protection with affiliates of Mr. Icahn owning 49.9% of the common stock and $165 million principal amount of debt securities (“Senior Notes”). As mandated by National Energy Group’s Plan of Reorganization, Holding LLC was formed and on September 1, 2001, National Energy Group contributed to Holding LLC all of its oil and natural gas properties in exchange for an initial membership

F-66

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

interest in Holding LLC. National Energy Group retained $4.3 million in cash. On September 1, 2001, an affiliate of Mr. Icahn contributed to Holding LLC oil and natural gas assets, cash and a $10.9 million note receivable from National Energy Group in exchange for the remaining membership interest, which was designated the managing membership interest. Concurrently, in September, 2001, but effective as of May 2001, Holding LLC formed a 100% owned subsidiary, NEG Operating Company, LLC (“Operating LLC”) and contributed all of its oil and natural gas assets to Operating LLC.

In October 2003, AREP acquired all outstanding Senior Notes ($148.6 million principal amount at October 2003) and 5,584,044 shares of common stock of National Energy Group from entities affiliated with Mr. Icahn for aggregate consideration of approximately $148.1 million plus approximately $6.7 million of accrued interest on the Senior Notes. As a result of this transaction and the acquisition by AREP of additional shares of National Energy Group, AREP beneficially owned 50.01% of the outstanding stock of National Energy Group and had effective control. In June 2005, all of the stock of National Energy Group and the $148.6 million principal amount of Senior Notes owned by AREP was contributed to the Company and National Energy Group became a 50.01% owned subsidiary. The accrued, but unpaid interest on the $148.6 million principal amount of Senior Notes was retained by AREP. National Energy Group and the Senior Notes will be retained by AREP and not purchased by Riata Energy.

NEG Holding LLC — On June 30, 2005, AREP acquired the managing membership interest in Holding LLC from an affiliate of Mr. Icahn for an aggregate consideration of approximately $320 million. The membership interest acquired constituted all of the membership interests other than the membership interest already owned by National Energy Group. The combined financial statements include the consolidation of the acquired 50% membership interest in Holding LLC, together with the 50% membership interest owned by National Energy Group. The Period of Common Control for Holding LLC began on September 1, 2001, the initial funding of Holding LLC.

The Holding LLC Operating Agreement — Holding LLC is governed by an operating agreement effective May 12, 2001, which provides for management and control of Holding LLC by the Company and distributions to National Energy Group and the Company based on a prescribed order of distributions (the “Holding LLC Operating Agreement”).

Order of Distributions

Pursuant to the Holding LLC Operating Agreement, distributions from Holding LLC to National Energy Group and the Company shall be made in the following order:

1. Guaranteed payments (“Guaranteed Payments”) are to be paid to National Energy Group, calculated on an annual interest rate of 103/4% on the outstanding priority amount (“Priority Amount”). The Priority Amount includes all outstanding debt owed to the Company, including the amount of National Energy Group’s 103/4% Senior Notes. As of December 31, 2005, the Priority Amount was $148.6 million. The Guaranteed Payments will be made on a semi-annual basis.

2. The Priority Amount is to be paid to National Energy Group. Such payment is to occur by November 6, 2006.

3. An amount equal to the Priority Amount and all Guaranteed Payments paid to National Energy Group, plus any additional capital contributions made by the Company, less any distributions previously made by Holding LLC to the Company, is to be paid to the Company.

4. An amount equal to the aggregate annual interest (calculated at prime plus 1/2% on the sum of the Guaranteed Payments), plus any unpaid interest for prior years (calculated at prime plus 1/2% on the sum

F-67

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

of the Guaranteed Payments), less any distributions previously made by Holding LLC to the Company, is to be paid to NEG Oil & Gas.

5. After the above distributions have been made, any additional distributions will be made in accordance with the ratio of NEG Oil & Gas and National Energy Group’s respective capital accounts. (Capital accounts as defined in the Holding LLC Operating Agreement.)

Redemption Provision in the Holding LLC Operating Agreement

The Holding LLC Operating Agreement contains a provision that allows the managing member (NEG Oil & Gas), at any time, in its sole discretion, to redeem National Energy Group’s membership interest in Holding LLC at a price equal to the fair market value of such interest determined as if Holding LLC had sold all of its assets for fair market value and liquidated.

Prior to closing the Riata Energy purchase transaction, AREP will cause NEG Oil & Gas to exercise the redemption provision and dividend the 103/4% Senior Notes to AREP or enter into transactions with a similar effect such that NEG Oil & Gas will own 100% of Holding LLC and no longer own the 103/4% Senior Notes receivable from National Energy Group. AREP will indemnify NEG Oil & Gas for any costs associated with the exercise of the redemption provision. The Holding LLC Operating Agreement will be cancelled.

National Onshore LP — On November 14, 2002, National Onshore filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. National Onshore’s First Amended Joint Plan of Reorganization submitted by an entity affiliated with Mr. Icahn, as modified on July 8, 2003 (the “National Onshore Plan”), was confirmed by the Bankruptcy Court on August 14, 2003 effective August 28, 2003.

As of the effective date of the National Onshore Plan, an entity affiliated with Mr. Icahn owned 89% of the outstanding shares of National Onshore. During June 2004, the entity affiliated with Mr. Icahn acquired an additional 5.7% of the outstanding shares of National Onshore from certain other stockholders. During December 2004, National Onshore acquired the remaining 5.3% of the outstanding shares that were not owned by an affiliate of Mr. Icahn. The difference between the purchase price for both acquisitions and the minority interest liability was treated as a purchase price adjustment which reduced the full cost pool.

On December 6, 2004, AREP purchased from an affiliates of Mr. Icahn $27.5 million aggregate principal amount, or 100%, of the outstanding term notes issued by National Onshore (the “National Onshore Notes”). The purchase price was $28.2 million, which equals the principal amount of the National Onshore Notes plus accrued unpaid interest. The notes are payable annually in equal consecutive annual payments of $5.0 million, with the final installment due August 28, 2008. Interest is payable semi-annually in February and August at the rate of 10% per annum.

On April 6, 2005, AREP acquired 100% of the outstanding stock of National Onshore from entities owned by Mr. Icahn for an aggregate consideration of $180 million. The operations of National Onshore are considered to have been contributed to the Company on August 28, 2003 at a historical cost of approximately $116.3 million, representing the historical basis in the assets and liabilities of National Onshore of the entities owned by Mr. Icahn. AREP contributed the National Onshore Notes, but not the accrued and unpaid interest through the date of contribution, to the Company on June 30, 2005. The Period of Common Control of National Onshore began on August 28, 2003.

National Offshore LP — On July 16, 2002, National Offshore filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court of the Southern District of Texas. On November 3, 2004, the Bankruptcy Court entered a confirmation order for the National

F-68

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Offshore’s Plan of Reorganization (the “National Offshore Plan”). The National Offshore Plan became effective November 16, 2004 and National Offshore began operating as a reorganized entity. Upon emergence from bankruptcy, an entity controlled by Mr. Icahn owned 100% of the outstanding common stock of National Offshore.

On December 6, 2004, AREP purchased $38.0 million aggregate principal amount of term loans issued by National Offshore, which constituted 100% of the outstanding term loans of National Offshore from an affiliate of Mr. Icahn. On June 30, 2005, AREP contributed the National Offshore term loan, but not the accrued and unpaid interest through the date of contribution, to the Company.

On June 30, 2005, AREP acquired 100% of the equity of National Offshore from affiliates of Mr. Icahn for consideration valued at approximately $125.0 million. The Period of Common Control for National Offshore began on November 16, 2004 when National Offshore emerged from bankruptcy. The acquisition of National Offshore has been recorded effective December 31, 2004. The historical cost of approximately $91.6 million, representing the historical basis in the assets and liabilities of National Offshore of the affiliates of Mr. Icahn, was considered to have been contributed to the Company on December 31, 2004.

2.   Significant Accounting Policies

Basis of Presentation

The combined financial statements include the accounts of NEG Oil & Gas LLC and subsidiaries excluding National Energy Group and the 103/4% Senior Notes due from National Energy Group, but including National Energy Group’s 50% membership interest in NEG Holding LLC (the Company). All material intercompany accounts and transactions have been eliminated in the combined financial statements. Investments in subsidiaries over which the Company has significant influence, but not control, are reported using the equity method.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents may include demand deposits, short-term commercial paper, and/or money-market investments with maturities of three months or less when purchased. Cash in bank deposit accounts are generally maintained at high credit quality financial institutions and may exceed federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk of loss.

Oil and Natural Gas Properties

The Company utilizes the full cost method of accounting for its crude oil and natural gas properties. Under the full cost method, all productive and nonproductive costs incurred in connection with the acquisition, exploration, and development of crude oil and natural gas reserves are capitalized and amortized on the units-of-production method based upon total proved reserves. The Company elects to include its current unevaluated properties in the full cost pool. Conveyances of properties, including gains or losses on

F-69

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

abandonments of properties, are treated as adjustments to the cost of crude oil and natural gas properties, with no gain or loss recognized unless the sale or disposition represents a significant portion of the Company’s oil and natural gas reserves.

Under the full cost method, the net book value of oil and natural gas properties, less related deferred income taxes, may not exceed the estimated after-tax future net revenues from proved oil and natural gas properties, discounted at 10% per year (the ceiling limitation) plus the lower of cost or fair value of unevaluated properties, if any. In arriving at estimated future net revenues, estimated lease operating expenses, development costs, abandonment costs, certain production related ad-valorem taxes, and estimated corporate income taxes relating to oil and gas properties, if any, are deducted. In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant indefinitely, except for changes which are fixed and determinable by existing contracts. Such contracts may include derivative contracts that meet the accounting requirements and are documented, designated and accounted for as cash flow hedges. None of the Company’s derivatives contracts were accounted for as cash flow hedges. Consequently, prices were held constant indefinitely. The net book value is compared to the ceiling limitation on a quarterly basis. The excess, if any, of the net book value above the ceiling limitation is required to be written off as a non-cash expense. The Company did not incur a ceiling writedown in 2003, 2004 and 2005. There can be no assurance that there will not be writedowns in future periods under the full cost method of accounting as a result of sustained decreases in oil and natural gas prices or other factors.

The Company has capitalized internal costs of $0.6 million; $1.0 million and $1.1 million for the years ended December 31, 2003, 2004 and 2005, respectively, as cost of oil and natural gas properties. Oil and natural gas properties include cumulative capitalized internal costs of $2.4 million and $3.5 million as of December 31, 2004 and 2005. Such capitalized costs include salaries and related benefits of individuals directly involved in the Company’s acquisition, exploration, and development activities based on a percentage of their salaries. These costs do not include any costs related to production, general corporate overhead, or similar activities.

Costs associated with production and general corporate activities are expensed in the period incurred. Production costs are costs incurred to operate and maintain the Company’s wells and related equipment and include cost of labor, well service and repair, location maintenance, power and fuel, transportation, cost of product, property taxes, production and severance taxes and production related general and administrative costs.

The Company receives reimbursement for administrative and overhead expenses incurred on behalf of other working interest owners on properties the Company operates. Such reimbursements are recorded as reductions to general and administrative expenses to the extent of actual costs incurred. Reimbursements in excess of actual costs incurred, if any, are credited to the full cost pool to be recognized through lower cost amortization as production occurs. Historically, the Company has not received any administrative and overhead reimbursements in excess of costs incurred.

The Company is subject to extensive federal, state, and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a noncapital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated.

F-70

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

The Company’s operations are subject to all of the risks inherent in oil and natural gas exploration, drilling and production. These hazards can result in substantial losses to the Company due to personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage, or suspension of operations. The Company maintains insurance of various types customary in the industry to cover its operations and believes it is insured prudently against certain of these risks. In addition, the Company maintains operator’s extra expense coverage that provides coverage for the care, custody and control of wells drilled by the Company. The Company’s insurance does not cover every potential risk associated with the drilling and production of oil and natural gas. As a prudent operator, the Company does maintain levels of insurance customary in the industry to limit its financial exposure in the event of a substantial environmental claim resulting from sudden and accidental discharges. However, 100% coverage is not maintained. The occurrence of a significant adverse event, the risks of which are not fully covered by insurance, could have a material adverse effect on the Company’s financial condition and results of operations. Moreover, no assurance can be given that the Company will be able to maintain adequate insurance in the future at rates it considers reasonable. The Company believes that it operates in compliance with government regulations and in accordance with safety standards which meet or exceed industry standards.

Other Property and Equipment

Other property and equipment includes furniture, fixtures, and other equipment. Such assets are recorded at cost and are depreciated over their estimated useful lives using the straight-line method.

The Company’s investment in Longfellow Ranch Field includes an interest in a gas separation facility. This investment is included in the oil and natural gas properties and depleted over the life of the reserves.

Maintenance and repairs are charged against income when incurred; renewals and betterments, which extend the useful lives of property and equipment, are capitalized.

Income Taxes

NEG Oil & Gas and Holding LLC are taxed as partnerships under applicable federal and state laws. No income taxes have been provided on the income of NEG Oil & Gas since these taxes are the responsibility of the member. Income tax liabilities and assets reflect the obligations and assets of its consolidated entities.

National Onshore and National Offshore were organized as corporations and were subject to corporate income tax until their acquisition by NEG Oil & Gas. For income tax purposes, through the date of acquisition by NEG Oil & Gas, the taxable income or loss of National Onshore and its subsidiaries and National Offshore are included in the consolidated income tax return of the Starfire Holding Corp. (“Starfire”) controlled group. National Onshore and its subsidiaries and National Offshore entered into tax allocation agreements with Starfire, an entity owned by Mr. Icahn. The tax allocation agreements provide for payments of tax liabilities to Starfire, calculated as if National Onshore and its subsidiaries and National Offshore each filed a consolidated income tax return separate from the Starfire controlled group. Additionally, the agreements provide for payments from Starfire to National Onshore and its subsidiaries or National Offshore for any previously paid tax liabilities that are reduced as a result of subsequent determinations by any government authority, or as a result of any tax losses or credits that are allowed to be carried back to prior years.

The Company accounts for income tax assets and liabilities of its consolidated corporate entities in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax

F-71

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company maintains valuation allowances where it is determined more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax planning strategies.

Accounts Receivable

The Company sells crude oil and natural gas to various customers. In addition, the Company participates with other parties in the operation of crude oil and natural gas wells. Substantially all of the Company’s accounts receivable are due from either purchasers of crude oil and natural gas or participants in crude oil and natural gas wells for which the Company serves as the operator. Generally, operators of crude oil and natural gas properties have the right to offset future revenues against unpaid charges related to operated wells. Crude oil and natural gas sales are generally unsecured.

The allowance for doubtful accounts is an estimate of the losses in the Company’s accounts receivable. The Company periodically reviews the accounts receivable from customers for any collectability issues. An allowance for doubtful accounts is established based on reviews of individual customer accounts, recent loss experience, current economic conditions, and other pertinent factors. Accounts deemed uncollectible are charged to the allowance. Provisions for bad debts and recoveries on accounts previously charged-off are added to the allowance.

Accounts receivable allowance for bad debt totaled approximately $0.3 million at December 31, 2004 and $0.2 million at December 31, 2005. At December 31, 2004 and 2005, the carrying value of the Company’s accounts receivable approximates fair value.

Revenue Recognition

Revenues from the sale of natural gas and oil produced are recognized upon the passage of title, net of royalties.

Natural Gas Production Imbalances

The Company accounts for natural gas production imbalances using the sales method, whereby the Company recognizes revenue on all natural gas sold to its customers notwithstanding the fact that its ownership may be less than 100% of the natural gas sold. Liabilities are recorded by the Company for imbalances greater than the Company’s proportionate share of remaining estimated natural gas reserves. The Company has recorded a liability for gas balancing of $0.9 million at December 31, 2004 and $1.1 million at December 31, 2005.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. There were no differences between net earnings and total comprehensive income in 2003, 2004 and 2005.

F-72

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Derivatives

From time to time, the Company enters into various derivative instruments consisting principally of no cost collar options (the “Derivative Contracts”) to reduce its exposure to price risk in the spot market for natural gas and oil. The Company follows Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities, which was amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. These pronouncements established accounting and reporting standards for derivative instruments and for hedging activities, which generally require recognition of all derivatives as either assets or liabilities in the balance sheet at their fair value. The accounting for changes in fair value depends on the intended use of the derivative and its resulting designation. The Company elected not to designate these instruments as hedges for accounting purposes, accordingly the cash settlements and valuation gains and losses are included in oil and natural gas sales. The following summarizes the cash settlements and valuation gains and losses for the years ended December 31, 2003, 2004 and 2005 (amounts in thousands):

	2003		2004		2005
Realized loss — (net cash payments)	$	8,309	$	16,625	$	51,263
Unrealized loss		2,987		9,179		69,254
Loss on Derivative Contracts	$	11,296	$	25,804	$	120,517

The following is a summary of the Company’s Derivative Contracts as of December 31, 2005:

Type of Contract	Production Month		Volume per Month		Floor		Ceiling
No cost collars		Jan-Dec 2006		31,000 Bbls	$	41.65	$	45.25
No cost collars		Jan-Dec 2006		16,000 Bbls		41.75		45.40
No cost collars		Jan-Dec 2006		570,000 MmBtu		6.00		7.25
No cost collars		Jan-Dec 2006		120,000 MmBtu		6.00		7.28
No cost collars		Jan-Dec 2006		500,000 MmBtu		4.50		5.00
No cost collars		Jan-Dec 2006		46,000 Bbls		60.00		68.50
(The Company participates in a second ceiling at $84.50 on the 46,000 Bbls)
No cost collars		Jan-Dec 2007		30,000 Bbls		57.00		70.50
No cost collars		Jan-Dec 2007		30,000 Bbls		57.50		72.00
No cost collars		Jan-Dec 2007		930,000 MmBtu		8.00		10.23
No cost collars		Jan-Dec 2008		46,000 Bbls		55.00		69.00
No cost collars		Jan-Dec 2008		750,000 MmBtu		7.00		10.35

While the use of derivative contracts can limit the downside risk of adverse price movements, it may also limit future gains from favorable movements. The Company addresses market risk by selecting instruments whose value fluctuations correlate strongly with the underlying commodity. Credit risk related to derivative activities is managed by requiring minimum credit standards for counter parties, periodic settlements, and mark to market valuations.

A liability of $16.7 million (including a current liability of $8.9 million) and $85.9 million (including a current liability of $68.0 million) was recorded by the Company as of December 31, 2004 and 2005 respectively, in connection with these contracts. As of December 31, 2004, the Company had issued $11.0 million in letters of credit securing the Company’s derivative position. During 2005, the Company was required to provide security to counter parties for its Derivative Contracts in loss positions.

F-73

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

On December 22, 2005, concurrent with the execution of the Company’s new credit facility (see note 9) the Company novated all of Derivative Contracts with Shell Trading (US) outstanding as of that date with identical Derivative Contracts with Citicorp (USA), Inc. as the counter party. Under this transaction, no contracts were settled, Citicorp (USA) replaced Shell Trading (US) as the counter party and no gain or loss was recorded. Under the new credit facility, Derivatives Contracts with certain lenders under the credit facility do not require cash collateral or letters of credit and rank pari passu with the credit facility. All cash collateral and letters of credit have been released as of December 31, 2005.

Accounting for Asset Retirement Obligations

The Company accounts for its asset retirement obligations under Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations. SFAS 143 provides accounting requirements for costs associated with legal obligations to retire tangible, long-lived assets. Under SFAS 143, an asset retirement obligation is recorded at fair value in the period in which it is incurred by increasing the carrying amount of the related long-lived asset. In each subsequent period, the liability is accreted to its present value and the capitalized cost is depreciated over the useful life of the related asset.

The Company’s asset retirement obligation represents expected future costs to plug and abandon its wells, dismantle facilities, and reclamate sites at the end of the related assets’ useful lives.

Recent Accounting Pronouncements

On December 16, 2004, the FASB issued Statement 123 (revised 2004), “Share-Based Payment” that will require compensation costs related to share-based payment transactions (e.g., issuance of stock options and restricted stock) to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. Statement 123(R) replaces SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” For us, SFAS 123(R) is effective for the first reporting period beginning after June 15, 2005. Entities that use the fair-value-based method for either recognition or disclosure under SFAS 123 are required to apply SFAS 123(R)using a modified version of prospective application. Under this method, an entity records compensation expense for all awards it grants after the date of adoption. In addition, the entity is required to record compensation expense for the unvested portion of previously granted awards that remain outstanding at the date of adoption. In addition, entities may elect to adopt SFAS 123(R)using a modified retrospective method whereby previously issued financial statements are restated based on the expense previously calculated and reported in their pro forma footnote disclosures. The Company had no share based payments subject to this standard.

In December 2004, the FASB issued Statement 153, “Exchanges of Nonmonetary Assets”, an amendment of APB Opinion No. 29, to clarify the accounting for nonmonetary exchanges of similar productive assets. SFAS 153 provides a general exception from fair value measurement for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The Statement will be applied prospectively and is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not have any nonmonetary transactions for any period presented that this Statement would apply.

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — an Interpretation of FASB Statement No. 143 (“Interpretation”). This Interpretation clarifies

F-74

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Thus, the timing and (or) method of settlement may be conditional on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This Interpretation is effective for the Company’s year ended December 31, 2005. The adoption of this Interpretation did not impact the Company’s combined financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS No. 154”). SFAS No. 154 requires retrospective application to prior period financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS No. 154 will become effective for the Company’s fiscal year beginning January 1, 2006. The impact of SFAS No. 154 will depend on the nature and extent of any voluntary accounting changes and correction of errors after the effective date, but management does not currently expect SFAS No. 154 to have a material impact on the Company’s combined financial position, results of operations or cash flows.

On February 16, 2006, the FASB issued Statement 155, “Accounting for Certain Hybrid Instruments — an amendment of FASB Statements No. 133 and 140.” The statement amends Statement 133 to permit fair value measurement for certain hybrid financial instruments that contain an embedded derivative, provides additional guidance on the applicability of Statement 133 and 140 to certain financial instruments and subordinated concentrations of credit risk. The new standard is effective for the first fiscal year that begins after September 15, 2006 (January 1, 2007 for the Company). We have no hybrid instruments subject to this standard.

3.   Management Agreements

The management and operation of Operating LLC is being undertaken by National Energy Group pursuant to the Management Agreement (the “Operating LLC Management Agreement”) which Operating LLC entered into with National Energy Group. However, neither National Energy Group’s officers nor directors control the strategic direction of Operating LLC’s oil and natural gas business, including oil and natural gas drilling and capital investments, which are controlled by the managing member of Holding LLC (NEG Oil & Gas). The Operating LLC management agreement provides that National Energy Group will manage Operating LLC’s oil and natural gas assets and business until the earlier of November 1, 2006, or such time as Operating LLC no longer owns any of the managed oil and natural gas properties. National Energy Group’s employees conduct the day-to-day operations of Operating LLC’s oil and natural gas business, and all costs and expenses incurred in the operation of the oil and natural gas properties are borne by Operating LLC, although the Operating LLC Management Agreement provides that the salary of National Energy Group’s Chief Executive Officer shall be 70% attributable to the managed oil and natural gas properties, and the salaries of each of the General Counsel and Chief Financial Officer shall be 20% attributable to the managed oil and natural gas properties. In exchange for National Energy Group’s management services, Operating LLC pays National Energy Group a management fee equal to 115% of the actual direct and indirect administrative and reasonable overhead costs that National Energy Group incurs in operating the oil and natural gas

F-75

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

properties. National Energy Group or Operating LLC may seek to change the management fee to within the range of 110%-115% as such change is deemed warranted. However, both have agreed to consult with each other to ensure that such administrative and reasonable overhead costs attributable to the managed properties are properly reflected in the management fee that is paid. In addition, Operating LLC has agreed to indemnify National Energy Group to the extent National Energy Group incurs any liabilities in connection with National Energy Group’s operation of the assets and properties of Operating LLC, except to the extent of National Energy Group’s gross negligence or misconduct. Operating LLC incurred $6.6 million, $6.2 million and $5.6 million in general and administrative expenses for the years ended December 31, 2003, 2004 and 2005, respectively under this agreement.

On August 28, 2003, National Energy Group entered into a management agreement to manage the oil and natural gas business of National Onshore. The National Onshore management agreement was entered in connection with a plan of reorganization for National Onshore proposed by Thornwood Associates LP, an entity affiliated with Carl C. Icahn (the “National Onshore Plan”). On August 28, 2003, the United States Bankruptcy Court, Southern District of Texas, issued an order confirming the National Onshore Plan. NEG Oil & Gas owns all of the reorganized National Onshore, which is engaged in the exploration, production and transmission of oil and natural gas, primarily in South Texas, including the Eagle Bay field in Galveston Bay, Texas and the Southwest Bonus field located in Wharton County, Texas. Bob G. Alexander and Philip D. Devlin, National Energy Group’s President and CEO, and National Energy Group’s Vice President, Secretary and General Counsel, respectively, have been appointed to the reorganized National Onshore Board of Directors and act as the two principal officers of National Onshore and its subsidiaries, Galveston Bay Pipeline Corporation and Galveston Bay Processing Corporation. Randall D. Cooley, National Energy Group’s Vice President and CFO, has been appointed Treasurer of reorganized National Onshore and its subsidiaries.

The National Onshore Management Agreement provides that National Energy Group shall be responsible for and have authority with respect to all of the day-to-day management of National Onshore business, but will not function as a Disbursing Agent as such term is defined in the National Onshore Plan. As consideration for National Energy Group services in managing the National Onshore business, National Energy Group receives a monthly fee of $0.3 million. The National Onshore Management Agreement is terminable (i) upon 30 days prior written notice by National Onshore, (ii) upon 90 days prior written notice by National Energy Group, (iii) upon 30 days following any day where High River designees no longer constitute the National Onshore Board of Directors, unless otherwise waived by the newly-constituted Board of Directors of National Onshore, or (iv) as otherwise determined by the Bankruptcy Court. The Company recorded $1.4 million, $4.7 million and $4.8 million in general and administrative expenses for the years ended December 31, 2003, and 2004 and 2005, respectively, under this agreement.

On November 3, 2004, the United States Bankruptcy Court for the Southern District of Texas issued an order effective November 16, 2004 confirming a plan of reorganization for National Offshore (“National Offshore Plan”). In connection with the National Offshore Plan, National Energy Group entered into a Management Agreement with National Offshore (the “National Offshore Management Agreement) pursuant to the Bankruptcy Court’s order confirming the effective date of the National Offshore Plan. NEG Oil & Gas owns all of the reorganized National Offshore. Mr. Bob G. Alexander, National Energy Group’s President and CEO, has been appointed to the reorganized National Offshore Board of Directors and acts as the reorganized National Offshore’s President. Mr. Philip D. Devlin, National Energy Group’s Vice President, General Counsel and Secretary, has been appointed to serve in the same capacities for National Offshore. Mr. Randall D. Cooley, National Energy Group’s Vice President and CFO, has been appointed as Treasurer of the reorganized National Offshore. In exchange for management services, National Energy Group receives a monthly fee equal to 115% of the actual direct and indirect administrative overhead costs that are incurred in operating and administering the National Offshore oil and natural gas properties. The Company recorded $0.7 million and $4.2 million in

F-76

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

general and administrative expenses for the years ended December 31, 2004 and 2005, respectively, under this agreement.

Substantially concurrent with the Riata Energy purchase transaction the management agreements will be terminated.

4.   Contributions of National Onshore and National Offshore

National Onshore — On August 28, 2003, the effective date of the confirmation of National Onshore’s bankruptcy plan, an entity affiliated with Mr. Icahn owned 89% of the outstanding shares of National Onshore. The assets and liabilities of National Onshore were considered to have been contributed to the Company on that date at the historical cost of the entity affiliated with Mr. Icahn as follows (amounts in thousands).

Assets contributed
Cash and cash equivalents	$	15,312
Accounts receivable		11,236
Drilling prepayments		505
Other current assets		1,318
Oil and natural gas properties		186,288
Other assets		226
Total assets		214,885
Liabilities assumed
Accounts payable		3,761
Current maturities of long-term debt		6,038
Accrued liabilities		10,158
Accounts payable — other		27
Long-term debt, net of current maturities		4,266
Note payable to affiliate — net of current maturities		27,500
Production payments — net of current maturities		5,617
Other liabilities		2,096
Income tax liability		27,926
Asset retirement obligation		3,381
Minority interest liability		7,862
Total liabilities assumed		98,632
Net assets contributed	$	116,253

During June 2004, the entity affiliated with Mr. Icahn acquired an additional 5.7% of the outstanding shares of National Onshore from certain other stockholders at a cost of approximately $2.2 million. The $2.2 million purchase is recorded as a capital contribution from member in 2004. In December 2004, the remaining 5.3% of National Onshore shares not owned by the entity affiliated with Mr. Icahn was purchased by National Onshore at a cost of $4.1 million. The share repurchase is reflected as a purchase of membership interest in 2004. The difference between the purchase price for both acquisitions and the minority interest liability was treated as an adjustment to the historical cost basis which reduced the full cost pool.

F-77

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

National Offshore — Effective December 31, 2004, the Period of Common Control of National Offshore, the following assets and liabilities were considered to have been contributed to the Company (amounts in thousands):

Assets contributed
Cash and cash equivalents	$	23,753
Accounts receivable		10,482
Drilling prepayments		2,601
Deferred tax assets, net		1,943
Other		2,051
Oil and natural gas properties		128,673
Restricted deposits		23,519
Deferred taxes		592
Total assets		193,614
Liabilities assumed
Accounts payable		11,235
Accounts payable — affiliate		555
Current portion of note payable to affiliate		5,429
Prepayments from partners		652
Accrued interest — affiliates		288
Income tax payable — affiliate		156
Accounts payable — revenue		716
Accounts payable — other		10
Derivative financial instruments		903
Note payable to affiliate — net of current maturities		32,571
Asset retirement obligation		49,538
Total liabilities assumed		102,053
Net assets contributed	$	91,561

5.   Acquisitions

In March 2005, the Company purchased an additional interest in Longfellow Ranch for $31.9 million.

In October 2005, the Company executed a purchase and sale agreement to acquire Minden Field assets near its existing production properties in East Texas. This acquisition consists of 3,500 acres with 17 producing wells and numerous drilling opportunities. The purchase price was approximately $85.0 million, which was subsequently reduced to $82.3 million after purchase price adjustments, and the transaction closed on November 8, 2005.

6.   Sale of West Delta Properties

In March 2005, the Company sold its rights and interest in West Delta 52, 54, and 58 to a third party in exchange for the assumption of existing future asset retirement obligations on the properties and a cash payment of $0.5 million. The estimated fair value of the asset retirement obligations assumed by the purchaser

F-78

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

was approximately $16.8 million. In addition, the Company transferred to the purchaser approximately $4.7 million in an escrow account that the Company had funded relating to the asset retirement obligations on the properties. The full cost pool was reduced by approximately $11.6 million and no gain or loss was recognized on the transaction.

7.   Investments/Note Receivable

In January 2002, the Company acquired stock valued at $49.95 million, which was sold at a gain of $8.7 million in February 2002. In an unrelated transaction, the Company completed a short sale of stock in November 2002 for $10.4 million. At December 31, 2002, this short sale position remained open and the mark-to-market value of such stock resulted in an unrealized loss of $0.3 million. In January 2003, the Company settled this position and recorded a loss of $1.0 million on the transaction.

In October 2003, the Company committed to an investment of $6.0 million in PetroSource Energy Company, LLC (“PetroSource”). The Company’s commitment was to acquire 24.8% of the outstanding stock for a price of $3.0 million and to advance $3.0 million as a subordinated loan bearing 6% interest due in six years. The Company initially purchased $1.8 million in stock and funded $1.8 million of the loan in October 2003. In February 2004, the Company purchased an additional $1.2 million of stock and funded the remaining $1.2 million loan commitment. PetroSource is in the business of selling CO(2) and also owns pipelines and compressor stations for delivery purposes. During 2004, PetroSource sold additional equity shares which reduced the Company’s ownership to 20.63%. The Company recorded losses of $0.1 million, $0.5 million, and $1.1 million in 2003, 2004 and 2005, respectively, as a result of accounting for the PetroSource investment under the equity method. During 2005, the Company invested an additional $0.5 million in PetroSource stock. In December 2005, the Company sold its entire investment in PetroSource, including the subordinate loan, for total proceeds of $10.5 million and recorded a gain of $5.5 million.

In April 2002, the Company entered into a revolving credit commitment to extend advances to an unrelated third party. Under the terms of the revolving credit arrangement, the Company agreed to make advances from time to time, as requested by the unrelated third party and subject to certain limitations, in an amount up to $5.0 million. Advances made under the revolving credit commitment bear interest at prime rate plus 2% and are collateralized by inventory and receivables. As of December 31, 2004, the Company determined that a portion of the total outstanding advances of $1.3 million had been impaired and recorded a loss of $0.8 million. As of December 31, 2005, the Company determined that the majority of the total outstanding advance of $1.27 million had been impaired and recorded an additional loss of $0.5 million bringing the total allowance to $1.26 million. The loss is recorded as an impairment of note receivable and is included in general and administrative expenses.

8.   Restricted Deposits

In connection with the National Offshore transaction, the Company acquired restricted deposits aggregating $23.5 million. The restricted deposits represent bank trust and escrow accounts required to be set up by surety bond underwriters and certain former owners of National Offshore’s offshore properties. In accordance with requirements of the U.S. Department of Interior’s Minerals Management Service (“MMS”), National Offshore was required to put in place surety bonds and/or escrow agreements to provide satisfaction of its eventual responsibility to plug and abandon wells and remove structures when certain offshore fields are no longer in use. As part of National Offshore’s agreement with the surety bond underwriter or the former owners of the particular fields, bank trust and escrow accounts were set up and funded based on the terms of the escrow agreements. Certain amounts are required to be paid upon receipt of proceeds from production.

F-79

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

The restricted deposits include the following:

1. A $4.2 million escrow account for the East Breaks 109 and 110 fields set up in favor of the surety bond underwriter who provides a surety bond to the MMS. The escrow account is fully funded as of December 31, 2005.

2. A $6.9 million escrow account for the East Breaks 165 and 209 fields set up in favor of the surety bond underwriter who provides a surety bond to the former owners of the fields and the MMS. The escrow account is fully funded as of December 31, 2005.

3. A $4.1 million escrow account set up in favor of a major oil company. The Company is required to make additional deposits to the escrow account in an amount equal to 10% of the net cash flow (as defined in the escrow agreement) from the properties that were acquired from the major oil company.

4. A $3.8 million escrow account that was required to be set up by the bankruptcy settlement proceedings of National Offshore. The Company is required to make monthly deposits based on cash flows from certain wells, as defined in the agreement.

5. A $5.3 million escrow account required to be set up by the MMS relating to East Breaks properties. The Company is required to make quarterly deposits to the escrow account of $0.8 million. Additionally, for some of the East Break properties, the Company will be required to deposit additional funds in the East Break escrow accounts, representing the difference between the required escrow deposit under the surety bond and actual escrow deposit balance at various points in time in the future. Aggregate payments to the East Breaks escrow accounts are as follows (in thousands):

Year Ended December 31,
2006	$	3,200
2007		6,100
2008		3,200
2009		3,200
2010		5,000
Thereafter		4,000
	$	24,700

9.   Debt

The Company’s debt consists of credit facilities, notes payable, note payable to affiliates and senior notes payable to affiliates.

Credit Facilities

The Operating LLC Credit Facility

On December 29, 2003, Holding LLC entered into a Credit Agreement (the “Mizuho Facility”) with certain commercial lending institutions, including Mizuho Corporate Bank, Ltd. as the Administrative Agent and the Bank of Texas, N.A. and the Bank of Nova Scotia as Co-Agents.

The Credit Agreement provided for a loan commitment amount of up to $145.0 million and a letter of credit commitment of up to $15 million (provided, the outstanding aggregate amount of the unpaid borrowings, plus the aggregate undrawn face amount of all outstanding letters of credit shall not exceed the borrowing base under the Credit Agreement). The Credit Agreement provided further that the amount available to the

F-80

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Operating LLC at any time was subject to certain restrictions, covenants, conditions and changes in the borrowing base calculation. In partial consideration of the loan commitment amount, Operating LLC has pledged a continuing security interest in all of its oil and natural gas properties and its equipment, inventory, contracts, fixtures and proceeds related to its oil and natural gas business.

At Operating LLC’s option, interest on borrowings under the Credit Agreement bear interest at a rate based upon either the prime rate or the LIBOR rate plus, in each case, an applicable margin that, in the case of prime rate loans, can fluctuate from 0.75% to 2.50% per annum. Fluctuations in the applicable interest rate margins are based upon Operating LLC’s total usage of the amount of credit available under the Credit Agreement, with the applicable margins increasing as Operating LLC’s total usage of the amount of the credit available under the Credit Agreement increases.

At the closing of the Credit Agreement, Operating LLC borrowed $43.8 million to repay $42.9 million owed by Operating LLC to an affiliate of Mr. Icahn under the secured loan arrangement which was then terminated and to pay administrative fees in connection with this borrowing. Approximately $1.4 million of loan issuance costs was capitalized in connection with the closing of this transaction.

The Credit Agreement required, among other things, semiannual engineering reports covering oil and natural gas properties, and maintenance of certain financial ratios, including the maintenance of a minimum interest coverage, a current ratio, and a minimum tangible net worth.

NEG Oil & Gas LLC Senior Secured Revolving Credit Facility

On December 22, 2005, the Company entered into a credit agreement, dated as of December 20, 2005, with Citicorp USA, Inc., as administrative agent, Bear Stearns Corporate Lending Inc., as syndication agent, and other lender parties thereto (the “NEG Credit Facility”). The NEG Credit Facility is secured by substantially all the assets of the Company and its subsidiaries, has a five-year term and permits payments and re-borrowings, subject to a borrowing base calculation based on the proved oil and gas reserves of the Company and its subsidiaries. Under the NEG Credit Facility, the Company will be permitted to borrow up to $500 million, and the initial borrowing base is set at $335 million. The Company used a portion of the initial $300 million funding under the NEG Credit Facility to purchase the Mizuho Facility. On a combined basis, the Mizuho Facility is no longer outstanding.

In consideration of each lender’s commitment to make loans under the NEG Credit Facility, the Company is required to pay a quarterly commitment fee ranging from 0.375% to 0.50% of the available borrowing base. Commitment fees are based upon the facility utilization levels.

At the Company’s option, borrowings under the NEG Credit Facility bear interest at Base Rate or Euro Dollar Rate, as defined in the borrowing agreement, plus, in each case, an applicable margin that, in the case of Base Rate loans, can fluctuate from 0.00% to 0.75% per annum, and, in the case of Euro Dollar loans, can fluctuate from 1.00% to 1.75% per annum. Fluctuations in the applicable interest rate margins are based upon the Company’s total usage of the amount of credit available under the NEG Credit Facility, with the applicable margins increasing as the Company’s total usage of the amount of the credit available under the NEG Credit Facility increases. Base Rate and Euro Dollar Rate fluctuate based upon Prime rate or LIBOR, respectively. At December 31, 2005, the interest rate on the outstanding amount under the credit facility was 6.44% and $14.6 million was available for future borrowings.

NEG Credit Facility agreement requires, among other things, semiannual engineering reports covering oil and natural gas properties, limitation on distributions, and maintenance of certain financial ratios, including maintenance of leverage ratio, current ratio and a minimum tangible net worth. The Company was in compliance with all covenants at December 31, 2005.

F-81

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

In addition to purchasing the Mizuho Facility, the Company used the proceeds from the NEG Credit Facility to (1) repay a loan of approximately $85 million by AREP used to purchase properties in the Minden Field; (2) pay a distribution of $78.0 million, and (3) pay transaction costs.

Notes Payable

Notes payable consist of the following (amounts in thousands):

	2004			2005
Notes payable to various prior creditors of National Onshore in settlement of bankruptcy claims. The notes are generally payable over a 30 month period with a stated interest rate of 6%; however, the notes have been discounted to an effective rate of 10%	$	4,320		$	2,503
Note payable — asset acquisition		83			—
Total		4,403			2,503
Less Current maturities		(1,761	)		(2,503	)
	$	2,642		$	—

Notes Payable to Affiliates

Notes payable to affiliates consist of the following (amounts in thousands):

	2004			2005
In connection with the National Onshore plan of reorganization, on August 28, 2003, National Onshore entered into a note agreement with an affiliate of Mr. Icahn. The note is a term loan in the amount of $32.5 million and bears interest at a rate of 10% per annum. Interest is payable semi-annually. Annual principal payments in the amount of $5 million are due on the first through fourth anniversary dates of the note with the final principal payment of $12.5 million due on the fifth anniversary date. The note is secured by substantially all of the assets of National Onshore. On December 6, 2004, AREP purchased the note from the affiliate of Mr. Icahn and on June 30, 2005, contributed the note, excluding accrued and unpaid interest, to the Company	$	27,500		$	—
Note payable to an affiliate of Mr. Icahn arising from the bankruptcy plan of National Offshore. The note bears interest at Wall Street Journal LIBOR plus 4% (6.35% at December 31, 2004) and is payable in quarterly principal installments of $1.4 million plus interest commencing March 31, 2005. The loan was secured by substantially all of the assets of National Offshore. On December 6, 2004, the note was purchased by AREP from an affiliate of Mr. Icahn and on June 30, 2005, the note, excluding accrued and unpaid interest was contributed to the Company		38,000			—
Total		65,500			—
Less Current maturities		(10,429	)		—
	$	55,071		$	—

During 2005, the Company borrowed additional $25.0 million from AREP and repaid $1.4 million. The remaining outstanding balance of $23.6 million, excluding accrued and unpaid interest, along with notes payable detailed above, were contributed to the Company.

F-82

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Advance from Affiliate

During 2005, AREP made unsecured non-interest bearing advance of $49.8 million, payable on demand, to fund their drilling programs as well as to fund derivative contract deposits, of which $39.8 million were outstanding at December 31, 2005. The outstanding balance was repaid in January 2006.

Deferred Loan Costs

The Company capitalized approximately $1.5 million in external direct costs associated with the Credit Agreement which was being amortized (approximately $0.05 million per month) as deferred loan costs. Upon execution of the NEG Credit Facility, the Company expensed the unamortized deferred loan cost of $0.4 million relating to the Mizuho Facility in December 2005.

Additionally, the Company capitalized $4.7 million in external direct costs associated with the NEG Credit Facility executed on December 22, 2005. The deferred costs will be amortized over the term of the facility as additional interest expense.

Five Year Maturities

Aggregate annual maturities of debt for fiscal years 2006 to 2010 are as follows: 2006 — $42.3 million; 2007 — $0 million; 2008 — $0; 2009 — $0; 2010 — $300.0 million.

10.   Income Taxes

National Onshore and National Offshore were organized as corporations until their respective acquisitions by NEG Oil & Gas LLC, and were subject to corporate taxes up until the date of acquisition as part of a tax sharing agreement with the Starfire, Inc. consolidated group. The Company accounts for income taxes of National Onshore and National Offshore according to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

The (provision) benefit for U.S. federal income taxes attributable to continuing operations is as follows (amounts in thousands):

	Year Ended December 31,
	2003			2004			2005
Current	$	(2,338	)	$	(404	)	$	(3	)
Deferred		14,953			144			2,935
	$	12,615		$	(260	)	$	2,932

F-83

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

The tax effect of significant differences representing net deferred tax assets (the difference between financial statement carrying values and the tax basis of assets and liabilities) for the Company is as follows (in thousands):

	December 31, 2004
	National			National
	Onshore			Offshore
Deferred tax assets related to:
Net operating loss carryforwards		21,434			14,917
AMT and other credit carryforwards		1,288			610
Property, plant & equipment undeveloped properties		64,945			—
Other, net		2,217			8,289
		89,884			23,816
Less valuation allowance		(49,793	)		—
Subtotal		40,091			23,816
Less current portion		—			(1,943	)
Deferred tax assets	$	40,091		$	21,873
Deferred tax liabilities related to:
Property, plant & equipment developed properties	$	(52,890	)	$	(21,281	)
Deferred tax liabilities		(52,890	)		(21,281	)
Net deferred tax asset/(liabilities)	$	(12,799	)	$	592

At December 31, 2004, after the filing of prior years amended returns, TransTexas Gas Corporation (“TransTexas”) had net operating loss carryforwards of approximately $150.0 million, which begin expiring in 2020. On April 6, 2005, TransTexas merged into National Onshore, a limited partnership, resulting in the treatment of an asset sale for tax purposes and subsequent liquidation into its parent company. Pursuant to the asset sale, TransTexas utilized approximately $75.0 million of its net operating loss carryforwards on its final corporate tax return and the remainder transferred to its parent company in the liquidation. Additionally, upon the TransTexas merger into National Onshore, the net deferred tax liabilities of approximately $9.9 million were credited to equity, in accordance with SFAS 109.

At December 31, 2004, Panaco, Inc. (“Panaco”) had net operating loss carryforwards available for federal income tax purposes of approximately $39.2 million, which begin expiring in 2019. On June 30, 2005, pursuant to the Panaco purchase agreement, Panaco merged into National Offshore LP. The purchase was a non-taxable transaction resulting in the net operating loss carryforwards remaining with the former Panaco stockholders. Additionally, in accordance with SFAS 109, for financial reporting purposes, the net deferred tax assets of approximately $2.6 million were debited to equity.

F-84

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

The reconciliation of income taxes computed at the U.S. federal statutory tax rates to the provision (benefit) for income taxes on income from continuing operations is as follows:

	Year Ended December 31,
	2003			2004			2005
Federal statutory rate		35.0	%		35.0	%		35.0	%
Income not subject to taxation		(39.0	)%		(31.2	)%		(44.0	)%
Valuation allowance on deferred tax assets		(45.3	)%		(3.0	)%		—
Other		0.8	%		—			(0.2	)%
		(48.5	)%		0.8	%		(9.2	)%

11.   Commitments and Contingencies

During 2000 and 2001 National Energy Group entered into several hedge contracts with Enron North America Corp (“Enron NAC”). In 2001 Enron Corporation and many Enron Corporation affiliates and subsidiaries, including Enron NAC filed for protection under Chapter 11 of the US bankruptcy code. The derivative contracts were subsequently contributed to Holding LLC and then to Operating LLC. Operating LLC has filed a claim for damages in the Enron NAC bankruptcy proceeding and our designee has been appointed as a representative to the official committee of unsecured creditors. The Company’s claim is unsecured. During 2005, we received $0.2 million in partial settlement of our claims which was recorded in interest income and other. In April 2006, we received an additional payment of $1.0 million and we should receive additional distributions from the Enron bankruptcy proceeding in accordance with its plan of reorganization. We will record such additional payments, if any, when the amounts are known.

Other than routine litigation incidental to its business operations which are not deemed by the Company to be material, there are no additional legal proceedings in which the Company, is a defendant.

Environmental Matters

The Company’s operations and properties are subject to extensive federal, state, and local laws and regulations relating to the generation, storage, handling, emission, transportation, and discharge of materials into the environment. Permits are required for various of the Company’s operations, and these permits are subject to revocation, modification, and renewal by issuing authorities. The Company’s operations are also subject to federal, state, and local laws and regulations that impose liability for the cleanup or remediation of property which has been contaminated by the discharge or release of hazardous materials or wastes into the environment. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines or injunctions, or both. The Company believes that it is in material compliance with applicable environmental laws and regulations. Noncompliance with such laws and regulations could give rise to compliance costs and administrative penalties. Management does not anticipate that the Company will be required in the near future to expend amounts that are material to the financial condition or operations of the Company by reason of environmental laws and regulations, but because such laws and regulations are frequently changed and, as a result, may impose increasingly strict requirements, the Company is unable to predict the ultimate cost of complying with such laws and regulations.

12.   Asset Retirement Obligation

In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). The Company adopted SFAS 143 on January 1, 2003 and recorded an abandonment obligation of $3.0 million,

F-85

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

increased oil and natural gas properties $4.9 million and recorded a cumulative transition gain of $1.9 million. SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. It also requires the Company to record a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The ARO assets are recorded on the balance sheet as part of the Company’s full cost pool and are included in the amortization base for the purposes of calculating depreciation, depletion and amortization expense. For the purpose of calculating the ceiling test, the future cash outflows associated with settling the ARO liability are excluded from the computation of the discounted present value of estimated future net revenues.

The following is a rollforward of the abandonment obligation as of December 31, 2004 and 2005 (amounts in thousands).

Balance as of January 1, 2004	$	6,745
Add: Accretion		593
Drilling additions		216
Panaco		49,538
Less: Revisions		(251	)
Settlements		(24	)
Dispositions		(293	)
Balance as of December 31, 2004	$	56,524
Add: Accretion	$	3,019
Drilling additions		2,067
Less: Revisions		(2,813	)
Settlements		(431	)
Dispositions		(17,138	)
Balance as of December 31, 2005	$	41,228

13.   Severance tax refund

During 2002, the Company applied for “high-cost/tight-gas formation” designation from the Railroad Commission of Texas for a portion of the Company’s South Texas production. For qualifying wells, “high-cost/tight-gas formation” production is either exempt from tax or taxed at a reduced rate until certain capital costs are recovered. The designation was approved in 2004 and was retroactive to the date of initial production. During 2004, the Company recognized a gain of approximately $4.5 million for the refund of prior period severance taxes, for which the Company’s severance tax payments were reduced by approximately $3.2 million. At December 31, 2004, accounts receivable includes $1.3 million in prior period severance tax refunds all of which was realized as reductions in severance tax payments in 2005.

F-86

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

14.   Crude Oil and Natural Gas Producing Activities

Costs incurred in connection with the exploration, development, and exploitation of the Company’s crude oil and natural gas properties for the years ended December 31, 2003, 2004 and 2005 are as follows (amounts in thousands except depletion rate per Mcfe):

	Year Ended December 31,
	2003		2004		2005
Acquisition of properties	$	—	$	—	$	114,244
Properties contributed by member		186,289		128,673		—
Exploration costs		6,950		62,209		75,357
Development costs		34,012		52,765		124,305
Depletion rate per Mcfe	$	1.85	$	2.11	$	2.33

As of December 31, 2004 and 2005, all capitalized costs are included in the full cost pool and are subject to amortization.

Revenues from individual purchasers that exceed 10% of crude oil and natural gas sales are as follows:

	Year Ended December 31,
	2003		2004		2005
Plains All American	$	15,667	$	19,857	$	41,345
Duke Energy		10,572		33,958		44,850
Kinder Morgan		5,787		18,005		14,402
Crosstex Energy Services, Inc.		9,228		5,081		22,790
Riata Energy, Inc.		30,672		29,846		52,300
Seminole Energy Services		7,216		19,568		27,315
Louis Dreyfus		—		—		26,790

15.   Supplementary Crude Oil and Natural Gas Reserve Information (Unaudited)

The revenues generated by the Company’s operations are highly dependent upon the prices of, and demand for, oil and natural gas. The price received by the Company for its oil and natural gas production depends on numerous factors beyond the Company’s control, including seasonality, the condition of the U.S. economy, foreign imports, political conditions in other oil and natural gas producing countries, the actions of the Organization of Petroleum Exporting Countries and domestic governmental regulations, legislation and policies.

The Company has made ordinary course capital expenditures for the development and exploitation of oil and natural gas reserves, subject to economic conditions. The Company has interests in crude oil and natural gas properties that are principally located onshore in Texas, Louisiana, Oklahoma, Arkansas, Gulf Coast and offshore in the Gulf of Mexico. The Company does not own or lease any crude oil and natural gas properties outside the United States.

In 2003 and 2004, estimates of the Company’s reserves and future net revenues were prepared by Netherland, Sewell & Associates, Inc., Prator Bett, LLC and DeGolyer and MacNaughton. In 2005, estimates of the Company’s reserves and future net revenues were prepared by Netherland, Sewell & Associates, Inc. and DeGolyer and MacNaughton. Estimated proved net recoverable reserves as shown below include only those quantities that can be expected to be recoverable at prices and costs in effect at the balance sheet dates under existing regulatory practices and with conventional equipment and operating methods.

F-87

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

In 2003, extension and discovery reserve additions were largely impacted by the successful drilling on the Longfellow Ranch. Drilling on the Longfellow Ranch in 2003 extended field producing boundaries as well as identifying deeper Caballos and Devonian reservoirs not previously captured as proved reserves. The drilling program in 2004 had continued success in the Longfellow Ranch Area extending field boundaries along with the discovery of two new fields. The East Texas Region in 2004 extended producing boundaries adding proved reserves for the Cotton Valley Reservoir. A new field discovery in the Gulf Coast area resulted in new reserves along with three extension wells. In 2005, continued drilling in the West Texas Region, Longfellow Ranch, and the East Texas Region, Cotton Valley development resulted in 86% of the added extension and discovery gas reserves. Changes in reserves associated with development drilling have been accounted for in revisions of previous estimates.

Proved developed reserves represent only those reserves expected to be recovered through existing wells. Proved undeveloped reserves include those reserves expected to be recovered from new wells on undrilled acreage or from existing wells on which a relatively major expenditure is required for recompletion.

Net quantities of proved developed and undeveloped reserves of natural gas and crude oil, including condensate and natural gas liquids, are summarized as follows:

	Crude Oil			Natural Gas
	(MBbl)			( MMcf)
December 31, 2002		5,209			122,567
Reserves of TransTexas contributed by member		1,120			41,441
Sales of reserves in place		(25	)		(744	)
Extensions and discoveries		494			61,638
Revisions of previous estimates		2,344			(2,729	)
Production		(976	)		(15,913	)
December 31, 2003		8,166			206,260
Reserves of Panaco contributed by member		5,204			25,982
Sales of reserves in place		(16	)		(344	)
Extensions and discoveries		524			50,226
Revisions of previous estimates		204			9,810
Production		(1,484	)		(18,895	)
December 31, 2004		12,598			273,039
Purchase of reserves in place		483			94,937
Sales of reserves in place		(625	)		(7,426	)
Extensions and discoveries		743			79,592
Revisions of previous estimates		495			17,015
Production		(1,790	)		(28,107	)
December 31, 2005		11,904			429,050
Proved developed reserves:
December 31, 2003		6,852			125,765
December 31, 2004		8,955			151,452
December 31, 2005		8,340			200,520

F-88

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Reservoir engineering is a subjective process of estimating the volumes of underground accumulations of oil and natural gas which cannot be measured precisely. The accuracy of any reserve estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Reserve estimates prepared by other engineers might differ from the estimates contained herein. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Future prices received for the sale of oil and natural gas may be different from those used in preparing these reports. The amounts and timing of future operating and development costs may also differ from those used. Accordingly, reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered.

The following is a summary of a standardized measure of discounted net cash flows related to the Company’s proved crude oil and natural gas reserves. For these calculations, estimated future cash flows from estimated future production of proved reserves were computed using crude oil and natural gas prices as of the end of each period presented. Future development, production and net asset retirement obligations attributable to the proved reserves were estimated assuming that existing conditions would continue over the economic lives of the individual leases and costs were not escalated for the future.

The Company cautions against using the following data to determine the fair value of its crude oil and natural gas properties. To obtain the best estimate of fair value of the crude oil and natural gas properties, forecasts of future economic conditions, varying discount rates, and consideration of other than proved reserves would have to be incorporated into the calculation. In addition, there are significant uncertainties inherent in estimating quantities of proved reserves and in projecting rates of production that impair the usefulness of the data.

The standardized measure of discounted future net cash flows relating to proved crude oil and natural gas reserves are summarized as follows (amounts in thousands):

	December 31,
	2004			2005
Future cash inflows	$	2,203,900		$	4,891,094
Future production costs		(488,473	)		(1,029,393	)
Future development costs		(347,619	)		(527,399	)
Future income tax expense		(32,979	)		—
Future net cash flows		1,334,829			3,334,302
10% annual discount for estimated timing of cash flows		(563,549	)		(1,562,242	)
Standardized measure of discounted future net cash flows	$	771,280		$	1,772,060

F-89

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

The following are the principal sources of change in the standardized measure of discounted future net cash flows (amounts in thousands):

	Year Ended December 31,
	2003			2004			2005
Beginning of Period	$	310,632		$	613,752		$	771,280
Purchases of reserves		—			—			415,208
Contribution of reserves by member		101,804			75,239			—
Sales of reserves in place		(2,476	)		(1,375	)		(34,820	)
Sales and transfers of crude oil and natural gas produced, net of production costs		(74,186	)		(130,640	)		(205,838	)
Net changes in prices and production costs		76,655			16,686			408,909
Development costs incurred during the period and changes in estimated future development costs		(76,545	)		(89,491	)		(150,639	)
Extensions and discoveries, less related costs		211,324			193,022			411,092
Income taxes		—			—			24,097
Revisions of previous quantity estimates		37,718			31,730			68,937
Accretion of discount		34,457			62,050			77,128
Changes in production rates (timing) and other		(5,631	)		307			(13,294	)
Net change		303,120			157,528			1,000,780
End of Period	$	613,752		$	771,280		$	1,772,060

During recent years, there have been significant fluctuations in the prices paid for crude oil in the world markets. The net weighted average prices of crude oil and natural gas at December 31, 2003, 2004 and 2005, used in the above table were $29.14 and $41.80 and $57.28 per barrel of crude oil, respectively, and $5.89, $5.93 and $9.59 per thousand cubic feet of natural gas, respectively.

F-90

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND SEPTEMBER 30, 2006

	December 31,			September 30,
	2005			2006
				(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	102,322		$	26,362
Accounts receivable, net		53,378			53,436
Notes receivable		10			9
Drilling prepayments		3,281			3,755
Derivative financial instruments		—			14,158
Other		9,798			5,788
Total current assets		168,789			103,508
Oil and gas properties, at cost (full cost method)		1,229,923			1,409,776
Accumulated depreciation, depletion and amortization		(488,560	)		(562,635	)
Net oil and gas properties		741,363			847,141
Other property and equipment		6,029			6,232
Accumulated depreciation		(4,934	)		(5,173	)
Net other property and equipment		1,095			1,059
Restricted deposits		24,267			30,713
Derivative financial instruments		—			15,787
Other assets		4,842			8,296
Total assets	$	940,356		$	1,006,504
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Accounts payable	$	18,105		$	20,058
Accounts payable — revenue		11,454			9,759
Accounts payable — affiliates		1,660			1,569
Current portion of notes payable		2,503			—
Advance from affiliate		39,800			—
Prepayments from partners		121			823
Accrued interest		162			61
Accrued interest — affiliates		2,194			2,194
Income tax payable — affiliate		2,749			2,749
Derivative financial instruments		68,039			—
Total current liabilities		146,787			37,213
Commitments and contingencies
Credit facility		300,000			300,000
Gas balancing		1,108			1,108
Derivative financial instruments		17,893			—
Other liabilities		250			250
Deferred income tax liability		—			2,128
Asset retirement obligation		41,228			47,609
Total liabilities		507,266			388,308
Member’s equity		433,090			618,196
Total liabilities and member’s equity	$	940,356		$	1,006,504

The accompanying notes are an integral part of these combined financial statements.

F-91

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC. BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENTS OF OPERATIONS

Nine Month Periods Ended September 30, 2005 and 2006

	Nine Months Ended
	September 30,
	2005			2006
	(Unaudited)
	(In thousands)
Revenues:
Oil and gas sales — gross	$	193,633		$	208,800
Unrealized derivatives (losses) gains		(111,631	)		115,877
Oil and gas revenues — net		82,002			324,677
Plant revenues		4,707			5,799
Total revenues		86,709			330,476
Costs and expenses:
Lease operating		19,632			26,817
Transportation and gathering		3,764			3,441
Plant and field operations		2,644			3,270
Production and ad valorem taxes		11,184			8,948
Depreciation, depletion and amortization		65,756			74,408
Accretion of asset retirement obligation		2,290			2,112
General and administrative		10,651			10,281
Total costs and expenses		115,921			129,277
Operating income (loss)		(29,212	)		201,199
Interest expense		(4,856	)		(16,738	)
Interest expense — affiliate		(3,047	)		—
Interest income and other		185			4,788
Income (loss) before income taxes		(36,930	)		189,249
Income tax benefit (expense)		2,932			(2,143	)
Net income (loss)	$	(33,998	)	$	187,106

The accompanying notes are an integral part of these combined financial statements.

F-92

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENTS OF CASH FLOWS

Nine Month Periods Ended September 30, 2005 and 2006

	Nine Months Ended
	September 30,
	2005			2006
	(Unaudited)
	(In thousands)
Operating activities:
Net income (loss)	$	(33,998	)	$	187,106
Noncash adjustments:
Deferred income tax expense (benefit)		(2,932	)		2,128
Depreciation, depletion and amortization		65,756			74,408
Unrealized derivative losses (gains)		111,631			(115,877	)
Accretion of asset retirement obligation		2,290			2,112
Amortization of note discount		66			27
Equity in loss on investment		917			—
Interest income-restricted deposits		(265	)		(616	)
Amortization of note costs		527			773
Gain on sale of assets		(9	)		(2	)
Changes in operating assets and liabilities:
Accounts receivable		(9,270	)		(212	)
Drilling prepayments		(1,616	)		(475	)
Derivative deposit		(64,068	)		—
Other assets		2,369			3,920
Accounts payable and accrued liabilities		(7,605	)		1,013
Net cash provided by operating activities		63,793			154,305
Investing activities:
Acquisition, exploration, and development costs		(183,479	)		(175,619	)
Proceeds from sales of oil and gas properties		679			37
Purchases of furniture, fixtures and equipment		(398	)		(293	)
Equity investment		(454	)		—
Investment in restricted deposits		(3,538	)		(5,832	)
Net cash used in investing activities		(187,190	)		(181,707	)
Financing activities:
Debt issuance costs		—			(573	)
Guaranteed payment to member		(7,989	)		(7,989	)
Equity contribution		—			7,989
Proceeds from/repayment of affiliate borrowings		73,443			(39,800	)
Dividend payment to member		—			(2,000	)
Proceeds from credit facility		59,100			—
Principal payments on debt		(1,554	)		(2,530	)
Deferred equity costs		—			(3,655	)
Net cash provided by (used in) financing activities		123,000			(48,558	)
Decrease in cash and cash equivalents		(397	)		(75,960	)
Cash and cash equivalents at beginning of period		30,846			102,322
Cash and cash equivalents at end of period	$	30,449		$	26,362
Supplemental cash flow information:
Cash paid for interest	$	13,205		$	16,052

The accompanying notes are an integral part of these combined financial statements.

F-93

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

COMBINED STATEMENT OF CHANGES IN TOTAL MEMBER’S EQUITY
Nine Month Period Ended September 30, 2006
(2006 Amounts Unaudited)

	(In thousands)
Total member’s equity — December 31, 2005	$	433,090
Dividend distribution		(2,000	)
Equity contribution		7,989
Guaranteed payment to member		(7,989	)
Net income		187,106
Total member’s equity — September 30, 2006	$	618,196

The accompanying notes are an integral part of these combined financial statements.

F-94

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 2006
(Unaudited)

1.   Organization, Basis of Presentation and Background

The accompanying combined financial statements present NEG Oil & Gas LLC and subsidiaries excluding National Energy Group, Inc., and the 103/4% Senior Notes due from National Energy Group, Inc., but including National Energy Group, Inc.’s 50% interest in NEG Holding LLC (collectively “the Company”). The Company is an oil and gas exploration and production company engaged in the exploration, development, production and operations of natural gas and oil properties, primarily located in Texas, Oklahoma, Arkansas and Louisiana (both onshore and in the Gulf of Mexico).

NEG Oil & Gas, LLC is wholly-owned by American Real Estate Holdings Limited Partnership (“AREH”). AREH is 99% owned by American Real Estate Partners, L.P. (“AREP”). AREP is a publicly traded limited partnership that is majority owned by Mr. Carl C. Icahn.

NEG Oil & Gas LLC was formed on December 2, 2004 to hold the oil and gas investments of the Company’s ultimate parent company, AREP. As of September 30, 2006 the Company’s assets and operations consist of the following:

•  A 50.01% ownership interest in National Energy Group, Inc (National Energy Group), a publicly traded oil and gas management company. National Energy Group’s principal asset consists of its 50% membership interest in NEG Holding LLC (Holding, LLC);

•  $148.6 million principal amount of 103/4% Senior Notes due from National Energy Group (the “103/4% Senior Notes”).

•  A 50% managing membership interest in Holding, LLC;

•  The oil and gas operations of National Onshore LP; and

•  The oil and gas operations of National Offshore LP.

All of the above assets initially were acquired by entities owned or controlled by Mr. Icahn and subsequently acquired by AREP (through subsidiaries) in various purchase transactions. In accordance with generally accepted accounting principles, assets transferred between entities under common control are accounted for at historical cost similar to a pooling of interest and the financial statements are combined from the date of acquisition by an entity under common control. The financial statements include the results of operations, financial position and cash flows of each of the above entities since its initial acquisition by entities owned or controlled by Mr. Icahn (the “Period of Common Control”).

On September 7, 2006, AREP signed a letter of intent to sell NEG Oil & Gas LLC and subsidiaries, excluding National Energy Group and the 103/4% Senior Notes due from National Energy Group, but including National Energy Group’s 50% interest in Holding LLC to Riata Energy, Inc., DBA Riata Energy, Inc. (“Riata Energy”) The combined financial statements include the entities to be sold to Riata Energy.

Basis of Presentation

The accompanying unaudited combined interim financial statements have been prepared in accordance both with accounting principles generally accepted in the United States of America for interim financial information, and Article 10 of Regulation S-X and are fairly presented. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash

F-95

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

flows for the periods indicated. The preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. Our financial data for the nine month periods ended September 30, 2005 and 2006 should be read in conjunction with our audited financial statements for the year ended December 31, 2005 including the notes thereto.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement 109 (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” of being sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is greater than 50 percent likely of being recognized upon ultimate settlement with the taxing authority, is recorded. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how to evaluate prior period financial statement misstatements for purposes of assessing their materiality in the current period. If the prior period effect is material to the current period, then the prior period is required to be corrected. Correcting prior year financial statements would not require an amendment of prior year financial statements, but such corrections would be made the next time the company files the prior year financial statements. Upon adoption, SAB 108 allows a one-time transitional cumulative effect adjustment to retained earnings for corrections of prior period misstatements required under this statement. SAB 108 is effective for fiscal years beginning after November 15, 2006. The adoption of SAB 108 is not expected to be material to the Company’s consolidated financial statements.

Background

National Energy Group, Inc — In February, 1999 National Energy Group was placed under involuntary, court ordered bankruptcy protection. Effective August 4, 2000 National Energy Group emerged from involuntary bankruptcy protection with affiliates of Mr. Icahn owning 49.9% of the common stock and $165 million principal amount of debt securities (“Senior Notes”). As mandated by National Energy Group’s Plan of Reorganization, Holding LLC was formed and on September 1, 2001, National Energy Group contributed to Holding LLC all of its oil and natural gas properties in exchange for an initial membership interest in Holding LLC. National Energy Group retained $4.3 million in cash. On September 1, 2001, an affiliate of Mr. Icahn contributed to Holding LLC oil and natural gas assets, cash and a $10.9 million note receivable from National Energy Group in exchange for the remaining membership interest, which was designated the managing membership interest. Concurrently, in September, 2001, but effective as of May 2001, Holding LLC formed a 100% owned subsidiary, NEG Operating Company, LLC (“Operating LLC”) and contributed all of its oil and natural gas assets to Operating LLC.

In October 2003, AREP acquired all outstanding Senior Notes ($148.6 million principal amount at October 2003) and 5,584,044 shares of common stock of National Energy Group from entities affiliated with Mr. Icahn for aggregate consideration of approximately $148.1 million plus approximately $6.7 million of accrued interest on the Senior Notes. As a result of this transaction and the acquisition by AREP of additional

F-96

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

shares of National Energy Group, AREP beneficially owned 50.01% of the outstanding stock of National Energy Group and had effective control. In June 2005, all of the stock of National Energy Group and the $148.6 million principal amount of Senior Notes owned by AREP was contributed to the Company and National Energy Group became a 50.01% owned subsidiary. The accrued, but unpaid interest on the $148.6 million principal amount of Senior Notes was retained by AREP. National Energy Group and the 103/4% Senior Notes will be retained by AREP.

NEG Holding LLC — On June 30, 2005, AREP acquired the managing membership interest in Holding LLC from an affiliate of Mr. Icahn for an aggregate consideration of approximately $320 million and contributed it to the Company. The membership interest acquired constituted all of the membership interests other than the membership interest already owned by National Energy Group. The combined financial statements include the consolidation of the acquired 50% membership interest in Holding LLC, together with the 50% membership interest owned by National Energy Group. The Period of Common Control for Holding LLC began on September 1, 2001, the initial funding of Holding LLC.

The Holding LLC Operating Agreement

Holding LLC is governed by an operating agreement effective May 12, 2001, which provides for management and control of Holding LLC by the Company and distributions to National Energy Group and the Company based on a prescribed order of distributions (the “Holding LLC Operating Agreement”).

Order of Distributions

Pursuant to the Holding LLC Operating Agreement, distributions from Holding LLC to National Energy Group and the Company shall be made in the following order:

1. Guaranteed payments (“Guaranteed Payments”) are to be paid to National Energy Group, calculated on an annual interest rate of 103/4% on the outstanding priority amount (“Priority Amount”). The Priority Amount includes all outstanding debt owed to NEG Oil & Gas, including the amount of National Energy Group’s 103/4% Senior Notes. As of December 31, 2005, the Priority Amount was $148.6 million. The Guaranteed Payments will be made on a semi-annual basis.

2. The Priority Amount is to be paid to National Energy Group. Such payment is to occur by November 6, 2006. This did not occur November 6, 2006 due to the pending transaction with Riata Energy as described above.

3. An amount equal to the Priority Amount and all Guaranteed Payments paid to National Energy Group, plus any additional capital contributions made by NEG Oil & Gas, less any distributions previously made by Holding LLC to NEG Oil & Gas, is to be paid to NEG Oil & Gas.

4. An amount equal to the aggregate annual interest (calculated at prime plus 1/2% on the sum of the Guaranteed Payments), plus any unpaid interest for prior years (calculated at prime plus 1/2% on the sum of the Guaranteed Payments), less any distributions previously made by Holding LLC to NEG Oil & Gas, is to be paid to NEG Oil & Gas.

5. After the above distributions have been made, any additional distributions will be made in accordance with the ratio of NEG Oil & Gas and National Energy Group’s respective capital accounts. (Capital accounts as defined in the Holding LLC Operating Agreement.)

F-97

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Redemption Provision in the Holding LLC Operating Agreement

The Holding LLC Operating Agreement contains a provision that allows the managing member (NEG Oil & Gas), at any time, in its sole discretion, to redeem National Energy Group’s membership interest in Holding LLC at a price equal to the fair market value of such interest determined as if Holding LLC had sold all of its assets for fair market value and liquidated.

Prior to closing the Riata Energy purchase transaction, AREP will cause NEG Oil & Gas to exercise the redemption provision and dividend the 103/4% Senior Notes to AREP or enter into transactions with a similar effect such that NEG Oil & Gas will own 100% of Holding LLC and no longer own the 103/4% Senior Notes receivable from National Energy Group. AREP will indemnify NEG Oil & Gas for any costs associated with the exercise of the redemption provision. The Holding LLC Operating Agreement will be cancelled.

National Onshore LP — On November 14, 2002, National Onshore filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. National Onshore’s First Amended Joint Plan of Reorganization submitted by an entity affiliated with Mr. Icahn, as modified on July 8, 2003 (the “National Onshore Plan”), was confirmed by the Bankruptcy Court on August 14, 2003 effective August 28, 2003.

As of the effective date of the National Onshore Plan, an entity affiliated with Mr. Icahn owned 89% of the outstanding shares of National Onshore. During June 2004, the entity affiliated with Mr. Icahn acquired an additional 5.7% of the outstanding shares of National Onshore from certain other stockholders. During December 2004, National Onshore acquired the remaining 5.3% of the outstanding shares that were not owned by an affiliate of Mr. Icahn. The difference between the purchase price for both acquisitions and the minority interest liability was treated as a purchase price adjustment which reduced the full cost pool.

On December 6, 2004, AREP purchased from an affiliate of Mr. Icahn $27.5 million aggregate principal amount, or 100%, of the outstanding term notes issued by National Onshore (the “National Onshore Notes”). The purchase price was $28.2 million, which equaled the principal amount of the National Onshore Notes plus accrued unpaid interest. The notes are payable annually in equal consecutive annual payments of $5.0 million, with the final installment due August 28, 2008. Interest is payable semi-annually in February and August at the rate of 10% per annum.

On April 6, 2005, AREP acquired 100% of the outstanding stock of National Onshore from entities owned by Mr. Icahn for an aggregate consideration of $180 million. The operations of National Onshore are considered to have been contributed to the Company on August 28, 2003 at a historical cost of approximately $116.3 million, representing the historical basis in the assets and liabilities of National Onshore of the entities owned by Mr. Icahn. AREP contributed The National Onshore Notes, but not the accrued and unpaid interest through the date of contribution, to the Company on June 30, 2005. The Period of Common Control of National Onshore began on August 28, 2003.

National Offshore LP — On July 16, 2002, National Offshore filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court of the Southern District of Texas. On November 3, 2004, the Bankruptcy Court entered a confirmation order for the National Offshore’s Plan of Reorganization (the “National Offshore Plan”). The National Offshore Plan became effective November 16, 2004 and National Offshore began operating as a reorganized entity. Upon emergence from bankruptcy, an entity controlled by Mr. Icahn owned 100% of the outstanding common stock of National Offshore.

On December 6, 2004, AREP purchased $38.0 million aggregate principal amount of term loans issued by National Offshore, which constituted 100% of the outstanding term loans of National Offshore from an

F-98

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

affiliate of Mr. Icahn. On June 30, 2005, AREP contributed the National Offshore term loan, but not the accrued and unpaid interest through the date of contribution, to the Company.

On June 30, 2005, AREP acquired 100% of the equity of National Offshore from affiliates of Mr. Icahn for consideration valued at approximately $125.0 million. The Period of Common Control for National Offshore began on November 16, 2004 when National Offshore emerged from bankruptcy. The acquisition of National Offshore has been recorded effective December 31, 2004. The historical cost of approximately $91.6 million, representing the historical basis in the assets and liabilities of National Offshore of the affiliates of Mr. Icahn, was considered to have been contributed to the Company on December 31, 2004.

2.   Management Agreements

The management and operation of Operating LLC is being undertaken by National Energy Group pursuant to the Management Agreement (the “Operating LLC Management Agreement”) which Operating LLC entered into with National Energy Group. However, neither National Energy Group’s officers nor directors control the strategic direction of Operating LLC’s oil and natural gas business, including oil and natural gas drilling and capital investments, which are controlled by the managing member of Holding LLC (NEG Oil & Gas). The Operating LLC management agreement provides that National Energy Group will manage Operating LLC’s oil and natural gas assets and business until the earlier of December 15, 2006 (previously November 1, 2006, before the amendment of such agreement effective October 30, 2006) or such time as Operating LLC no longer owns any of the managed oil and natural gas properties. National Energy Group’s employees conduct the day-to-day operations of Operating LLC’s oil and natural gas business, and all costs and expenses incurred in the operation of the oil and natural gas properties are borne by Operating LLC, although the Operating LLC Management Agreement provides that the salary of National Energy Group’s Chief Executive Officer shall be 70% attributable to the managed oil and natural gas properties, and the salaries of each of the General Counsel and Chief Financial Officer shall be 20% attributable to the managed oil and natural gas properties. In exchange for National Energy Group’s management services, Operating LLC pays National Energy Group a management fee equal to 115% of the actual direct and indirect administrative and reasonable overhead costs that National Energy Group incurs in operating the oil and natural gas properties. National Energy Group or Operating LLC may seek to change the management fee to within the range of 110%-115% as such change is deemed warranted. However, both have agreed to consult with each other to ensure that such administrative and reasonable overhead costs attributable to the managed properties are properly reflected in the management fee that is paid. In addition, Operating LLC has agreed to indemnify National Energy Group to the extent National Energy Group incurs any liabilities in connection with National Energy Group’s operation of the assets and properties of Operating LLC, except to the extent of National Energy Group’s gross negligence or misconduct. Operating LLC incurred $3.7 million and $5.5 million in general and administrative expenses for the nine month periods ended September 30, 2005 and 2006, respectively under this agreement.

On August 28, 2003, National Energy Group entered into a management agreement to manage the oil and natural gas business of National Onshore. The National Onshore management agreement was entered in connection with a plan of reorganization for National Onshore proposed by Thornwood Associates LP, an entity affiliated with Carl C. Icahn (the “National Onshore Plan”). On August 28, 2003, the United States Bankruptcy Court, Southern District of Texas, issued an order confirming the National Onshore Plan. NEG Oil & Gas owns all of the reorganized National Onshore, which is engaged in the exploration, production and transmission of oil and natural gas, primarily in South Texas, including the Eagle Bay field in Galveston Bay, Texas and the Southwest Bonus field located in Wharton County, Texas. Bob G. Alexander and Philip D. Devlin, National Energy Group’s President and CEO, and National Energy Group’s Vice President, Secretary and General Counsel, respectively, have been appointed to the reorganized National Onshore Board of Directors

F-99

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

and act as the two principal officers of National Onshore and its subsidiaries, Galveston Bay Pipeline Corporation and Galveston Bay Processing Corporation. Randall D. Cooley, National Energy Group’s Vice President and CFO, has been appointed Treasurer of reorganized National Onshore and its subsidiaries.

The National Onshore Management Agreement provides that National Energy Group shall be responsible for and have authority with respect to all of the day-to-day management of National Onshore business, but will not function as a Disbursing Agent as such term is defined in the National Onshore Plan. As consideration for National Energy Group services in managing the National Onshore business, National Energy Group receives a monthly fee of $0.3 million. The National Onshore Management Agreement is terminable (i) upon 30 days prior written notice by National Onshore, (ii) upon 90 days prior written notice by National Energy Group, (iii) upon 30 days following any day where High River designees no longer constitute the National Onshore Board of Directors, unless otherwise waived by the newly-constituted Board of Directors of National Onshore, or (iv) as otherwise determined by the Bankruptcy Court. The Company recorded $3.5 million and $3.6 million in general and administrative expenses for the nine month periods ended September 30, 2005 and 2006, respectively, under this agreement.

On November 3, 2004, the United States Bankruptcy Court for the Southern District of Texas issued an order effective November 16, 2004 confirming a plan of reorganization for National Offshore (“National Offshore Plan”). In connection with the National Offshore Plan, National Energy Group entered into a Management Agreement with National Offshore (the “National Offshore Management Agreement”) pursuant to the Bankruptcy Court’s order confirming the effective date of the National Offshore Plan. NEG Oil & Gas owns all of the reorganized National Offshore. Mr. Bob G. Alexander, National Energy Group’s President and CEO, has been appointed to the reorganized National Offshore Board of Directors and acts as the reorganized National Offshore’s President. Mr. Philip D. Devlin, National Energy Group’s Vice President, General Counsel and Secretary, has been appointed to serve in the same capacities for National Offshore. Mr. Randall D. Cooley, National Energy Group’s Vice President and CFO, has been appointed as Treasurer of the reorganized National Offshore. In exchange for management services, National Energy Group receives a monthly fee equal to 115% of the actual direct and indirect administrative overhead costs that are incurred in operating and administering the National Offshore oil and natural gas properties. The Company recorded $2.9 million and $4.1 million in general and administrative expenses for the nine month periods ended September 30, 2005 and 2006, respectively, under this agreement.

Substantially concurrent with the Riata Energy purchase transaction the management agreements will be terminated.

3.   Derivatives

From time to time, the Company enters into various derivative instruments consisting principally of no cost collar options (the “Derivative Contracts”) to reduce its exposure to price risk in the spot market for natural gas and oil. The Company follows Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities, which was amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. These pronouncements established accounting and reporting standards for derivative instruments and for hedging activities, which generally require recognition of all derivatives as either assets or liabilities in the balance sheet at their fair value. The accounting for changes in fair value depends on the intended use of the derivative and its resulting designation. The Company elected not to designate these instruments as hedges for accounting purposes, accordingly the cash settlements and valuation gains and losses are included in oil and

F-100

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

natural gas sales. The following summarizes the cash settlements and valuation gains and losses for the nine month periods ended September 30, 2005 and 2006 (amounts in thousands):

	Nine Months Ended
	September 30,
	2005			2006
Realized loss — (net cash payments)	$	(19,486	)	$	(25,014	)
Unrealized gain (loss)		(111,631	)		115,877
Gain (loss) on Derivative Contracts	$	(131,117	)	$	90,863

The following is a summary of the Company’s Derivative Contracts as of September 30, 2006:

Type of Contract	Production Month		Volume per Month		Floor		Ceiling
No cost collars		Oct-Dec 2006		31,000 BBLS	$	41.65	$	45.25
No cost collars		Oct-Dec 2006		16,000 Bbls		41.75		45.40
No cost collars		Oct-Dec 2006		570,000 MMBTU		6.00		7.25
No cost collars		Oct-Dec 2006		120,000 MMBTU		6.00		7.28
No cost collars		Oct-Dec 2006		500,000 MMBTU		4.50		5.00
No cost collars		Oct-Dec 2006		46,000 Bbls		60.00		68.50
(The Company participates in a second ceiling at $84.50 on the 46,000 Bbls)
No cost collars		Jan-Dec 2007		30,000 Bbls		57.00		70.50
No cost collars		Jan-Dec 2007		30,000 Bbls		57.50		72.00
No cost collars		Jan-Dec 2007		930,000 MMBTU		8.00		10.23
No cost collars		Jan-Dec 2007		1,000 Bbls		65.00		87.40	(A)
No cost collars		Jan-Dec 2007		7,000 Bbls		65.00		86.00	(A)
No cost collars		Jan-Dec 2007		330,000 MMBTU		9.60		12.10	(A)
No cost collars		Jan-Dec 2007		100,000 MMBTU		9.55		12.60	(A)
No cost collars		Jan-Dec 2008		46,000 Bbls		55.00		69.00
No cost collars		Jan-Dec 2008		750,000 MMBTU		7.00		10.35
No cost collars		Jan-Dec 2008		9,000 Bbls		65.00		81.25	(A)
No cost collars		Jan-Dec 2008		70,000 MMBTU		8.75		11.90	(A)
No cost collars		Jan-Dec 2008		270,000 MMBTU		8.80		11.45	(A)
No cost collars		Jan-Dec 2009		19,000 Bbls		65.00		78.50	(A)
No cost collars		Jan-Dec 2009		26,000 Bbls		65.00		77.00	(A)
No cost collars		Jan-Dec 2009		330,000 MMBTU		7.90		10.80	(A)
No cost collars		Jan-Dec 2009		580,000 MMBTU		7.90		11.00	(A)

(A) On October 17, 2006 the Company terminated the derivative contract. See Note 12.

While the use of derivative contracts can limit the downside risk of adverse price movements, it may also limit future gains from favorable movements. The Company addresses market risk by selecting instruments whose value fluctuations correlate strongly with the underlying commodity. Credit risk related to derivative activities is managed by requiring minimum credit standards for counter parties, periodic settlements, and mark to market valuations.

F-101

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

A liability of $85.9 million (including a current liability of $68.0 million) and an asset of $29.9 million (including a current asset of $14.1 million) was recorded by the Company as of December 31, 2005 and September 30, 2006, respectively, in connection with these contracts. As of December 31, 2004, the Company had issued $11.0 million in letters of credit securing the Company’s derivative position. During 2005, the Company was required to provide security to counter parties for its Derivative Contracts in loss positions.

On December 22, 2005, concurrent with the execution of the company’s new credit facility the Company novated all of Derivative Contracts with Shell Trading (US) outstanding as of that date with identical Derivative Contracts with Citicorp (USA), Inc. as the counter party. Under this transaction, no contracts were settled, Citicorp (USA) replaced Shell Trading (US) as the counterparty and no gain or loss was recorded. Under the new credit facility, Derivatives Contracts with certain lenders under the credit facility do not require cash collateral or letters of credit and rank pari passu with the credit facility. All cash collateral and letters of credit have been released as of December 31, 2005.

As a condition to closing the Riata purchase transaction, all derivatives contracts will be terminated or assumed by AREP. See Note 12.

4.   Acquisitions

On July 10, 2006, we acquired an additional interest in our East Breaks 160 offshore block from BP America for approximately $14.1 million which increased our interest in East Breaks to approximately 66%. As a condition to closing the acquisition, we were required to issue a $16.0 million letter of credit to BP America to collaterize the potential plugging and abandonment liability associated with the offshore block. The purchase price was paid from cash on hand.

In March 2005, the Company purchased an additional interest in Longfellow Ranch for $31.9 million.

In October 2005, the Company executed a purchase and sale agreement to acquire Minden Field assets near its existing production properties in East Texas. This acquisition consists of 3,500 acres with 17 producing wells and numerous drilling opportunities. The purchase price was approximately $85.0 million, which was subsequently reduced to $82.3 million after purchase price adjustments, and the transaction closed on November 8, 2005.

5.   Sale of West Delta Properties

In March 2005, the Company sold its rights and interest in West Delta 52, 54, and 58 to a third party in exchange for the assumption of existing future asset retirement obligations on the properties and a cash payment of $0.5 million. The estimated fair value of the asset retirement obligations assumed by the purchaser was approximately $16.8 million. In addition, the Company transferred to the purchaser approximately $4.7 million in an escrow account that the Company had funded relating to the asset retirement obligations on the properties. The full cost pool was reduced by approximately $11.6 million and no gain or loss was recognized on the transaction.

6.   Investments/Note Receivable

In October 2003, the Company committed to an investment of $6.0 million in PetroSource Energy Company, LLC (“PetroSource”). The Company’s commitment was to acquire 24.8% of the outstanding stock for a price of $3.0 million and to advance $3.0 million as a subordinated loan bearing 6% interest due in six years. The Company initially purchased $1.8 million in stock and funded $1.8 million of the loan in October 2003. In February 2004, the Company purchased an additional $1.2 million of stock and funded the remaining $1.2 million loan commitment. PetroSource is in the business of selling CO₂ and also owns

F-102

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

pipelines and compressor stations for delivery purposes. During 2004, PetroSource sold additional equity shares which reduced the Company’s ownership to 20.63%. During 2005, the Company invested an additional $0.5 million in PetroSource stock. In December 2005, the Company sold its entire investment in PetroSource, including the subordinate loan, for total proceeds of $10.5 million and recorded a gain of $5.5 million.

In April 2002, the Company entered into a revolving credit commitment to extend advances to an third party. Under the terms of the revolving credit arrangement, the Company agreed to make advances from time to time, as requested by the third party and subject to certain limitations, in an amount up to $5.0 million. Advances made under the revolving credit commitment bear interest at prime rate plus 2% and are collateralized by inventory and receivables. As of December 31, 2004, the Company determined that a portion of the total outstanding advances of $1.3 million had been impaired and recorded a loss of $0.8 million. As of December 31, 2005, the Company determined that the majority of the total outstanding advance of $1.27 million had been impaired and recorded an additional loss of $0.5 million bringing the total allowance to $1.26 million.

7.   Restricted Deposits

In connection with the National Offshore transaction, the Company acquired restricted deposits aggregating $23.5 million. The restricted deposits represent bank trust and escrow accounts required to be set up by surety bond underwriters and certain former owners of National Offshore’s offshore properties. In accordance with requirements of the MMS, National Offshore was required to put in place surety bonds and/or escrow agreements to provide satisfaction of its eventual responsibility to plug and abandon wells and remove structures when certain offshore fields are no longer in use. As part of National Offshore’s agreement with the surety bond underwriter or the former owners of the particular fields, bank trust and escrow accounts were set up and funded based on the terms of the escrow agreements. Certain amounts are required to be paid upon receipt of proceeds from production.

The restricted deposits include the following at September 30, 2006:

1. A $4.4 million escrow account for the East Breaks 109 and 110 fields set up in favor of the surety bond underwriter who provides a surety bond to the MMS. The escrow account was fully funded as of September 30, 2006.

2. A $7.0 million escrow account for the East Breaks 165 and 209 fields set up in favor of the surety bond underwriter who provides a surety bond to the former owners of the fields and the MMS. The escrow account was fully funded as of September 30, 2006.

3. A $6.0 million escrow account set up in favor of a major oil company. The Company is required to make additional deposits to the escrow account in an amount equal to 10% of the net cash flow (as defined in the escrow agreement) from the properties that were acquired from the major oil company.

4. A $5.5 million escrow account that was required to be set up by the bankruptcy settlement proceedings of National Offshore. The Company is required to make monthly deposits based on cash flows from certain wells, as defined in the agreement.

5. $7.8 million in escrow accounts required to be set up by the MMS relating to East Breaks properties. The Company is required to make quarterly deposits to the escrow accounts of $0.8 million. Additionally, for some of the East Break properties, the Company will be required to deposit additional funds in the East Break escrow accounts, representing the difference between the required escrow deposit

F-103

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

under the surety bond and actual escrow deposit balance at various points in time in the future. Aggregate payments to the East Breaks escrow accounts are as follows (in thousands):

Year Ended December 31,
Remainder of 2006		800
2007		6,100
2008		3,200
2009		3,200
2010		5,000
Thereafter		4,000
	$	22,300

8.   Debt

The Company’s debt consists of credit facilities, notes payable, note payable to affiliates and senior notes payable to affiliates.

Credit Facilities

The Operating LLC Credit Facility

On December 29, 2003, Holding LLC entered into a Credit Agreement (the “Mizuho Facility”) with certain commercial lending institutions, including Mizuho Corporate Bank, Ltd. as the Administrative Agent and the Bank of Texas, N.A. and the Bank of Nova Scotia as Co-Agents.

The Credit Agreement provided for a loan commitment amount of up to $145.0 million and a letter of credit commitment of up to $15 million (provided, the outstanding aggregate amount of the unpaid borrowings, plus the aggregate undrawn face amount of all outstanding letters of credit shall not exceed the borrowing base under the Credit Agreement). The Credit Agreement provided further that the amount available to the Operating LLC at any time was subject to certain restrictions, covenants, conditions and changes in the borrowing base calculation. In partial consideration of the loan commitment amount, Operating LLC has pledged a continuing security interest in all of its oil and natural gas properties and its equipment, inventory, contracts, fixtures and proceeds related to its oil and natural gas business.

At Operating LLC’s option, interest on borrowings under the Credit Agreement bear interest at a rate based upon either the prime rate or the LIBOR rate plus, in each case, an applicable margin that, in the case of prime rate loans, can fluctuate from 0.75% to 2.50% per annum. Fluctuations in the applicable interest rate margins are based upon Operating LLC’s total usage of the amount of credit available under the Credit Agreement, with the applicable margins increasing as Operating LLC’s total usage of the amount of the credit available under the Credit Agreement increases.

At the closing of the Credit Agreement, Operating LLC borrowed $43.8 million to repay $42.9 million owed by Operating LLC to an affiliate of Mr. Icahn under the secured loan arrangement which was then terminated and to pay administrative fees in connection with this borrowing. Approximately $1.4 million of loan issuance costs was capitalized in connection with the closing of this transaction.

The Credit Agreement required, among other things, semiannual engineering reports covering oil and natural gas properties, and maintenance of certain financial ratios, including the maintenance of a minimum interest coverage, a current ratio, and a minimum tangible net worth.

F-104

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

NEG Oil & Gas LLC Senior Secured Revolving Credit Facility

On December 22, 2005, NEG Oil & Gas entered into a credit agreement, dated as of December 20, 2005, with Citicorp USA, Inc., as administrative agent, Bear Stearns Corporate Lending Inc., as syndication agent, and other lender parties thereto (the “NEG Credit Facility”). The NEG Credit Facility is secured by substantially all the assets of NEG Oil & Gas and its subsidiaries, has a five-year term and permits payments and re-borrowings, subject to a borrowing base calculation based on the proved oil and gas reserves of the Company and its subsidiaries. Under the NEG Credit Facility, the Company will be permitted to borrow up to $500 million, and the initial borrowing base is set at $335 million. The Company used a portion of the initial $300 million funding under the NEG Credit Facility to purchase the Operating LLC Credit Facility. On a combined basis, the Operating LLC Credit Facility is no longer outstanding.

In consideration of each lender’s commitment to make loans under the NEG Credit Facility, the Company is required to pay a quarterly commitment fee ranging from 0.375% to 0.50% of the available borrowing base. Commitment fees are based upon the facility utilization levels.

At the Company’s option, borrowings under the NEG Credit Facility bear interest at Base Rate or Euro Dollar Rate, as defined in the borrowing agreement, plus, in each case, an applicable margin that, in the case of Base Rate loans, can fluctuate from 0.00% to 0.75% per annum, and, in the case of Euro Dollar loans, can fluctuate from 1.00% to 1.75% per annum. Fluctuations in the applicable interest rate margins are based upon the Company’s total usage of the amount of credit available under the NEG Credit Facility, with the applicable margins increasing as the Company’s total usage of the amount of the credit available under the NEG Credit Facility increases. Base Rate and Euro Dollar Rate fluctuate based upon Prime rate or LIBOR, respectively. At September 30, 2006 the interest rate on the outstanding amount under the credit facility was 7.38% and $14.8 million was available for future borrowings.

NEG Credit Facility agreement requires, among other things, semiannual engineering reports covering oil and natural gas properties, limitation on distributions, and maintenance of certain financial ratios, including maintenance of leverage ratio, current ratio and a minimum tangible net worth. The Company was in compliance with all covenants at September 30, 2006.

In addition to purchasing the Operating LLC Credit Facility, the Company used the proceeds from the NEG Credit Facility to (1) repay a loan of approximately $85 million by AREP used to purchase properties in the Minden Field; (2) pay a distribution of $78.0 million, and (3) pay transaction costs.

Notes Payable

Notes payable consist of the following (amounts in thousands):

	December 31,			September 30,
	2005			2006
Notes payable to various prior creditors of National Onshore in settlement of bankruptcy claims. The notes are generally payable over a 30 month period with a stated interest rate of 6%; however, the notes have been discounted to an effective rate of 10%	$	2,503		$	—
Less Current maturities		(2,503	)		—
	$	—		$	—

F-105

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Advance from Affiliate

During 2005, AREP made unsecured non-interest bearing advance of $49.8 million, payable on demand, to fund their drilling programs as well as to fund derivative contract deposits, of which $39.8 million were outstanding at December 31, 2005. The outstanding balance was repaid in January 2006.

9.   Income Taxes

National Onshore and National Offshore were organized as corporations until their respective acquisitions by NEG Oil & Gas, LLC, and were subject to corporate taxes up until the date of acquisition as part of a tax sharing arrangement with the Starfire, Inc. consolidated group. The Company accounts for income taxes of National Onshore and National Offshore according to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

In May 2006, the State of Texas enacted legislation that replaces the taxable capital and earned surplus components of its franchise tax with a new franchise tax that is based on modified gross revenue. The new franchise tax becomes effective beginning with the 2007 tax year. The current franchise tax remains in effect through the end of 2006.

In accordance with generally accepted accounting principles in the United States, the new franchise tax is based on a measure of income, and thus accounted for in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes” (SFAS 109). The provisions of SFAS 109 require recognition of the effects of the tax law change in the period of enactment. During the nine month period ended September 30, 2006, the Company recorded an income tax expense and a deferred tax liability of $2.1 million to record effects of the change in Texas franchise law.

10.   Commitments and Contingencies

During the nine month period ended September 30, 2006, we entered into four drilling contracts to provide us with drilling rigs at specified drilling day rates. Due to previous commitments of the drilling rig operators, we have not taken delivery of the drilling rigs as of September 30, 2006. Our future obligations, and the estimated year of expenditure, under the drilling rig contracts are estimated as follows (dollar amounts in thousands):

				Estimated Commitment as of
				September 30, 2006
Expected Drilling Location	Contract Duration			Total		2006		2007		2008
Onshore West Texas		Six wells (approximately 3 months	)	$	1,201	$	1,201	$	—	$	—
Onshore East Texas		18 months			10,900		1,800		7,300		1,800
Onshore East Texas		18 months			10,900		1,200		7,300		2,400
Offshore		6 months			8,100		—		8,100		—
Total estimated commitments				$	31,101	$	4,201	$	22,700	$	4,200

During 2000 and 2001 National Energy Group entered into several hedge contracts with Enron North America Corp (“Enron NAC”). In 2001, Enron Corporation and many Enron Corporation affiliates and subsidiaries, including Enron NAC filed for protection under Chapter 11 of the US bankruptcy code. The

F-106

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

derivative contracts were subsequently contributed to Holding LLC and then to Operating LLC. Operating LLC has filed a claim for damages in the Enron NAC bankruptcy proceeding and our designee has been appointed as a representative to the official committee of unsecured creditors. The Company’s claim is unsecured. We received $0.2 million and $1.0 million for the nine month periods ended September 30, 2005 and 2006, respectively, in partial settlement of our claims, which was recorded in interest income and other. In October 2006, we received an additional $.9 million.

The Company expects to receive additional distributions from the Enron bankruptcy proceeding in accordance with its plan of reorganization. We will record such additional payments, if any, when the amounts are known.

Other than routine litigation incidental to its business operations which are not deemed by the Company to be material, there are no additional legal proceedings in which the Company, is a defendant.

Environmental Matters

The Company’s operations and properties are subject to extensive federal, state, and local laws and regulations relating to the generation, storage, handling, emission, transportation, and discharge of materials into the environment. Permits are required for various of the Company’s operations, and these permits are subject to revocation, modification, and renewal by issuing authorities. The Company’s operations are also subject to federal, state, and local laws and regulations that impose liability for the cleanup or remediation of property which has been contaminated by the discharge or release of hazardous materials or wastes into the environment. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines or injunctions, or both. The Company believes that it is in material compliance with applicable environmental laws and regulations. Noncompliance with such laws and regulations could give rise to compliance costs and administrative penalties. Management does not anticipate that the Company will be required in the near future to expend amounts that are material to the financial condition or operations of the Company by reason of environmental laws and regulations, but because such laws and regulations are frequently changed and, as a result, may impose increasingly strict requirements, the Company is unable to predict the ultimate cost of complying with such laws and regulations.

11.   Asset Retirement Obligation

In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. It also requires the Company to record a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The ARO assets are recorded on the balance sheet as part of the Company’s full cost pool and are included in the amortization base for the purposes of calculating depreciation, depletion and amortization expense. For the purpose of calculating the ceiling test, the future cash outflows associated with settling the ARO liability are excluded from the computation of the discounted present value of estimated future net revenues.

F-107

NEG OIL & GAS LLC AND SUBSIDIARIES, EXCLUDING NATIONAL ENERGY GROUP, INC.
AND THE 103/4% SENIOR NOTES DUE FROM NATIONAL ENERGY GROUP, INC., BUT INCLUDING
NATIONAL ENERGY GROUP INC.’S 50% MEMBERSHIP INTEREST IN NEG HOLDING LLC

NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The following is a rollforward of the asset retirement obligation as of December 31, 2005 and September 30, 2006 (amounts in thousands).

Balance as of December 31, 2005	$	41,228
Add: Accretion		2,112
Drilling additions		—
Acquired properties		4,269
Less: Revisions		—
Settlements		—
Dispositions		—
Balance as of September 30, 2006	$	47,609

12.   Subsequent Events

As a condition to closing the Riata Energy purchase transaction, the Company is required to terminate or otherwise assign all derivatives contracts to AREP. On October 17, 2006, the Company terminated all of its derivatives contracts for 2009 production and some of it derivatives contracts relating to 2007 and 2008 production. The Company received $17.6 million in cash upon termination of the contracts. No gain or loss was recognized upon termination because the derivatives contracts are recorded at fair market value.

F-108

ANNEX A

GLOSSARY OF NATURAL GAS AND OIL TERMS

The following is a description of the meanings of some of the natural gas and oil industry terms used in this offering memorandum.

2-D seismic or 3-D seismic.  Geophysical data that depict the subsurface strata in two dimensions or three dimensions, respectively. 3-D seismic typically provides a more detailed and accurate interpretation of the subsurface strata than 2-D seismic.

Bbl.  One stock tank barrel, or 42 U.S. gallons liquid volume, used in this offering memorandum in reference to crude oil or other liquid hydrocarbons.

Bcf.  Billion cubic feet of natural gas.

Bcfe.  Billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Boe.  Barrels of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.

Btu or British thermal unit.  The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

Completion.  The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Condensate.  Liquid hydrocarbons associated with the production of a primarily natural gas reserve.

CO₂.  Carbon Dioxide.

Developed acreage.  The number of acres that are allocated or assignable to productive wells or wells capable of production.

Development well.  A well drilled into a proved natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.

Dry hole.  A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Environmental Assessment (EA).  A study to determine whether a federal action significantly affect the environment, which federal agencies may be required by the National Environmental Policy Act or similar state statutes to undertake prior to the commencement of activities that would constitute federal actions, such as natural gas and oil exploration and production activities on federal lands.

Environmental Impact Statement.  A more detailed study of the environmental effects of a federal undertaking and its alternatives than an EA, which may be required by the National Environmental Policy Act or similar state statutes, either after the EA has been prepared and determined that the environmental consequences of a proposed federal undertaking, such as natural gas and oil exploration and production activities on federal lands, may be significant, or without the initial preparation of an EA if a federal agency anticipates that a proposed federal undertaking may significantly impact the environment.

Exploratory well.  A well drilled to find and produce natural gas or oil reserves not classified as proved, to find a new reservoir in a field previously found to be productive of natural gas or oil in another reservoir or to extend a known reservoir.

Field.  An area consisting of either a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

A-1

Gross acres or gross wells.  The total acres or wells, as the case may be, in which a working interest is owned.

High CO₂ gas.  Natural gas that contains more than 10% CO₂ by volume.

Imbricate stacking.  A geological formation characterized by multiple layers lying lapped over each other.

MBbls.  Thousand barrels of crude oil or other liquid hydrocarbons.

Mcf.  Thousand cubic feet of natural gas.

Mcf/d.  Mcf per day.

Mcfe.  Thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

MmBbls.  Million barrels of crude oil or other liquid hydrocarbons.

Mmboe.  Million barrels of oil equivalent.

MBtu.  Thousand British Thermal Units.

MmBtu.  Million British Thermal Units.

Mmcf.  Million cubic feet of natural gas.

Mmcf/d.  Mmcf per day.

Mmcfe.  Million cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Mmcfe/d.  Mmcfe per day.

Net acres or net wells.  The sum of the fractional working interest owned in gross acres or gross wells, as the case may be.

Plugging and abandonment.  Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of all states require plugging of abandoned wells.

Present value of future net revenues (PV-10).  The present value of estimated future revenues to be generated from the production of proved reserves, before income taxes, calculated in accordance with SEC guidelines, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation and without giving effect to hedging activities, non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization. PV-10 is calculated using an annual discount rate of 10%.

Productive well.  A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

Prospect.  A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.

Proved developed reserves.  Has the meaning given to such term in Rule 4-10(a)(3) of Regulation S-X, which defines proved developed reserves as:

Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery should be included as proved developed

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reserves only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

Proved reserves.  Has the meaning given to such term in Rule 4-10(a)(2) of Regulation S-X, which defines proved reserves as:

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

(i) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, and (B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.

(ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the proved classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.

(iii) Estimates of proved reserves do not include the following: (A) Oil that may become available from known reservoirs but is classified separately as indicated additional reserves; (B) crude oil, natural gas, and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors; (C) crude oil, natural gas, and natural gas liquids, that may occur in undrilled prospects; and (D) crude oil, natural gas, and natural gas liquids, that may be recovered from oil shales, coal, gilsonite and other such sources.

Proved undeveloped reserves.  Has the meaning given to such term in Rule 4-10(a)(4) of Regulation S-X, which defines proved undeveloped reserves as:

Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

Pulling Units.  Pulling units are used in connection with completions and workover operations.

PV-10.  See “Present value of future net revenues.”

Rental Tools.  A variety of rental tools and equipment, ranging from trash trailers to blow out preventors to sand separators, for use in the oil field.

Reservoir.  A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.

Roustabout Services.  The provision of manpower to assist in conducting oil field operations.

A-3

Standardized Measure or Standardized Measure of Discounted Future Net Cash Flows.  The present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs and future income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. Standardized Measure differs from PV-10 because Standardized Measure includes the effect of future income taxes and asset retirement obligations on future net revenues.

Stratigraphic play.  An oil or natural gas formation contained within an area created by permeability and porosity changes characteristic of the alternating rock layer that result from the sedimentation process.

Trucking.  The provision of trucks to move our drilling rigs from one well location to another and to deliver water and equipment to the field.

Undeveloped acreage.  Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

Working interest.  The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations.

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           Shares

SandRidge Energy, Inc.

Common Stock

PROSPECTUS

          , 2007

Joint Book-Running Managers

Lehman Brothers

Goldman, Sachs & Co.

Banc of America Securities LLC

Bear, Stearns & Co. Inc.

Credit Suisse

Deutsche Bank Securities

JPMorgan

UBS Investment Bank

Howard Weil Incorporated

Raymond James

RBC Capital Markets

Simmons & Company International

TudorPickering

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.   Other Expenses of Issuance and Distribution

Set forth below are the expenses (other than underwriting discounts and commissions) expected to be incurred in connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities and Exchange Commission registration fee, the NASD filing fee and the NYSE listing fee, the amounts set forth below are estimates:

Securities and Exchange Commission registration fee	$	21,183
NASD filing fee		69,500
NYSE listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Transfer agent and registrar fees		*
Miscellaneous		*
TOTAL	$	*

* To be completed by amendment.

Item 14.   Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law (“DGCL”) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The Company’s certificate of incorporation and bylaws provide that indemnification shall be to the fullest extent permitted by the DGCL for all current or former directors or officers of the Company. As permitted by the DGCL, the certificate of incorporation provides that directors of the Company shall have no personal liability to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except (1) for any breach of the director’s duty of loyalty to the Company or its stockholders, 2 for acts or omissions not in

II-1

good faith or which involve intentional misconduct or knowing violation of law, (3) under Section 174 of the DGCL or (4) for any transaction from which a director derived an improper personal benefit.

Item 15.   Recent Sales of Unregistered Securities

During the past three years, we have issued unregistered securities to a limited number of persons, as described below:

On December 21, 2005, we acquired ownership interests in a variety of entities in which we previously held interests, as well as additional leasehold and working interests in natural gas and oil properties in the Piceance Basin, in exchange for consideration of $68.5 million, including 3,508,335 shares of our common stock and $15.9 million in additional cash. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder. Each of the recipients of these securities represented their status as an “accredited investor” as defined in Rule 501(a) under the Securities Act.

We sold 12,500,000 shares of our common stock on December 21, 2005 and an additional 239,630 shares of our common stock on January 9, 2006 in a private placement to Banc of America Securities LLC and Goldman, Sachs & Co. who resold those shares to certain eligible investors. In connection with this private placement, we received net proceeds of $175.7 million after deducting the initial purchasers’ discount of $13.4 million and expenses of $2.0 million. This transaction did not involve a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act. We believe the resale of the securities by the initial purchasers’ was exempt from registration requirements pursuant to Rule 144A promulgated under the Securities Act and the analysis commonly known as Rule 4(11/2).

On December 21, 2005, we granted restricted stock awards consisting of an aggregate of 1,552,167 shares of our common stock. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Securities and Exchange Commission Rule 701 under the Securities Act.

On December 22, 2005, we acquired certain interests in several natural gas and oil properties in West Texas from Carl E. Gungoll Exploration, LLC and certain other parties in exchange for consideration of approximately $6.0 million, including 174,833 shares of our common stock and $5.4 million in additional cash. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. Each of the recipients of these securities represented their status as an “accredited investor” as defined in Rule 501(a) under the Securities Act.

On May 26, 2006, we acquired working interests in leases in West Texas in exchange for consideration of approximately $12.9 million, including 251,351 shares of our common stock and $8.2 million in additional cash. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder. Each of the recipients of these securities represented their status as an “accredited investor” as defined in Rule 501(a) under the Securities Act.

On June 7, 2006, we acquired the remaining 1% equity interest in PetroSource in exchange for approximately $0.1 million consisting of 27,749 shares of our common stock. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder. Each of the recipients of these securities represented their status as an “accredited investor” as defined in Rule 501(a) under the Securities Act.

On November 21, 2006, we acquired all of the outstanding equity interests of NEG in exchange for consideration of approximately $1,500.5 million, including $990.4 million in cash, the assumption of $300 million in debt, the receipt of $21.1 million in cash and 12,842,000 shares of our common stock. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder. Each of the recipients of these securities represented their status as an “accredited investor” as defined in Rule 501(a) under the Securities Act.

II-2

On November 21, 2006, we issued 2,136,667 shares of our convertible preferred stock and common units consisting of and aggregate of 5,331,580 shares of our common stock and warrants entitling the holder to shares of our convertible preferred stock upon surrender of an equal amount of the shares of common stock issued as part of a common unit. In connection with this private placement, we received net proceeds of approximately $536.9 million after deducting expenses of approximately $13.2 million. Banc of America Securities LLC acted as placement agent in connection with this transaction. This offering was only made to (a) two large “institutional accredited investors” as such term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act and (b) investors that are both (i) “accredited investors” as defined in Rule 501(a) under the Securities Act and (ii) “qualified institutional buyers” within the meaning of Rule 144A under the Securities Act. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

On March 20, 2007, we issued 13,888,888 shares of common stock to two “institutional accredited investors” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, including an affiliate of Mr. Ward, our Chairman, President and Chief Executive Officer, and an additional 3,891,767 shares of common stock to certain holders of our convertible preferred stock pursuant to a preemptive right. In connection with this private placement, we received net proceeds of approximately $318.9 million after deducting expenses of approximately by $1.1 million. This transaction did not involve any underwriter or a public offering, and we believe this transaction was exempt from registration requirements pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

Item 16.   Exhibits and Financial Statement Schedules

a. Exhibits:

1	.1	—	Form of Underwriting Agreement(1)
3	.1	—	Certificate of Incorporation(2)
3	.2	—	Certificate of Designation of convertible preferred stock(2)
3	.3	—	Bylaws(2)
4	.1	—	Specimen Stock Certificate representing common stock(4)
4	.2	—	Resale Registration Rights Agreement, dated December 21, 2005, by and between SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Banc of America Securities, LLC(2)
4	.3	—	Registration Rights Agreement, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and the Purchasers party thereto(2)
4	.4	—	Securities Purchase Agreement, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and the Purchasers party thereto(4)
4	.5	—	Specimen Stock Certificate representing convertible preferred stock(4)
4	.6	—	Form of Warrant(2)
4	.7	—	Amended and Restated Shareholders Agreement, dated April 4, 2007, among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and certain shareholders(2)
4	.8	—	Registration Rights Agreement, dated March 20, 2007, by and among SandRidge Energy, Inc. and the several purchasers party thereto(4)
4	.9	—	Stock Purchase Agreement, dated February 12, 2007, by and among SandRidge Energy, Inc. and each of the investors signatory thereto(4)
4	.10	—	Shareholders Agreement, dated March 20, 2007, by and among SandRidge Energy, Inc. and certain common shareholders(4)
4	.11	—	Form of Consent to Amend the Resale Registration Rights Agreement, dated June 13, 2006(4)
4	.12	—	Form of Consent to Amend the Resale Registration Rights Agreement, dated April 23, 2007(4)
5	.1	—	Opinion of Vinson & Elkins L.L.P.(1)
10	.1	—	401(k) Plan of SandRidge Energy, Inc.(4)
10	.2	—	2005 Stock Plan of SandRidge Energy, Inc.(2)
10	.3	—	Employee Participation Plan of SandRidge Energy, Inc.(2)
10	.4	—	Well Participation Plan of SandRidge Energy, Inc.(3)
10	.5	—	Form of Indemnification Agreement(4)
10	.6	—	Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(4)

II-3

10	.7	—	Senior Bridge Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Banc of America Bridge LLC, as the Initial Bridge Lender and Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P., and Lehman Brothers, Inc. as joint lead arrangers and book runners(4)
10	.8	—	Credit Agreement, dated March 22, 2007 by and among SandRidge Energy, Inc. and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger(4)
10	.9	—	Amendment No. 1 to Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(3)
10	.10	—	Amendment No. 2 to Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(3)
10	.11	—	Employment Agreement of Tom L. Ward(3)
10	.12	—	Employment Agreement of Larry K. Coshow(3)
10	.13	—	Partnership Interest Purchase Agreement, dated November 21, 2005 by and among Riata Energy, Inc. and Matthew McCann(3)
10	.14	—	Purchase and Sale Agreement, dated December 4, 2005 by and between Gillco Energy, LP, as Seller and Riata Energy, Inc., Riata Piceance, LLC, MidContinent Resources, LLC, and ROC Gas Company, as Buyer(3)
10	.15	—	Purchase and Sale Agreement, dated December 4, 2005 by and between Wallace Jordan, LLC and Daniel White Jordan, as Sellers and Riata Energy, Inc., Sierra Madera CO2 Pipeline, LLC, Riata Piceance, LLC, and ROC Gas Company, as Buyers(3)
10	.16	—	Purchase and Sale Agreement, dated August 29, 2006 by and among Alstate Management and Investment Company and Longfellow Ranch Partners, LP(3)
10	.17	—	Purchase and Sale Agreement, dated June 7, 2007 by and between Wallace Jordan, LLC and SandRidge Energy, Inc.(3)
10	.18	—	Office Lease Agreement, dated March 6, 2006 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc.(3)
10	.19	—	First Amendment to Office Lease Agreement, dated October 19, 2006 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc. d/b/a SandRidge Energy, Inc.(3)
10	.20	—	Second Amendment to Office Lease Agreement, dated January 26, 2007 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc. d/b/a SandRidge Energy, Inc.(3)
10	.21	—	Letter Agreement for Acquisition of Properties, dated September 21, 2007 by and between SandRidge Energy, Inc., Longfellow Energy, LP, Dalea Partners, LP and N. Malone Mitchell, 3rd(4)
21	.1	—	Subsidiaries of SandRidge Energy, Inc.(4)
23	.1	—	Consent of PricewaterhouseCoopers LLP(4)
23	.2	—	Consent of DeGolyer & MacNaughton(3)
23	.3	—	Consent of Vinson & Elkins L.L.P.(5)
23	.4	—	Consent of Grant Thornton LLP(4)
23	.5	—	Consent of Netherland, Sewell & Associates, Inc.(3)
23	.6	—	Consent of Harper & Associates, Inc.(3)
24	.1	—	Power of Attorney(6)

(1) To be filed by amendment.

(2) Previously filed on June 22, 2007 as an exhibit to the initial filing of this registration statement.

(3) Previously filed on September 4, 2007 as an exhibit to the second amendment to this registration statement.

(4) Filed herewith.

(5) To be contained in Exhibit 5.1.

(6) Included on signature page to initial filing of this registration statement.

b. Financial Statement Schedules

None.

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Item 17.   Undertakings

The undersigned Registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(b) To provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(c) For purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(d) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 3 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma, in the State of Oklahoma on October 4, 2007.

SANDRIDGE ENERGY, INC.

By:  *

Name: Tom L. Ward

Title:  President, Chief Executive Officer

And Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 3 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated below.

Signature	Title	Date
* Tom L. Ward	President, Chief Executive Officer And Chairman of the Board (Principal Executive Officer)	October 4, 2007
* Dirk M. Van Doren	Chief Financial Officer and Executive Vice President (Principal Financial Officer)	October 4, 2007
* Randall D. Cooley	Vice President of Accounting (Principal Accounting Officer)	October 4, 2007
* Dan Jordan	Director	October 4, 2007
* Bill Gilliland	Director	October 4, 2007
* Roy T. Oliver, Jr.	Director	October 4, 2007
* D. Dwight Scott	Director	October 4, 2007
* Jeff Serota	Director	October 4, 2007

*  By  /s/  V. Bruce Thompson

V. Bruce Thompson, Attorney-in-fact

II-6

EXHIBIT INDEX

1	.1	—	Form of Underwriting Agreement(1)
3	.1	—	Certificate of Incorporation(2)
3	.2	—	Certificate of Designation of convertible preferred stock(2)
3	.3	—	Bylaws(2)
4	.1	—	Specimen Stock Certificate representing common stock(4)
4	.2	—	Resale Registration Rights Agreement, dated December 21, 2005, by and between SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Banc of America Securities, LLC(2)
4	.3	—	Registration Rights Agreement, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and the Purchasers party thereto(2)
4	.4	—	Securities Purchase Agreement, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and the Purchasers party thereto(4)
4	.5	—	Specimen Stock Certificate representing convertible preferred stock(4)
4	.6	—	Form of Warrant(2)
4	.7	—	Amended and Restated Shareholders Agreement, dated April 4, 2007, among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and certain shareholders(2)
4	.8	—	Registration Rights Agreement, dated March 20, 2007, by and among SandRidge Energy, Inc. and the several purchasers party thereto(4)
4	.9	—	Stock Purchase Agreement, dated February 12, 2007, by and among SandRidge Energy, Inc. and each of the investors signatory thereto(4)
4	.10	—	Shareholders Agreement, dated March 20, 2007, by and among SandRidge Energy, Inc. and certain common shareholders(4)
4	.11	—	Form of Consent to Amend the Resale Registration Rights Agreement, dated June 13, 2006(4)
4	.12	—	Form of Consent to Amend the Resale Registration Rights Agreement, dated April 23, 2007(4)
5	.1	—	Opinion of Vinson & Elkins L.L.P.(1)
10	.1	—	401(k) Plan of SandRidge Energy, Inc.(4)
10	.2	—	2005 Stock Plan of SandRidge Energy, Inc.(2)
10	.3	—	Employee Participation Plan of SandRidge Energy, Inc.(2)
10	.4	—	Well Participation Plan of SandRidge Energy, Inc.(3)
10	.5	—	Form of Indemnification Agreement(4)
10	.6	—	Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(4)
10	.7	—	Senior Bridge Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Banc of America Bridge LLC, as the Initial Bridge Lender and Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P., and Lehman Brothers, Inc. as joint lead arrangers and book runners(4)
10	.8	—	Credit Agreement, dated March 22, 2007 by and among SandRidge Energy, Inc. and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger(4)
10	.9	—	Amendment No. 1 to Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(3)
10	.10	—	Amendment No. 2 to Senior Credit Facility, dated November 21, 2006, by and among SandRidge Energy, Inc. (as successor by merger to Riata Energy, Inc.) and Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC as Lead Arranger and Book Running Manager(3)
10	.11	—	Employment Agreement of Tom L. Ward(3)
10	.12	—	Employment Agreement of Larry K. Coshow(3)
10	.13	—	Partnership Interest Purchase Agreement, dated November 21, 2005 by and among Riata Energy, Inc. and Matthew McCann(3)
10	.14	—	Purchase and Sale Agreement, dated December 4, 2005 by and between Gillco Energy, LP, as Seller and Riata Energy, Inc., Riata Piceance, LLC, MidContinent Resources, LLC, and ROC Gas Company, as Buyer(3)
10	.15	—	Purchase and Sale Agreement, dated December 4, 2005 by and between Wallace Jordan, LLC and Daniel White Jordan, as Sellers and Riata Energy, Inc., Sierra Madera CO2 Pipeline, LLC, Riata Piceance, LLC, and ROC Gas Company, as Buyers(3)
10	.16	—	Purchase and Sale Agreement, dated August 29, 2006 by and among Alstate Management and Investment Company and Longfellow Ranch Partners, LP(3)
10	.17	—	Purchase and Sale Agreement, dated June 7, 2007 by and between Wallace Jordan, LLC and SandRidge Energy, Inc.(3)
10	.18	—	Office Lease Agreement, dated March 6, 2006 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc.(3)

10	.19	—	First Amendment to Office Lease Agreement, dated October 19, 2006 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc. d/b/a SandRidge Energy, Inc.(3)
10	.20	—	Second Amendment to Office Lease Agreement, dated January 26, 2007 by and between 1601 Tower Properties, L.L.C. and Riata Energy, Inc. d/b/a SandRidge Energy, Inc.(3)
10	.21	—	Letter Agreement for Acquisition of Properties, dated September 21, 2007 by and between SandRidge Energy, Inc., Longfellow Energy, LP, Dalea Partners, LP and N. Malone Mitchell, 3rd(4)
21	.1	—	Subsidiaries of SandRidge Energy, Inc.(4)
23	.1	—	Consent of PricewaterhouseCoopers LLP(4)
23	.2	—	Consent of DeGolyer & MacNaughton(3)
23	.3	—	Consent of Vinson & Elkins L.L.P.(5)
23	.4	—	Consent of Grant Thornton LLP(4)
23	.5	—	Consent of Netherland, Sewell & Associates, Inc.(3)
23	.6	—	Consent of Harper & Associates, Inc.(3)
24	.1	—	Power of Attorney(6)

(1) To be filed by amendment.

(2) Previously filed on June 22, 2007 as an exhibit to the initial filing of this registration statement.

(3) Previously filed on September 4, 2007 as an exhibit to the second amendment to this registration statement.

(4) Filed herewith.

(5) To be contained in Exhibit 5.1.

(6) Included on signature page to initial filing of this registration statement.

EX-4.1

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by the Registrar. fcl ||| |fg|g^|l|| Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. 1^«5 ml^Sd^^iN Pap <»-j{jm z<OQ^’OcQui^ =^ 6gf •liiliii -t, n^? oKR “‘C’jSS.E § Dated: ^f \ % * ^ = 8 .. > I IH ^/ /f y xS?5N            rvfe’ r u 11! ^^^- /^«^s\ r            ii            i ill = ^w’ SEAL i-°= \s * % =^ ^^sl

K»jV. BRUCE THOMPSON •£ \ «•"-"•- .• 5 TOM L WARD V-’ c> < Wim I .............. IS 5 ^S‘5 SECRETARY ^ \<^, ^.i ^ PRESIDENT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER            m 3 — ^ sb ^j (C)SECURITY-COLUMBIAN            UNITED STATES BANKNOTE COMPANY            I960 ........................................................................................ *5^ “ ....................................................... ^ ................................................................................... _^ ................................................................ .................. _^ ................................................................................. [J]“5^X —

SANDRIDGE ENERGY, INC.

     The Corporation will furnish, without charge to each stockholder who so requests, the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of stock of the Corporation, and the qualifications, limitations or restrictions of such preferences and/or rights. Please direct any such request to the Corporation or the Transfer Agent.

     The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	- as tenants in common	UNIF GIFT MIN ACT-			Custodian
TEN ENT	- as tenants by the entireties		(Cust)			(Minor)
JT TEN	- as joint tenants with right of		under Uniform Gifts to Minors
	survivorship and not as tenants		Act
	in common			(State)

Additional abbreviations may also be used even though not in the above list.

for value received, I,                                                              , now sell, assign and transfer to-

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

shares

of the Common Stock represented by this Certificate, and do irrevocably constitute and appoint

Attorney

to transfer this stock on the books of the Corporation, with full power of substitution in the premises.

Dated

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed:

By

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

EX-4.4

Exhibit 4.4

SECURITIES PURCHASE AGREEMENT

by and among

RIATA ENERGY, INC.

d/b/a SANDRIDGE ENERGY, INC.

and

THE PURCHASERS SET FORTH ON

SCHEDULE I HERETO

Table of Contents

	ARTICLE I
	DEFINITIONS
Section 1.01	Definitions	1
	ARTICLE II
	SALE AND PURCHASE
Section 2.01	Sale and Purchase	7
Section 2.02	Closing	7
Section 2.03	The Company’s Deliveries	7
Section 2.04	Purchasers’ Deliveries	8
Section 2.05	Independent Nature of Purchasers’ Obligations and Rights	8
	ARTICLE III
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01	No Registration	9
Section 3.02	No Integration	9
Section 3.03	Disclosure	9
Section 3.04	Authorization of the Purchase Agreement	9
Section 3.05	Authorization of the Purchased Securities	9
Section 3.06	Authorization and Enforceability of Operative Documents	10
Section 3.07	No Material Adverse Change	10
Section 3.08	Independent Accountants	10
Section 3.09	Financial Statements	10
Section 3.10	Incorporation and Good Standing of the Company and its Subsidiaries	11
Section 3.11	Capitalization and Other Capital Stock Matters	11
Section 3.12	Non-Contravention of Existing Instruments; No Further Authorizations or
	Approvals Required.	12
Section 3.13	No Material Actions or Proceedings	13
Section 3.14	All Necessary Permits, etc	13
Section 3.15	Title to Properties	13
Section 3.16	Condition of Properties	14
Section 3.17	Company Not an “Investment Company”	14
Section 3.18	Insurance	14
Section 3.19	No Restriction on Distributions	15
Section 3.20	Related Party Transactions	15
Section 3.21	No General Solicitation	15
Section 3.22	Compliance with Environmental Laws	15
Section 3.23	Brokers	16
Section 3.24	Subsidiaries	16
Section 3.25	Acquisition Agreement, Credit Agreement and Bridge Credit Agreement.	16
Section 3.26	Taxes	17
Section 3.27	ERISA Matters	17

	ARTICLE IV
	REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Section 4.01	Authorization	17
Section 4.02	Unregistered Offering and Sale of Securities	18
Section 4.03	No Other Representations or Warranties	20
	ARTICLE V
	ADDITIONAL AGREEMENTS
Section 5.01	Limited Preemptive Right	20
Section 5.02	Tag-Along Rights	21
Section 5.03	Information Rights	22
	ARTICLE VI
	MISCELLANEOUS
Section 6.01	Use of Proceeds	23
Section 6.02	Interpretation; Severability	23
Section 6.03	Survival of Representations and Warranties	23
Section 6.04	Waivers; Remedies; Amendments	23
Section 6.05	Binding Effect; Assignment	24
Section 6.06	Non-Disclosure	24
Section 6.07	Communications	24
Section 6.08	Entire Agreement	25
Section 6.09	Governing Law	25
Section 6.10	Execution in Counterparts	25
Section 6.11	Finder’s Fee	25
Section 6.12	Fees and Expenses	25
Section 6.13	Exculpation Among Purchasers	26
Section 6.14	Waiver of Conflicts	26

Schedules and Exhibits

Schedule 2.01	Purchasers
Schedule 2.04	Wiring Instructions
Schedule 3.24	Subsidiaries of the Company
Exhibit A	Form of Registration Rights Agreement
Exhibit B	Form of Warrant
Exhibit C	Opinion of Vinson & Elkins L.L.P.
Exhibit D	Opinion of In-House Counsel

ii

SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT, dated as of November 21, 2006 (this “Agreement”), is by and among RIATA ENERGY, INC., a Texas corporation d/b/a SANDRIDGE ENERGY, INC. (the “Company”) and each of the investors signatory hereto and listed for convenience on Schedule I hereto (each a “Purchaser” and collectively, the “Purchasers”).

     NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings specified in this Section 1.01.

     “Acquisition Agreement” means the Purchase and Sale Agreement, dated as of November 21, 2006, by and among American Real Estate Partners, L.P., American Real Estate Holdings Limited Partnership, AREP Oil & Gas Holdings LLC, AREP O & G Holdings LLC, NEG Oil & Gas, LLC, and the Company providing for the acquisition by the Company of 100% of the membership or other equity interests of NEG Oil & Gas, LLC.

     “Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

     “Available Remaining Taggable Shares Number” means at any time, (a) the Remaining Taggable Shares Number, less (b)(i) a percentage determined by dividing (x) the number of Shares beneficially owned by the applicable Company Principal and its Related Parties (but such number shall not be greater than the number of Shares beneficially owned by the applicable Company Principal and its Related Parties on the date hereof), by (y) such number of Shares beneficially owned by the applicable Company Principal and its Related Parties) and his Permitted Transferees (as defined in the Shareholders Agreement) plus the number of Shares beneficially owned by the Purchasers, multiplied by (ii) the Remaining Taggable Shares Number.

     “Bridge Credit Agreement” means the Credit Agreement, dated as of November 21, 2006, among the Company, each Lender from time to time party hereto and Bank of America, N.A.

     “Business Day” means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in New York, New York.

     “Closing” has the meaning specified in Section 2.02.

     “Closing Date” has the meaning specified in Section 2.02.

     “Code” means the Internal Revenue Code of 1986.

     “Commission” means the United States Securities and Exchange Commission.

     “Common Stock” means the common stock, par value $0.001 per share, of the Company.

     “Common Unit” means a purchase unit consisting of a number of shares of Common Stock purchased as Purchased Securities and a Warrant that can be exercised by the surrender of a corresponding number of shares of Common Stock.

     “Company” has the meaning specified in the introductory paragraph of this Agreement.

     “Company Equity Securities” means (i) Common Stock and (ii) Equity Interest Equivalents of the Company.

     “Company Principals” means Tom Ward, N. Malone Mitchell 3^rd or their respective Affiliates; provided however, that in no event shall a “Company Principals” include the Company or any of its Subsidiaries.

     “Confidentiality Agreements” means the confidentiality agreements executed by the Company and any of the Purchasers or their affiliates in connection with or in contemplation of the offering of the Purchased Securities.

     “Credit Agreement” means the Credit Agreement, dated as of November 21, 2006, among the Company, each Lender from time to time party hereto and Bank of America, N.A., as Administrative Agent and L/C Issuer.

     “Environmental Claims” has the meaning specified in Section 3.22.

     “Environmental Laws” has the meaning specified in Section 3.22.

     “Equity Interest” means (i) the equity ownership rights in a business entity, whether a corporation, company, joint stock company, limited liability company, general or limited partnership, joint venture, bank, association, trust, trust company, land trust, business trust, sole proprietorship or other business entity or organization, and whether in the form of capital stock, ownership unit, limited liability company interest, membership interest, limited or general partnership interest or any other form of ownership, and (ii) also includes all Equity Interest Equivalents.

     “Equity Interest Equivalents” means all rights, warrants, options, convertible securities (including the Preferred Stock) or indebtedness, exchangeable securities or other instruments, or other rights that are outstanding and exercisable for or convertible or exchangeable into, directly or indirectly, any Shares of Common Stock; provided that the Common Units and related

2

Warrants shall be treated as Equity Interest Equivalents only to the extent of Common Stock issued on the date of this Agreement as part of a Common Unit.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; provided, however, that an item described in any of items (a) through (f) shall not constitute an ERISA Event unless it could reasonably be expected to result in a Material Adverse Effect or it relates to an event which could reasonably be related to result in a Material Adverse Effect.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “Existing Instrument” has the meaning set forth in Section 3.12(a).

     “GAAP” means generally accepted accounting principles in the United States in effect from time to time.

     “Governmental Authority” means, with respect to a particular Person, the country, state, county, city and political subdivisions in which such Person or such Person’s Property is located or that exercises valid jurisdiction over any such Person or such Person’s Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them that exercises valid jurisdiction over any such Person or such Person’s Property.

     “Investment Company Act” means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “IPO” shall have the meaning set forth in the Certificate of Designation for the Preferred Stock.

     “Law” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation or common law.

3

     “Lien” means any lien, encumbrance, security interest, equity, charge or other interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based in Law or contract or other instrument, and whether such obligation or claim is fixed or contingent, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purpose of this Agreement, a Person shall be deemed to be the owner of any Property that it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in connection with a financing.

     “Material Adverse Change” has the meaning specified in Section 3.07.

     “Material Adverse Effect” has the meaning specified in Section 3.10.

     “Materials of Environmental Concern” has the meaning specified in Section 3.22.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Operative Documents” means this Agreement, the Registration Rights Agreement, the Warrant, the Acquisition Agreement, the Credit Agreement and the Bridge Credit Agreement.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permits” means, with respect to the Company or any of the Subsidiaries, any licenses, permits, variances, consents, authorizations, waivers, grants, franchises, concessions, exemptions, orders, registrations and approvals of Governmental Authorities or other Persons necessary for the ownership, leasing, operation, occupancy and use of its Properties and the conduct of its businesses as currently conducted.

     “Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Company or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

4

     “Preferred Stock” means the shares of Series A Convertible Preferred Stock issued by the Company pursuant to this Agreement and the shares of Series A Convertible Preferred Stock of the Company issued by the Company upon the exercise of the warrants issued by the Company pursuant to this Agreement.

     “Private Placement Memorandum” means the private placement memorandum dated November 20, 2006 provided to each Purchaser.

     “Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

     “Purchase Price” means, with respect to a particular Purchaser, the amount set forth opposite such Purchaser’s name under the column entitled “Total Purchase Price” on Schedule 2.01 hereto.

     “Purchased Securities” means, with respect to a particular Purchaser, the number of shares of Class A Convertible Preferred Stock or number of Common Units, as applicable, set forth opposite such Purchaser’s name under the column entitled “Securities Purchased” on Schedule 2.01 hereto.

     “Purchaser” and “Purchasers” have the respective meanings specified in the introductory paragraph.

     “Purchaser Common Stock” means the shares of Common Stock issued by the Company pursuant to this Agreement and the shares of Common Stock issued upon conversion of shares of Preferred Stock, provided that a share of Common Stock shall cease to constitute Purchaser Common Stock when such share is resold pursuant to a registration statement effective under the Securities Act or in compliance with Rule 144 under the Securities Act.

     “Purchaser Material Adverse Effect” means, with respect to a particular Purchaser, any material and adverse effect on the ability of such Purchaser to meet its obligations and to consummate the transactions under this Agreement.

     “Registration Rights Agreement” means the Resale Registration Rights Agreement by and between the Company and the Purchasers in the form attached hereto as Exhibit A.

     “Regulation D” has the meaning specified in Section 3.21.

     “Related Parties” shall mean (i) with respect to any of Tom Ward and N. Malone Mitchell 3rd, his wife, children and grandchildren and any entities, trusts and other Affiliates, whether or not controlled, the sole beneficiaries or beneficial owners of which are Tom Ward or Malone, as applicable, his children and/or grandchildren (and/or such entities, trusts or Affiliates of which Tom Ward or N. Malone Mitchell 3rd, as applicable, his children and/or grandchildren their wives, children and grandchildren are the sole direct or indirect beneficiaries or beneficial owners); provided, however, that in no event shall the Company or any of its Subsidiaries be deemed to be a “Related Party”.

5

     “Remaining Taggable Shares Number” means, in connection with any proposed Sale by a Company Party or its Related Parties, (a) the number of the Taggable Shares in such Sale, less (b) the number of Shares, if any, sought to be sold by the Tagging Shareholder (as defined in the Shareholders Agreement) pursuant to its exercise of its tag-along rights under Section 2.2 of the Shareholders Agreement in connection with such Sale.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Representatives” of any Person means the officers, directors, employees, agents, counsel, accountants, investment bankers and other representatives of such Person.

     “Sale” (and “Sell” shall have a correlative meaning) means, with respect to any shares, the sale, transfer, assignment or similar disposition (excluding pledge, encumbrance or hypothecation) of such shares in which cash, securities or other property is received as consideration.

     “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “Shareholders Agreement” means the Shareholder Agreement, dated November 21, 2006, among the Company, the Company Principals and the other parties thereto as in effect on such date.

     “Shares” means, as of any date, (i) with respect to the Company Principals and their Related Parties, the shares of Common Stock held by such Persons as of such date, and (ii) with respect to the Purchasers, the shares of Purchaser Common Stock held by such Purchasers and the Shares of Purchaser Common Stock issuable upon the conversion of the shares of Preferred Stock; provided, that with respect to any provisions of this Agreement which requires the calculation of the number or percentage of Shares, any shares of Preferred Stock shall be deemed to be fully converted into Common Stock.

     “Subsidiaries” means those entities listed on Schedule 3.24.

     “Taggable Percentage” means, with respect to each Purchaser, the percentage derived by dividing the maximum number of Shares sought to be sold by such Purchaser in connection with a proposed Sale as reflected in the Purchaser Tag-along Notice delivered to the Selling Shareholder during the Response Period, by the aggregate of the maximum numbers of Shares sought to be sold by all Purchaser in connection with such proposed Sale as reflected in all Purchaser Tag-along Notices delivered to the Selling Shareholder during the Response Period.

     “Transfer” (and “Transferee” shall have a correlative meaning) means, directly or indirectly, to Sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the Sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Shares beneficially owned by a Person or any interest in any Shares beneficially owned by a Person

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     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “Warrant” means a Preferred Stock Purchase Warrant entitling the holder to surrender the number of shares of Common Stock purchased as Purchased Securities in exchange for shares of Preferred Stock, on the terms and conditions set forth therein, in the form attached hereto as Exhibit B.

ARTICLE II

SALE AND PURCHASE

     Section 2.01 Sale and Purchase. Upon the terms hereof, the Company hereby issues and sells to each Purchaser, and each Purchaser, severally and not jointly hereby purchases from the Company, the Purchased Securities for the Purchase Price set forth opposite such Purchaser’s name under the column entitled “Purchase Price” on Schedule 2.01 hereto.

     Section 2.02 Closing. Upon the terms hereof, the consummation of the sale and purchase of the Purchased Securities hereunder (the “Closing”) shall take place on the date of this Agreement (the “Closing Date”), at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Suite 2500, Houston, Texas 77002.

     Section 2.03 The Company’s Deliveries. At the Closing, the Company will deliver, or cause to be delivered, to each Purchaser, as applicable:

     (a) A certificate or certificates or other instruments representing the Purchased Securities of such Purchaser;

     (b) A cross-receipt executed by the Company certifying that it has received a wire transfer as of the Closing Date in an amount equal to the Purchase Price of such Purchaser;

     (c) An Opinion of Vinson & Elkins L.L.P., as counsel to the Company, addressed to each Purchaser in the form attached hereto as Exhibit C;

     (d) An Opinion of Matthew McCann, as in-house counsel to the Company, addressed to each Purchaser in the form attached hereto as Exhibit D;

     (e) A copy of the Registration Rights Agreement, dated as of the Closing Date and executed by the Company;

     (f) A certificate of Secretary of the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Purchasers, certifying as to (i) the amended and restated articles of incorporation of the Company, including the Certificate of Designation relating to the Preferred Stock; (ii) the by-laws of the Company; (iii) the resolutions of the board of directors of the Company authorizing the execution and performance of this Agreement, the Registration Rights Agreement and the Warrant and

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the Certificate of Designation relating to the Preferred Stock; and (iv) incumbency and signatures of the officers of the Company executing this Agreement, the Registration Rights Agreement and the Warrant and the Certificate of Designation relating to the Preferred Stock and this certificate.

     (g) A certificate of the Chief Executive Officer and Chief Financial Officer, dated as of the Closing Date, in form and substance reasonably satisfactory to the Purchasers, certifying to such matters as reasonably requested by the Purchasers.

     Section 2.04 Purchasers’ Deliveries. At the Closing, each Purchaser will deliver, or cause to be delivered, to the Company:

     (a) Payment to the Company of the Purchase Price of such Purchaser by wire transfer of immediately available funds to the account designated by the Company on Schedule 2.04;

     (b) A cross-receipt executed by such Purchaser and delivered to the Company certifying that it has received the Purchased Securities of such Purchaser as of the Closing Date, as evidenced by the certificate and/or instruments referenced in Section 2.03(a); and

     (c) A copy of the Registration Rights Agreement, dated as of the Closing Date and executed by such Purchaser.

     Section 2.05 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of the other Purchasers, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. The representations and warranties of each Purchaser under this Agreement are several and not joint with the representations and warranties of the other Purchasers, and no Purchaser shall be deemed to have made any representations and warranties with respect to any other Purchasers under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for the other Purchasers to be joined as additional parties in any proceeding for such purpose. Notwithstanding the foregoing, each Purchaser’s obligation to purchase its Purchased Securities is conditioned on the contemporaneous closing of the purchase of Purchased Securities by the other Purchasers and, if, for any reason, any Purchaser shall refuse to enter into this Agreement or shall fail to consummate its obligations hereunder, all obligations of the other Purchasers hereunder shall be null and void.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Purchasers:

     Section 3.01 No Registration. Assuming the accuracy of the representations and warranties of the Purchasers contained in Section 4.02, it is not necessary, in connection with the issuance and sale of the Purchased Securities to the Purchasers in the manner contemplated by this Agreement or in connection with the issuance of Preferred Stock upon exercise of any Warrant or the issuance of Common Stock upon conversion of the Preferred Stock pursuant to its terms, to register the Purchased Securities (or any such Common Stock) under the Securities Act or any other securities Laws.

     Section 3.02 No Integration. None of the Company or any of its Subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any “security” (as defined in the Securities Act) that is or will be integrated with the sale of the Purchased Securities in a manner that would require registration under the Securities Act of the Purchased Securities.

     Section 3.03 Disclosure. The Private Placement Memorandum and other information provided by the Company to the Purchasers for the purpose of deciding whether to acquire the Purchased Securities (other than the Company’s financial and other projections describing its proposed business), as of the date of such information and the date hereof, when read together did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial and other projections prepared by management were prepared in good faith; however, the Company does not warrant that it will achieve such projections nor has it assumed any obligation to update such projections.

     Section 3.04 Authorization of the Purchase Agreement. Each Operative Document has been duly authorized, executed and delivered by the Company and constitutes the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as to rights to indemnification thereunder may be limited by applicable Law.

     Section 3.05 Authorization of the Purchased Securities. The Purchased Securities have been duly authorized for issuance and sale by the Company and pursuant to this Agreement and, when issued and delivered by the Company to the Purchasers pursuant to this Agreement on the Closing Date, the Preferred Stock and the Common Stock constituting Purchased Securities will be validly issued, fully paid and non-assessable, and the issuance of the Purchased Securities will not be subject to any preemptive or similar rights. The shares of Common Stock or Preferred Stock issuable upon conversion or exchange of Purchased Securities have been duly authorized for issuance by the Company and, when issued and delivered by the Company, will be validly issued, fully paid and non-assessable, and such shares will not be subject to any preemptive or similar rights.

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     Section 3.06 Authorization and Enforceability of Operative Documents. Each of the Operative Documents has been duly authorized by the Company and, when executed and delivered by the Company, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as to rights to indemnification thereunder may be limited by applicable Law. The Company is in compliance with the terms of the Credit Agreement and Bridge Credit Agreement, and each representation and warranty contained in the Credit Agreement or the Bridge Credit Agreement is true and correct.

     Section 3.07 No Material Adverse Change. Except as otherwise disclosed in the Private Placement Memorandum, subsequent to the respective dates as of which information is given in the Private Placement Memorandum: (i) there has been no material adverse change, effect or event or development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, assets or results of operations (other than as a result of developments affecting the oil and gas industry generally that do not have a disproportionate effect on the Company and its Subsidiaries), whether or not arising from transactions in the ordinary course of business, of the Company and its Subsidiaries, taken as a whole (a “Material Adverse Change”); (ii) the Company and its Subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered into any material transaction or agreement; and (iii) there has been no cash dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or any wholly-owned Subsidiary of the Company, any of its Subsidiaries on any class of capital stock or other security or repurchase or redemption by the Company or any of its Subsidiaries of any class of capital stock or other security.

     Section 3.08 Independent Accountants. PricewaterhouseCoopers LLP and Grant Thornton LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) and supporting schedules included in the Private Placement Memorandum, are independent registered public accountants with respect to the Company as required by the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder.

     Section 3.09 Financial Statements. The financial statements of the Company included in Private Placement Memorandum present fairly the consolidated financial position of the Company and its consolidated Subsidiaries as of and at the dates indicated and present fairly the results of operations and cash flow of the Company and its consolidated subsidiaries of and at the dates indicated. The financial statements of NEG Oil & Gas, LLC included in the Private Placement Memorandum present fairly the consolidated financial position of NEG Oil & Gas, LLC and its consolidated subsidiaries as of and at the dates indicated and present fairly the results of operations and cash flow of NEG Oil & Gas, LLC and its consolidated subsidiaries of and at the dates indicated. Such financial statements of the Company and NEG Oil & Gas, LLC comply as to form with the applicable accounting requirements of Regulation S-X and have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set

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forth in the Private Placement Memorandum under the captions “Summary—Summary SandRidge Consolidated Historical Financial Data”, “Summary— Summary NEG Oil & Gas Consolidated Historical Financial Data”, “Capitalization”, “SandRidge Energy Selected Historical Financial Data” and “NEG Selected Historical Financial Data” fairly present the information set forth therein on a basis consistent with that of the audited financial statements contained in the Private Placement Memorandum. The pro forma condensed consolidated financial statements of the Company and its subsidiaries and the related notes thereto and the other pro forma financial data included in the Private Placement Memorandum have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly presented on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.

     Section 3.10 Incorporation and Good Standing of the Company and its Subsidiaries. Each of the Company and its Subsidiaries has been duly incorporated or otherwise formed and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, and has power and authority (corporate or otherwise) to own or lease, as the case may be, and operate its properties and to conduct its business as presently conducted and, in the case of the Company, to enter into and perform its obligations under each Operative Document. Each of the Company and each Subsidiary is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result or reasonably be expected to result in a material adverse effect on the condition, financial or otherwise, or on the earnings, business, properties, assets or results of operations, whether or not arising from transactions in the ordinary course of business, of the Company and its Subsidiaries, taken as a whole (a “Material Adverse Effect”). All of the issued and outstanding shares of capital stock, or similar equity interest, of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company, directly or through Subsidiaries, free and clear of any Lien, except that the Company’s revolving credit facility is secured by a negative pledge on any of the Company’s non-mortgage properties.

     Section 3.11 Capitalization and Other Capital Stock Matters. The authorized capital of the Company consists of: (i) 50,000,000 shares of preferred stock, par value of $0.001 per share, of which 2,625,000 shares are designated as Preferred Stock, 2,136,669 of which will be issued as of the date hereof pursuant to this Agreement, and (ii) 400,000,000 shares of Common Stock, 91,703,134 of which will be issued and outstanding as of the date hereof after giving effect to the issuance of Common Units pursuant to this Agreement and the issuance of 12,842,000 shares of Common Stock pursuant to the Acquisition Agreement. Except for an aggregate of 7,074,252 shares of Common Stock issuable upon exercise of outstanding stock options or warrants, shares of Preferred Stock issuable upon the exchange of the Common Units issued hereunder and the shares of Common Stock issuable upon conversion of the Company such shares of Preferred Stock and the shares of Preferred Stock issued hereunder, the Company has not issued any other options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares

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of its capital stock or other security. Except for pursuant to the terms of the Purchased Securities and other customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders), and the issuance and sale of the shares of Preferred Stock and Common Units hereunder and the conversion and exchange thereof will not obligate the Company to issue shares of Common Stock or other securities to any Person or result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its Subsidiaries other than those described in the Private Placement Memorandum. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Private Placement Memorandum accurately presents and summarizes such plans, arrangements, options and rights.

          Section 3.12 Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required.

          (a) Neither the execution nor the delivery of any Operative Document by the Company or any of its Subsidiaries, nor the performance of its obligations thereunder, (i) will result in a violation or breach of its charter or bylaws (or other applicable organizational document), (ii) with or without the giving of notice or the passage of time, or both, violate, or be in conflict with, breach of, or constitute a default under, or cause or permit the termination or the acceleration of the maturity of, any material indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject (each, an “Existing Instrument”), (iii) require notice to or the consent of any party to any agreement or commitment, including, without limitation, any lease or license to which the Company is a party, or by which it or its properties is bound or subject other than those notices or consents that have been given or received; (iv) result in the creation or imposition of any security interest, lien, or other encumbrance upon any property or assets of the Company under any agreement or commitment to which it is a party, or by which it or its properties is bound or subject; or (v) violate or breach any material statute or Law or any judgment, decree, order, regulation or rule of any court or Governmental Authority to which the Company, its Subsidiaries or their properties is bound or subject.

          (b) The Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Private Placement Memorandum (i) have been duly authorized by all necessary corporate action and will not result in any violation of the charter or bylaws (or other applicable organizational document) of the Company or any Subsidiary, (ii) will not conflict with or constitute a breach of, or default

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under, or result in the termination (or a right of termination) under, the acceleration of any obligations under or the creation or imposition of any Lien upon any property or assets of the Company or any of its Subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument or contract or other agreement or instrument to which the Company or any of its Subsidiaries is a party and (iii) will not result in any violation of any material Law, regulation, judgment, order or decree applicable to the Company or any of its Subsidiaries of any Governmental Authority having jurisdiction over the Company or any of its Subsidiaries or any of its or their properties.

          (c) No consent, approval, authorization or other order of, or registration or filing with, any court or other Governmental Authority or agency is required for the Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Private Placement Memorandum and by this Agreement, except (i) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act and the rules and regulations promulgated thereunder and (ii) such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws.

     Section 3.13 No Material Actions or Proceedings. Except as otherwise disclosed in the Private Placement Memorandum, there are no legal or governmental actions, suits, hearings or investigations or proceedings pending or, to the Company’s knowledge, threatened (i) against or affecting the Company or any of its Subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its Subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) it is reasonable likely that such action, suit or proceeding would be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to have a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement.

     Section 3.14 All Necessary Permits, etc. The Company and each Subsidiary possess such valid and current licenses, certificates, authorizations or permits issued by the appropriate local, state, federal or foreign regulatory agencies or Governmental Authority necessary to conduct their respective businesses except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of revocation or modification of, non-compliance with or proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, and in the case of a notice or proceedings, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect.

     Section 3.15 Title to Properties. Each of the Company and its Subsidiaries has (i) generally satisfactory title to its oil and gas properties, title investigations having been carried out by the Company or its Subsidiaries in accordance with the practice in the oil and gas industry in the areas in which the Company and its Subsidiaries operate, (ii) good and marketable title to all other real property owned by it (including pipeline and other easement rights) to the extent necessary to carry on its business, and (iii) good and marketable title to all personal property owned by it, in each case free and clear of all Liens and defects except such as are described in

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the Private Placement Memorandum or such as do not materially affect the value of the such properties of the Company and its Subsidiaries, taken as a whole, and do not interfere with the use made and proposed to be made of such properties, by the Company and its Subsidiaries, taken as a whole; and all of the easements, leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds or uses properties described in the Private Placement Memorandum, are in full force and effect, and neither the Company nor any of its Subsidiaries has any notice of any claim that has been asserted by anyone adverse to the rights of the Company or its Subsidiaries under any of the easements, leases or subleases mentioned above, or affecting or questioning the rights of the Company or any Subsidiary thereof to the continued possession or use of the easement or leased or subleased premises that would reasonably be expected to have a Material Adverse Effect.

     Section 3.16 Condition of Properties. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the plants, buildings, structures and equipment owned by the Company and its Subsidiaries are in good operating condition and repair and have been reasonably maintained consistent with standards generally followed in the industry in which the Company and its Subsidiaries operates (giving due account to the age and length of use of same, ordinary wear and tear excepted), are adequate and suitable for their present uses and, in the case of plants, buildings and other structures, are structurally sound.

     Section 3.17 Company Not an “Investment Company”. The Company is not, and, after receipt of payment for the Purchased Securities and application of the proceeds as described under “Use of Proceeds” in the Private Placement Memorandum will not be, required to register as an “investment company” within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act.

     Section 3.18 Insurance. Each of the Company and its Subsidiaries are insured by recognized and, to the knowledge of the Company, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of terrorism or vandalism and earthquakes. All policies of insurance and fidelity or surety bonds insuring the Company or any of its Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its Subsidiaries are in compliance, in all material respects, with the terms of such policies and instruments; and there are no material claims by the Company or any of its Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such Subsidiary has, in the past three years, been refused any insurance coverage sought or applied for. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not have a Material Adverse Effect.

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     Section 3.19 No Restriction on Distributions. No Subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Private Placement Memorandum.

     Section 3.20 Related Party Transactions. There are no business relationships or related-party transactions involving the Company or any Subsidiary or any other person, which would be required to be disclosed pursuant to Item 404 of Regulation S-K under the Securities Act and are not disclosed and described in Private Placement Memorandum.

     Section 3.21 No General Solicitation. None of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation D”)), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with the offering of the Purchased Securities (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Purchased Securities except for this Agreement, and the Company will not enter into any such arrangement except for the Registration Rights Agreement and as may be contemplated thereby.

     Section 3.22 Compliance with Environmental Laws. Except as otherwise disclosed in the Private Placement Memorandum (i) neither the Company nor any of its Subsidiaries is in violation of Law, order, permit or other requirement relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, “Environmental Laws”), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its Subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its Subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its Subsidiaries is in violation of any Environmental Law, except, in each case, as would not, individually or in the aggregate, have a Material Adverse Effect; (ii) there is no claim, action or cause of action filed with a court or Governmental Authority, no investigation with respect to which the Company has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its Subsidiaries, now or in the past (collectively, “Environmental Claims”), pending or, to the Company’s

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knowledge, threatened against the Company or any of its Subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) to the Company’s knowledge, there are no past, present or anticipated future actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law, require expenditures to be incurred pursuant to Environmental Law, except as would not, individually or in the aggregate, have a Material Adverse Effect; and (iv) neither the Company nor any of its Subsidiaries is subject to any pending or, to the Company’s knowledge, threatened proceeding under Environmental Law to which a governmental authority is a party and which is reasonably likely to result in monetary sanctions of $100,000 or more.

     Section 3.23 Brokers. Except as otherwise disclosed in the Private Placement Memorandum, there is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

     Section 3.24 Subsidiaries. The Subsidiaries listed on Schedule 3.24 attached hereto are the only “significant subsidiaries” of the Company as defined by Rule 405 under the Securities Act.

     Section 3.25 Acquisition Agreement, Credit Agreement and Bridge Credit Agreement.

          (a) The Company has provided to the Purchasers a true and complete copy of the Acquisition Agreement and all agreements and documents ancillary thereto. The Acquisition Agreement and each of the agreements and documents ancillary thereto is valid and binding and in full force and effect. There have been no amendments to the terms of the Acquisition Agreement or any of the agreements and documents ancillary thereto other than those provided to the Purchasers prior to the date of this Agreement. Simultaneously with the Closing the Company is consummating the transactions contemplated by the Acquisition Agreement, and acquiring 100% of the membership or other equity interests of NEG Oil & Gas, LLC, pursuant to the terms and conditions of the Acquisition Agreement and the agreements and documents ancillary thereto, with the waiver by the Company of any of the terms or conditions thereof (other than waivers that, in the aggregate are immaterial).

          (b) The Company has provided to the Purchasers true and complete copies of the Credit Agreement and the Bridge Credit Agreement and all agreements and documents ancillary thereto. Each of the Credit Agreement and the Bridge Credit Agreement and each of the agreements and documents ancillary thereto is valid and binding and in full force and effect. There have been no amendments to the terms of the Credit Agreement and the Bridge Credit Agreement or any of the agreements and documents ancillary thereto other than those provided to the Purchasers prior to the date of this Agreement. Simultaneously with the Closing, the Company is borrowing not more than $150 million under the Credit Agreement and not more than $850 under the Bridge Credit Agreement.

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     Section 3.26 Taxes. The Company and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect.

     Section 3.27 ERISA Matters.

          (a) Each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws except for such events of noncompliance which could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

          (c) With respect to each Plan, (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; in each case, which could not reasonably be expected to result in a Material Adverse Effect.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER

     Each Purchaser, severally and not jointly, represents and warrants to the Company, as to itself only, that:

     Section 4.01 Authorization. Each Purchaser has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by such Purchaser, will constitute valid and legally binding obligation of such Purchaser, enforceable in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

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     Section 4.02 Unregistered Offering and Sale of Securities.

          (a) Investment. The Purchased Securities are being acquired for such Purchaser’s own account and with no intention of distributing the Purchased Securities or any part thereof other than in accordance with the Securities Act and other applicable securities and blue sky laws, and such Purchaser has no present intention of selling or granting any participation in or otherwise distributing the same in any transaction in violation of the Securities Act or the securities or blue sky laws of any other jurisdiction. If such Purchaser should in the future decide to dispose of any of the Purchased Securities, such Purchaser understands and hereby agrees that it may do so only in compliance with the Securities Act and applicable securities and blue sky laws of any other jurisdiction, as then in effect, which may include a sale contemplated by any registration statement pursuant to which the Purchased Securities are then being offered.

          (b) Such Purchaser understands that (i) the Purchased Securities (A) have not been registered under the Securities Act or any state securities Laws, (B) will be issued in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act pursuant to Regulation D thereof and (C) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings, and (ii) the Purchaser must therefore bear the economic risk of such investment indefinitely unless a subsequent disposition thereof is registered or exempted under the Securities Act and applicable state securities laws or is exempt therefrom.

          (c) Nature of Purchasers. Such Purchaser represents and warrants to the Company that it is one of the following as indicated on such Purchaser’s signature page hereto:

               (i) (A) an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act and a “qualified institutional buyer” as defined in Rule 144A promulgated by the Commission pursuant to the Securities Act and (B) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Securities, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment;

               (ii) (A) not a U.S. Person (as defined in Regulation S under the Securities Act, which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee, respectively, is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the United States) and is not purchasing the Purchased Securities on behalf of, or for the account or benefit of, a person in the United States or a U.S. Person; (B) the Purchased Securities have not been offered to such Purchaser in the United States, and the individuals making the order to purchase the Purchased Securities and executing and delivering this Agreement on behalf of such Purchaser were not in the United States when the order was placed and this Agreement was executed and delivered; (C) it undertakes and agrees that it will not offer, sell or otherwise transfer the Purchased Securities except: (1) to the Company, (2) outside the United States in accordance with

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Rule 903 or 904 of Regulation S under the Securities Act, and in compliance with applicable local laws and regulations, (3) inside or outside the United States after one year pursuant to the exemption from registration under the Securities Act provided by Rule 144 thereunder, (4) to a person it reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, (5) inside the United States, in any other transaction exempt from registration under the Securities Act and, in any event, in compliance with any applicable state securities laws of the United States, provided that prior to any transfer pursuant to this clause (5), the Company may require a legal opinion reasonably satisfactory to the Company that such transfer is exempt from registration under the Securities Act and any applicable state securities laws or (6) pursuant to a registration statement effective under the Securities Act and covering such offer, sale or transfer; and (D) it agrees not to engage in hedging transactions involving the Purchased Securities unless in compliance with the Securities Act.

               (iii) (A) an institutional “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities Act and (B) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Securities, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment.

          (d) Receipt of Information; Authorization. Such Purchaser acknowledges that it has (a) had access to the Private Placement Memorandum and (b) been provided a reasonable opportunity to ask questions of and receive answers from Representatives of the Company, and to be furnished requested information, regarding such matters sufficient to enable such Purchaser to evaluate the risks and merits of purchasing the Purchased Securities and consummating the transactions contemplated by this Agreement.

          (e) Legend. It is understood that any certificates evidencing the Purchased Securities will bear the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS, (II) SUCH TRANSACTION IS PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (III) AN OPINION OF COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH OPINION

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          STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT SUCH REGISTRATION.”

     Certificates evidencing the Purchased Securities and the certificates representing the securities issued upon conversion or exchange of the Purchased Securities (or any securities issued upon conversion or exchange of the Purchased Securities) shall not be required to contain such legend or any other legend after (A) such securities are registered for resale under the Securities Act, (B) following any sale of such securities pursuant to and in accordance with Rule 144, (C) if such securities are eligible for sale under Rule 144(k), or (D) if such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Staff of the SEC).

     Section 4.03 No Other Representations or Warranties. Such Purchaser acknowledges and agrees that the Company is not making and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Agreement.

ARTICLE V

ADDITIONAL AGREEMENTS

     Section 5.01 Limited Preemptive Right.

          (a) If at any time prior to the earlier of completion of an IPO, the Company proposes to Sell, issue or otherwise Transfer any Company Equity Security (but, in the event such sale, issuance or transfer is pursuant to a public offering or occurs concurrently with a public offering, less the underwriters’ discount or commissions for such public offering), then each Purchaser shall have the right to purchase the Preemptive Right Proportionate Number of Company Equity Securities being offered at the same price and terms as those offered by the Company provided, that the preemptive right provided under this Section 5.01 shall not be applicable to sales or issuances of Excluded Stock (as defined in the Series A Convertible Preferred Stock Certificate of Designation). The “Preemptive Right Proportionate Number” shall be, at any given time, a number equal to (i) the number of Shares beneficially owned by such Purchaser at such time multiplied by (ii) a fraction, the numerator of which is the total number of shares of Common Stock or other Company Equity Securities proposed to be issued or sold by the Company at such time and the denominator of which is the total number of Shares beneficially owned by the Company Principals and their Related Parties and the Purchasers; provided, such fraction shall not exceed 3/10. For the avoidance of doubt, this Section 5.01 shall not be applicable to (i) the conversion or exercise of any convertible securities, warrants, options or similar securities so long as the sale or issuance of such securities was made in accordance with this Section 5.01 or (ii) the financing of the transactions contemplated by the Acquisition Agreement.

          (b) In the event the Company proposes to undertake a sale or issuance of Company Equity Securities to which this Section 5.01 applies, it shall provide each Purchaser written notice (the “Preemptive Notice”) of its intention to do so (attaching copies of the most current drafts of any term sheets, agreements or other documents relating thereto), specifying the proposed price (it being understood that the form of consideration shall be cash or tangible assets

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only), the identity of the purchaser and the material terms upon which the Company proposes to Sell, issue or otherwise Transfer the same. The Purchaser shall have five (5) Business Days from the delivery date of any Preemptive Notice to agree to purchase (if the form of consideration is tangible assets, at such Purchaser’s option, for cash and/or the same type of tangible assets of equal value), on the same closing date as the Company an amount of Company Equity Securities up to the Preemptive Right Proportionate Number (in each case calculated prior to the issuance) for the price and upon the terms specified in the Preemptive Notice by giving written notice to the Company and stating therein the amount of Company Equity Securities to be purchased. If a definitive agreement for the purchase of such Company Equity Securities is not provided along with the Preemptive Notice, Purchaser’s election to purchase Company Equity Securities pursuant to such Preemptive Notice shall not be binding until a definitive agreement is executed (but, subject to Section 5.01(c), an election to not purchase shall be binding).

          (c) In the event Purchasers do not purchase all of the Preemptive Right Proportionate Number of Company Equity Securities pursuant to this Section 5.01, the Company shall have 180 days after the date of the Preemptive Notice to consummate the sale or issuance of the Company Equity Securities with respect to which Purchasers’ preemptive rights were not exercised to any Person at or above the price and upon terms not more favorable in any material respect (it being understood and agreed that any increase in the number of Company Equity Securities or any decrease in the price thereof shall be deemed material for this purpose) than the terms specified in the initial Preemptive Notice given in connection with such sale or issuance.

     Section 5.02 Tag-Along Rights.

          (a) In the event that, in connection with a proposed Sale of Shares by a Company Principal or any of his Related Parties prior to an IPO, (i) the Tagging Shareholder (as defined in the Shareholders Agreement) does not elect, or no longer has the right to elect, to exercise its tag-along rights provided under Section 2.2 of the Shareholders Agreement (or waives or is deemed to have waived such rights) or (ii) the Tagging Shareholder elects to exercise its tag-along rights provided under Section 2.2 of the Shareholders Agreement, but the number of Shares sought to be sold by the Tagging Shareholder is less than the number of the Taggable Shares (as defined in the Shareholders Agreement) (any such proposed Sale by a Company Principal or any of his Related Parties, an "Investor Tag-along Sale”), than the Company Principal shall deliver to each of the Purchasers a written notice (an “Purchaser Sale Notice”), which notice shall state (i) the name of the proposed Transferee, (ii) the number of Taggable Shares and the Remaining Taggable Shares Number, (iii) the proposed purchase price therefor, including a description of any non-cash consideration (along with any reports and other material documents (and summaries of any other material oral information) relevant to the valuation of such non-cash consideration which the Company Principal or its Related Parties has, so long as the Purchaser agrees to keep such reports, documents and information confidential), and (iv) the other material terms and conditions of the proposed Sale, including the proposed closing date (which date may not be less than fifteen (15) Business Days after delivery of the Purchaser Sale Notice). Each Purchaser desiring to participate in any such Sale shall deliver to the Company Principal, within fifteen (15) Business Days after the delivery to all Purchasers of the Purchaser Sale Notice (the “Response Period”), a written notice (an “Purchaser Tag-along Notice”), which notice shall state that such Purchaser elects to exercise its tag-along rights under this Section 5.02 and shall state the maximum number of Shares sought to be sold by such

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Purchaser. No Company Principal shall, or shall permits any of his Related Party to, consummate any Purchaser Tag-along Sale unless each Purchaser has been provided the right from the proposed Transferee to sell to the proposed Transferee identified in the Purchaser Sale Notice, on the terms and conditions set forth in the Purchaser Sale Notice, that number of Shares that is equal to (a) if the aggregate number of Shares that the Purchasers seek to sell as reflected in the Purchaser Tag-along Notices delivered within the Response Period exceeds the Available Remaining Taggable Shares Number, such Purchaser’s Taggable Percentage of the Available Remaining Taggable Shares Number (rounded down to the nearest whole number) or (b) if the aggregate number of Shares that the Purchasers seek to sell as reflected in the Purchaser Tag-along Notices delivered during the Response Period is equal to or less than the Available Remaining Taggable Shares Number, the maximum number of Shares sought to be sold by such Purchaser in connection with a proposed Sale as reflected in the Purchaser Tag-along Notice.

          (b) Each Purchaser, if it has elected to exercise its tag-along rights provided under this Section 5.02, shall participate in the Sale by delivering to the applicable Company Principal at the closing of the Sale of the Shares of the Company Principal or his Related Party’ to the Transferee the Shares to be sold by the Tagging Shareholder, duly endorsed for transfer, against payment of the aggregate purchase price therefor.

          (c) Transfers by a Company Principal to his Related Parties or by one of his Related Parties to him or another of his Related Parties shall not be subject to the tag-along rights provided under this Section 5.02.

          (d) Notwithstanding the other provisions of this Section 5.02, with respect to any Block Trade of a Substantial Block (both as defined in the Shareholders Agreement) under a registration statement pursuant to Article IV of the Shareholders Agreement, (i) the fifteen (15) Business Day period referred to in Section 5.02(a) shall be reduced to a three (3) Business Day period and (ii) the Purchaser Sale Notice may omit the name of the proposed Transferee and may specify the proposed minimum purchase price (in lieu of the purchase price).

          (e) Each of the Purchasers and any subsequent holders of Preferred Stock and Purchased Common Stock shall be an express third-party beneficiary of the provisions of Section 5.01 and this Section 5.02 applicable to the Purchasers and Section 5.01 and this Section 5.02 shall not be amended in a manner adverse to the Purchasers or eliminated, including by means of a termination of this Agreement, without the prior written consent of holders of a majority of the Shares held by the Purchasers and such subsequent holders.

     Section 5.03 Information Rights. The Company shall provide each Purchaser access to the materials provided to the lenders pursuant to Section 6.01 of the Credit Agreement, provided, each Purchaser shall enter into an agreement substantially similar to the Confidentiality Agreement with respect to non-public information contained in materials prior to the granting of such access.

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ARTICLE VI

MISCELLANEOUS

     Section 6.01 Use of Proceeds. The Company shall use the net proceeds it receives from the sale of the Purchased Securities as described under “Use of Proceeds” in the Private Placement Memorandum.

     Section 6.02 Interpretation; Severability. Article, Section, Schedule, and Exhibit references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any party has an obligation under this Agreement, the expense of complying with that obligation shall be an expense of such party unless otherwise specified. If any provision of this Agreement is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions shall remain in full force and effect.

     Section 6.03 Survival of Representations and Warranties. The representations and warranties set forth in Section 3.05 hereunder shall survive the execution and delivery of this Agreement indefinitely. The remainder of the representations or warranties set forth in this Agreement shall survive the execution and delivery of this Agreement until the earlier of (i) ten (10) Business Days following the delivery of audited financial statements of the Company for the year ended December 31, 2007 and (ii) an IPO (as defined in the Certificate of Designations). The covenants made in this Agreement shall survive the Closing and remain operative and in full force and effect regardless of acceptance of any of the Purchased Securities by the Purchasers and payment therefor and repayment, conversion, exercise or repurchase thereof. The Company shall indemnify, defend, protect and hold harmless each Purchaser and the officers, directors, partners, members, agents, employees and Affiliates of each of them from and against any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, costs of preparation and reasonable attorneys’ fees of one counsel to the Purchasers, promptly as incurred, arising out of or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Credit Agreement or any certificate, instrument or document contemplated hereby or thereby to the extent such losses, claims, damages, liabilities, settlement costs and expenses exceed $100 million in the aggregate, or (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any certificate, instrument or document contemplated hereby.

     Section 6.04 Waivers; Remedies; Amendments.

          (a) No Waiver; Remedies Cumulative. No failure or delay on the part of any party in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any right, power, or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

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          (b) Amendments and Modifications. Except as otherwise provided herein, no amendment, waiver, consent, modification, or termination of any provision of this Agreement shall be effective unless signed by each of the parties hereto affected by such amendment, waiver, consent, modification, or termination. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party hereto from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on any party hereto in any case shall entitle any party hereto to any other or further notice or demand in similar or other circumstances.

     Section 6.05 Binding Effect; Assignment. This Agreement shall be binding upon the Company, the Purchasers, and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns.

     Section 6.06 Non-Disclosure. Notwithstanding anything herein to the contrary, each Confidentiality Agreement shall remain in full force and effect according to its terms regardless of any termination of this Agreement.

     Section 6.07 Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

     (a) If to a Purchaser, to the contact information set forth on such Purchaser’s signature page hereto.

with a copy (which shall not constitute notice) to:

Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Attention: Joshua Tinkelman
Facsimile: 212-751-4864

     (b) If to the Company:

1601 NW Expressway, Suite 1600
Oklahoma City, Oklahoma 73118
Attention: Matthew McCann
Facsimile: (405) 753-5975

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with a copy (which shall not constitute notice) to:

Vinson & Elkins L.L.P.
First City Tower
1001 Fannin, Suite 2500
Houston, Texas 77002
Attention: T. Mark Kelly
Facsimile: (713) 615-5531

or to such other address as the Company or such Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified mail, return receipt requested, or regular mail, if mailed; when receipt acknowledged, if sent via facsimile; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

     Section 6.08 Entire Agreement. This Agreement and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those set forth or referred to herein or therein with respect to the rights granted by the Company or any of its Affiliates or each of the Purchasers or any of their Affiliates set forth herein or therein. This Agreement and the other agreements and documents referred to herein supersede all prior agreements and understandings between the parties with respect to such subject matter.

     Section 6.09 Governing Law. This Agreement will be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflicts of laws.

     Section 6.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

     Section 6.11 Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission or other similar fee or commission in connection with the purchase of Purchased Securities hereunder, other than placement agent fees paid by the Company to Banc of America Securities, LLC. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a such a fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

     Section 6.12 Fees and Expenses. The Company and the Purchasers shall bear their own expenses and legal fees incurred on their behalf with respect to this Agreement and the transactions contemplated hereby; provided, however, that the Company shall bear up to an amount previously agreed for the fees and expenses of Latham & Watkins LLP incurred with

25

respect to this Agreement and the transactions contemplated hereby upon receipt of proper documentation therefor.

     Section 6.13 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person or entity, other than the Company and its representatives, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, members, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Purchased Securities.

     Section 6.14 Waiver of Conflicts. Each party to this Agreement acknowledges that Latham & Watkins LLP, counsel for certain of the Purchasers, has in the past performed and may continue to perform legal services for certain of the Purchasers in matters unrelated to the transactions described in this Agreement, including the representation of such Purchasers in capital financings and other matters. Accordingly, each party to this Agreement hereby (a) acknowledges that Latham & Watkins LLP has represented only the Purchasers that have engaged it in connection with the transactions contemplated herein and not any of the other Purchasers or the Company with respect to the transactions contemplated herein; (b) acknowledges that they have had an opportunity to ask for information relevant to such representation; and (c) gives its informed consent to Latham & Watkins LLP’s representation of certain of such Purchasers in such unrelated matters and to Latham & Watkins LLP’s representation of such Purchasers in connection with this Agreement and the transactions contemplated hereby.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth.

RIATA ENERGY, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
Solely for the purposes of Section 5.02 hereof:
TOM L. WARD
/s/ Tom L. Ward
Tom L. Ward
N. MALONE MITCHELL, 3rd
/s/ N. Malone Mitchell
N. Malone Mitchell, 3rd

[Signature Page to Purchase Agreement]

THE PURCHASERS:
BLUE RIDGE INVESTMENTS, L.L.C.
By:	/s/  Ray Cubero
	Name:	Ray Cubero
	Title:	Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:    76,190
	Number of Common Units: ___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$15,999,900.00
Address for Notice	Daven Patel
	214 N. Tryon St
	Charlotte, NC 28255
	704-386-4161
	Facsimile:	(704) 387-3621

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

CENTAURUS CAPITAL, LLC
By:	/s/ John D. Arnold
	Name: John D. Arnold
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 47,619
	Number of Common Units:  -0-
Purchase Price ($210/Preferred Share; $19/Common Unit	$9,999,990.00
Address for Notice
	2629 Yorktown Place
	Houston, TX 77056
	Facsimile:	(713) 554-1350

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

CREDIT SUISSE SECURITIES (USA), LLC
By:	CREDIT SUISSE SECURITIES (USA), LLC
By:	/s/ Todd Sandoz
	Name: Todd Sandoz
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:   19,048
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$4,080,000
Address for Notice	Credit Suisse Securities (USA) LLC
	Attn: Jeffrey B. Andreski
	11 Madison Avenue, 3rd Floor
	New York NY 10010
	Facsimile:	(212) 325-1150

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

x an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

DALEA PARTNERS
By:	/s/ Malone Mitchell
	Name: N. Malone Mitchell
	Title: Partner

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:		47,619
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$ 9,999,990.00
Address for Notice	701 S. Taylor, Suite 500
	Amarillo, TX 79101
	Facsimile:	(806)-373-3454

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

FARALLON CAPITAL PARTNERS, L.P.
By:	FARALLON PARTNERS, L.L.C., their General Partner
By:	/s/ Monica R. Landry
	Name: Monica R. Landry
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:		61,471
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$12,900,910
Address for Notice	Farallon Capital Management, LLC
	One Maritime Plaza, Suite 1325
	San Francisco, CA 94111
	Facsimile:	(415) 421-2133

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
By:	FARALLON PARTNERS, L.L.C., their General Partner
By:	/s/ Monica R. Landry
	Name: Monica R. Landry
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:		49,019
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$10,293,900
Address for Notice	c/o Farallon Capital Management LLC
	One Maritime Plaza, Suite 1325
	San Francisco, CA 94111
	Facsimile:	(415) 421-2133

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
By:	FARALLON PARTNERS, L.L.C., their General Partner
By:	/s/ Monica R. Landry
	Name: Monica R. Landry
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  3,890
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$816,900
Address for Notice	c/o Farallon Capital Management LLC
	One Maritime Plaza, Suite 1325
	San Francisco, CA 94111
	Facsimile:	(415)-421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
By:	FARALLON PARTNERS, L.L.C., their General Partner
By:	/s/ Monica R. Landry
	Name: Monica R. Landry
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  2,333
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$ 489,930
Address for Notice	c/o Farallon Capital Management LLC
	One Maritime Plaza, Suite 1325
	San Francisco, CA 94111
	Facsimile:	(415) 421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TINICUM PARTNERS, L.P.
By:	FARALLON PARTNERS, L.L.C., their General Partner
By:	/s/ Monica R. Landry
	Name: Monica R. Landry
	Title: Managing Member

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  2,333
	Number of Common Units:___________
Purchase Price ($210/Preferred Share; $19/Common Unit	$489,930
Address for Notice	c/o Farallon Capital Management LLC
	One Maritime Plaza, Suite 1325
	San Francisco, CA 94111
	Facsimile:	(415) - 421-2133

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

GOLDMAN, SACHS & CO., on behalf of its Principal Strategies Group
By:	/s/ Ken Eberts
	Name: Ken Eberts
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 213,333
	Number of Common Units: 0
Purchase Price ($210/Preferred Share; $19/Common Unit	$44,799,930.00
Address for Notice	Sabrina Liak, Goldman Sachs
	1 New York Plaza, 47th Floor
	New York, NY 10004
	Facsimile:	(212) 256-4869

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

HBK FUND L.P.
By:	HBK INVESTMENTS L.P., Investment Advisor
By:	/s/ J. Baker Gentry
	Name: J. Baker Gentry, Jr.
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 119,048
	Number of Common Units:________
Purchase Price ($210/Preferred Share; $19/Common Unit	$25,000,080
Address for Notice	c/o HBK Investments, L.P.
	300 Crescent Court, Suite 700
	Dallas, TX 75201
	Attn: Legal
	Facsimile:	(214) 758-1207

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

HIGHBRIDGE INTERNATIONAL LLC
By:	HIGHBRIDGE CAPITAL MANAGEMENT, LLC
By:	/s/ Adam J. Chill
	Name: Adam J. Chill
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  -0-
	Number of Common Units:  526,316
Purchase Price ($210/Preferred Share; $19/Common Unit	$10,000,004.00
Address for Notice	c/o Highbridge Capital Management, LLC
	9 West 57th Street, 27th Floor
	New York, NY 10019
	Attn: Adam J. Chill
	Facsimile:	(212) 751-0755

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

INVESTMENT PARTNERS (C) LTD.
By:
	QUELLOS CAPITAL MANAGEMENT, L.P. its Investment Manager
By:	/s/ Marie M. Bender
	Name: Marie M. Bender
	Title: General Counsel
By:	/s/ Paul Bonde
	Name: Paul Bonde
	Title: Principal, Investment Operations

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  43,810
	Number of Common Units:  568,421
Purchase Price ($210/Preferred Share; $19/Common Unit	$20,000,099
Address for Notice	601 Union Street, 56th Floor
	Seattle, WA 98101
	Attn: Robert Ellsworth
	Facsimile:	(206) 613-6714

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

KINGS ROAD INVESTMENTS LTD.
By:	POLYGON INVESTMENT PARTNERS LP, its Investment Manager
By:	/s/ Brandon L. Jones
	Name: Brandon L. Jones
	Title: Co-Head, Private Investments

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units:  1,842,105
Purchase Price ($210/Preferred Share; $19/Common Unit	$34,999,995
Address for Notice	598 Madison Avenue
	14th Floor
	New York, NY 10022
	Facsimile:	(212) 359-7303

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

LB I GROUP INC.
By:	/s/ Paul H. Tice
	Name: Paul H. Tice
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  214,286
	Number of Common Units:  0
Purchase Price ($210/Preferred Share; $19/Common Unit	$45,000,060.00
Address for Notice	Lehman Brothers
	745 Seventh Avenue, 8th Floor
	New York, NY 10019
	Attn: Paul Tice
	Facsimile:	(212) 520-9364

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

LEONARDO, L.P.
By:	LEONARDO CAPITAL MANAGEMENT, INC., its General Partner
By:	ANGELO, GORDON & CO., L.P., its Director
By:	/s/ Joseph R. Wekselblatt
	Name: Joseph R. Wekselblatt
	Title: Chief Financial Officer

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units:   289,474
Purchase Price ($210/Preferred Share; $19/Common Unit	$	5,500,006
Address for Notice	245 Park Ave., 26th Floor
	New York, NY 10161
	Attn: Gary Wolf
	Facsimile:		(212)- 867-6395

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

x a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

MAGNETAR CAPITAL FUND, LTD
By:	MAGNETAR FINANCIAL LLC,
	its General Partner
By:	/s/ Paul Smith
	Name: Paul Smith
	Title: General Counsel

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:   -0-
	Number of Common Units:   789,474
Purchase Price ($210/Preferred Share; $19/Common Unit	$	15,000,006.00
Address for Notice	c/o Magnetar Financial LLC
	Attn: General Counsel
	1603 Orrington Ave., 13th Floor
	Evanston, IL 60201
	Facsimile:		(847) 905-5680

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

x a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

MAGNETAR CAPITAL FUND, LTD
By:	MAGNETAR FINANCIAL LLC,
	its Investment Manager
By:	/s/ Paul Smith
	Name: Paul Smith
	Title: General Counsel

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:   95,240
	Number of Common Units:   -0-
Purchase Price ($210/Preferred Share; $19/Common Unit	$	20,000,400.00
Address for Notice	c/o Magnetar Financial LLC
	Attn: General Counsel
	1603 Orrington Ave., 13th Floor
	Evanston, IL 60201
	Facsimile:		(847) 905-5680

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

x an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

MOORE MACRO FUND, LP
By:	MOORE CAPITAL MANAGEMENT, LLC
	Trading Manager
By:	/s/ Anthony Gallagher
	Name: Anthony Gallagher
	Title: Director of Operations

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 238,095
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$49,999,950.00
Address for Notice	1251 Avenue of the Americas, 52nd Floor
	New York, NY 10020
	Facsimile:	(212) 382-9877

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

OSPRAIE SANDRIDGE HOLDINGS LLC
By:	THE OSPRAIE FUND, LP,
	its Managing Member
By:	OSPRAIE GROUP, LLC
	its General Partner
By:	/s/ Richard Puma
	Name: Richard Puma
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 59,523
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$12,499,830.00
Address for Notice	c/o Ospraie Advisors, L.P.
	320 Park Avenue, 27th Floor
	New York, NY 10022
	Facsimile:	(212) 980-3796

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

OSPRAIE SPECIAL OPPORTUNITIES
MASTER ALTERNATIVE HOLDINGS LLC
By:	OSPRAIE ASSOCIATES, LLC,
	its Manager
By:	OSPRAIE ASSOCIATES HOLDINGS,
	LLC, its Managing Member
By:	OSPRAIE GROUP, LLC,
	its Managing Member
By:	/s/ Richard Puma
	Name: Richard Puma
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  59,523
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$12,499,830.00
Address for Notice	c/o Ospraie Advisors, L.P.
	320 Park Avenue, 27th Floor
	New York, NY 10022
	Facsimile:	(212) 980-3796

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

PORTSIDE GROWTH AND OPPORTUNITY FUND
By:	/s/ Jeffrey Solomon
	Name: Jeffrey Solomon
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units: 105,263
Purchase Price ($210/Preferred Share; $19/Common Unit		$1,999,997.00
Address for Notice	c/o Ramius Capital Group, LLC
	666 Third Avenue, 26th Floor
	New York, NY 10017
	Facsimile:		(212) 201-4802

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

QRA SR, LTD.
By:	QUELLOS PRIVATE CAPITAL
	MARKETS, L.P., its Investment Manager
By:	QUELLOS CAPITAL MANAGEMENT,
	L.P., its General Partner
By:	/s/ Marie M. Bender
	Name: Marie M. Bender
	Title: General Counsel
By:	/s/ Paul Bonde
	Name: Paul Bonde
	Title: Principal, Investment Operations

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  23,810
	Number of Common Units:   0
Purchase Price ($210/Preferred Share; $19/Common Unit	$5,000,100
Address for Notice	601 Union Street, 56th Floor
	Seattle, WA 98101
	Attn: Robert Ellsworth
	Facsimile:	(206) 613-6714

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

RCG BALDWIN, LP
By:	RAMIUS CAPITAL GROUP, L.L.C.,
	its General Partner
By:	C4S & CO., L.L.C.,
	its Managing Member
By:	/s/ Jeffrey Solomon
	Name: Jeffrey Solomon
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units:  52,632
Purchase Price ($210/Preferred Share; $19/Common Unit	$1,000,008.00
Address for Notice	c/o Ramius Capital Group LLC
	666 Third Avenue, 26th Floor
	New York, NY 10017
	Facsimile:	(212) 845-7990

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

RCG CARPATHIA MASTER FUND, LTD.
By:	/s/ Jeffrey Solomon
	Name: Jeffrey Solomon
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units:  210,526
Purchase Price ($210/Preferred Share; $19/Common Unit	$	3,999,994
Address for Notice	c/o Ramius Capital Group LLC
	666 Third Avenue, 26th Floor
	New York, NY 10017
	Facsimile:		(212) - 845-7990

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

RCG ENERGY, LLC
By:	RAMIUS CAPITAL GROUP, L.L.C.,
	its Managing Member
By:	C4S & CO., L.L.C.,
	its Managing Member
By:	/s/ Jeffrey Solomon
	Name: Jeffrey Solomon
	Title: Authorized Signatory

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units:   157,895
Purchase Price ($210/Preferred Share; $19/Common Unit	$3,000,005
Address for Notice	c/o Ramius Capital Group LLC
	666 Third Avenue, 26th Floor
	New York, NY 10017
	Facsimile:	(212) 845-7990

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

SILVER OAK CAPITAL, L.L.C.
By:	/s/ Joseph R. Wekselblatt
	Name: Joseph R. Wekselblatt
	Title: Manager

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:   69,048
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$14,500,080
Address for Notice	245 Park Avenue, 26th Floor
	New York, NY 10161
	Attn: Gary Wolf
	Facsimile:	(212) 867-6395

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

STANFIELD OFFSHORE LEVERAGED ASSETS, LTD.
By:	STANFIELD CAPITAL PARTNERS, LLC
	its Investment Advisor
By:	/s/ Chris Pucillo
	Name: Chris Pucillo
	Title: Portfolio Manager

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  166,667
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$35,000,070.00
Address for Notice	Stanfield Offshore Leveraged Assets, Ltd.
	430 Park Ave, 11th Floor
	New York, NY 10022
	Facsimile:	(212) - 891-9625

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TCW ASSET MANAGEMENT COMPANY, 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., TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ Kurt Talbot
	Name:  Kurt Talbot
	Title:    Managing Director
By:	/s/ Patrick Hickey
	Name:  Patrick Hickey
	Title:    Senior Vice President

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 25,602
	Number of Common Units:    0
Purchase Price ($210/Preferred Share; $19/Common Unit	$	5,376,420.00
Address for Notice	TCW Energy
	865 S. Figueroa Street, 18th Floor
	Los Angeles, CA 90017
	Attn: Phil Abejar
	Facsimile:		(213)-244-0604

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TCW ASSET MANAGEMENT COMPANY, a California corporation, 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, TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ Kurt Talbot
	Name: Kurt Talbot
	Title: Managing Director
By:	/s/ Patrick Hickey
	Name: Patrick Hickey
	Title: Senior Vice President

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 25,602
	Number of Common Units:         0
Purchase Price ($210/Preferred Share; $19/Common Unit	$	5,376,420.00
Address for Notice	TCW Energy
	865 S. Figueroa Street, 18th Floor
	Los Angeles, CA 90017
	Attn: Phil Abejar
	Facsimile:		(213) 244-0604

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TCW ENERGY FUND XB – NL, L.P.,
a California limited partnership
By:	TCW (ENERGY X) LLC,
	its General Partner
By:	TCW ASSET MANAGEMENT
	COMPANY, its Managing Member
By:	/s/ Kurt Talbot
	Name: Kurt Talbot
	Title: Managing Director
By:	/s/ Patrick Hickey
	Name: Patrick Hickey
	Title: Senior Vice President

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 107,526
	Number of Common Units:        0
Purchase Price ($210/Preferred Share; $19/Common Unit	$	22,580,460.00
Address for Notice	TCW Energy
	865 S. Figueroa Street, 18th Floor
	Los Angeles, CA 90017
	Attn: Phil Abejar
	Facsimile:		(213) 244-0604

The Purchaser referenced above hereby certifies that it is (check one):

x a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TCW ENERGY FUND XD – NL, L.P.,
a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner
By:	TCW ASSET MANAGEMENT
	COMPANY, its Managing Member
By:	/s/ Kurt Talbot
	Name: Kurt Talbot
	Title: Managing Director
By:	/s/ Patrick Hickey
	Name: Patrick Hickey
	Title: Senior Vice President

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 79,365
	Number of Common Units: 0
Purchase Price ($210/Preferred Share; $19/Common Unit	$16,666,650.00
Address for Notice	TCW Energy
	865 S. Figueroa Street, 18th Floor
	Los Angeles, CA 90017
	Attn: Phil Abijor
	Facsimile:	(213) 244-0604

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TEMPO MASTER FUND LP
By:	JD CAPITAL MANAGEMENT LLC
	(its Investment Advisor)
By:	/s/ Donald McCarthy
	Name: Donald McCarthy
	Title: Chief Financial Officer

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:
	Number of Common Units: 789,474
Purchase Price ($210/Preferred Share; $19/Common Unit	$15,000,006
Address for Notice	Two Greenwich Plaza, 2nd Floor
	Greenwich, CT 06830
	Attn: Don McCarthy
	Facsimile:	(203) 985-8920

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TLW PROPERTIES, L.L.C.
By:	/s/ Tom L. Ward
	Name: Tom L. Ward
	Title: Manager

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  262,857
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$ 55,199,970
Address for Notice	P.O. Box 54525
	Oklahoma City, OK 73154-1525
	Facsimile:	(405) 848-5143

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

þ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

UBS O’CONNOR LLC fbo O’CONNOR GLOBAL CONVERTIBLE ARBITRAGE MASTER LIMITED
By:	/s/ George Locasto
	Name: George Locasto
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock:  7,144
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$1,500,240
Address for Notice	1 North Wacker Dr.
	Chicago, IL 60606
	Facsimile:	(312) 525-6271

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

UBS O’CONNOR LLC fbo O’CONNOR GLOBAL CONVERTIBLE ARBITRAGE II MASTER LIMITED
By:	/s/ George Locasto
	Name: George Locasto
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 15,067
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$3,164,070
Address for Notice	1 North Wacker Dr.
	Chicago, IL 60606
	Facsimile:	(312) 525-6271

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

UBS O’CONNOR LLC fbo O’CONNOR PIPES CORPORATE STRATEGIES MASTER LIMITED
By:	/s/ George Locasto
	Name: George Locasto
	Title: Managing Director

Amount of Purchased Securities	Shares of Series A Convertible Preferred Stock: 1,600
	Number of Common Units:
Purchase Price ($210/Preferred Share; $19/Common Unit	$336,000
Address for Notice	1 North Wacker Dr.
	Chicago, IL 60606
	Facsimile:	(312) 525-6271

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

SCHEDULE 2.01

	Series A
	Convertible
	Preferred		Common		Total Purchase
Purchaser	Stock		Units		Price
Silver Oak Capital, L.L.C		69,048			$	14,500,080.00
Leonardo, L.P.				289,474		5,500,006.00
Blue Ridge Investments, L.L.C		76,190				15,999,900.00
Centaurus Capital, LLC		47,619				9,999,990.00
Credit Suisse Securities (USA), LLC		19,048				4,000,080.00
Farallon Capital Partners, L.P.		61,471				12,908,910.00
Farallon Capital Institutional Partners, L.P.		49,019				10,293,990.00
Farallon Capital Institutional Partners II, L.P.		3,890				816,900.00
Farallon Capital Institutional Partners III, L.P.		2,333				489,930.00
Tinicum Partners, L.P.		2,333				489,930.00
Goldman, Sachs & Co.		213,333				44,799,930.00
HBK Fund L.P.		119,048				25,000,080.00
Highbridge International LLC				526,316		10,000,004.00
Tempo Master Fund				789,474		15,000,006.00
LB I Group Inc.		214,286				45,000,060.00
Magnetar Capital Fund, Ltd.				789,474		15,000,006.00
Magnetar Capital Fund, LP		95,240				20,000,400.00
Dalea Partners		47,619				9,999,990.00
Moore Macro Fund, LP		238,095				49,999,950.00
Ospraie Special Opportunities Master Alternative Holdings LLC		59,523				12,499,830.00
Ospraie Sandridge Holdings LLC		59,523				12,499,830.00
King’s Road Investments Ltd.				1,842,105		34,999,995.00
QRA SR, Ltd.		23,810				5,000,100.00
Investment Partners (C), Ltd.		43,810		568,421		20,000,099.00
Portside Growth and Opportunity Fund				105,263		1,999,997.00
RCG Carpathia Master Fund, Ltd.				157,895		3,000,005.00
RCG Energy, LLC				210,526		3,999,994.00
RCG Baldwin, LP				52,632		1,000,008.00
Stanfield Offshore Leveraged Assets, Ltd.		166,667				35,000,070.00
TCW Asset Management Company – Ensign		25,602				5,376,420.00
TCW Asset Management Company – ING		25,602				5,376,420.00
TCW Energy Fund XB – NL, L.P.		107,527				22,580,670.00
TCW Energy Fund XD – NL, L.P.		79,365				16,666,650.00
TLW Properties, L.L.C		262,857				55,199,970.00
UBS O’Connor LLC fbo O’Connor PIPES Corporate Strategies Master Limited		7,144				1,500,240.00
UBS O’Connor LLC fbo O’Connor Global Convertible Arbitrage Master Limited		15,067				3,164,070.00
UBS O’Connor LLC fbo O’Connor Global Convertible Arbitrage II Master Limited		1,600				336,000.00
Total		2,136,669		5,331,580	$	550,000,510.00

Schedule 2.01

SCHEDULE 2.04

Bank Name:	Bank of America
	701 S. Taylor
	Amarillo, Texas
ABA #:	26009593
Acct #:	000007183925
Acct Name:	Riata Energy, Inc./dba SandRidge Energy

Schedule 2.04

SCHEDULE 3.24

Lariat Services, Inc.	Texas corporation
PetroSource Energy Company, L.P.	Texas limited partnership
ROC Gas Company	Texas corporation

Schedule 3.06

EXHIBIT A

FORM OF REGISTRATION RIGHTS AGREEMENT

[Filed as Exhibit 4.3 to the Registration Statement on Form S-1 (File No. 333-144004)]

 A-1

EXHIBIT B

FORM OF WARRANT

[Filed as Exhibit 4.6 to the Registration Statement on Form S-1 (File No. 333-144004)]

 B-1

EXHIBIT C

OPINION OF VINSON & ELKINS L.L.P.

EXHIBIT D

OPINION OF IN-HOUSE COUNSEL

EX-4.5

Exhibit 4.5

FORM OF PREFERRED STOCK

FACE OF SECURITY

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE COMPANY OR ANY TRANSFER AGENT APPOINTED BY THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH APPLICABLE RESTRICTIONS ON TRANSFER. UNTIL OTHERWISE DETERMINED, THE COMPANY HAS ELECTED TO ACT AS TRANSFER AGENT.

     THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS, (II) SUCH TRANSACTION IS PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (III) AN OPINION OF COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH OPINION STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT SUCH REGISTRATION.

     A STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF SHARES OF EACH CLASS OF STOCK OF THE CORPORATION, INCLUDING A DENIAL OF PREEMPTIVE RIGHTS, IS SET FORTH IN THE CERTIFICATE OF INCORPORATION OF THE CORPORATION. A COPY OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY IS ON FILE WITH THE DELAWARE SECRETARY OF STATE AND MAY BE OBTAINED BY THE RECORD HOLDER FREE OF CHARGE BY WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.

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Certificate Number
 
[                    ] Number of Shares of
Convertible Preferred Stock
[                    ]

Series A Convertible Preferred Stock
of
SandRidge Energy, Inc.

     SandRidge Energy, Inc., a Delaware corporation (the “Company”), hereby certifies that [___] (the “Holder”) is the registered owner of [___] fully paid and non-assessable preferred securities of the Company designated the Series A Convertible Preferred Stock, par value $0.001, (the “Preferred Stock”). The shares of Preferred Stock are transferable on the books and records of the Company, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Stock represented hereby are issued and shall in all respects be subject to the provisions of the Certificate of Designation dated December ___, 2006, as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.

     Reference is hereby made to select provisions of the Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.

     Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.

     If at any time a Transfer Agent other than the Company has been appointed and is acting, unless the Transfer Agent’s Certificate of Authentication hereon has been properly executed, these shares of Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.

2

     IN WITNESS WHEREOF, the Company has executed this certificate this ___day of December, 2006.

SANDRIDGE ENERGY, INC.
By:
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

3

REVERSE OF SECURITY

     Cash dividends on each share of Preferred Stock shall be payable at a rate per annum set forth in the face hereof or as provided in the Certificate of Designation.

     The shares of Preferred Stock shall be convertible into the Company’s Common Stock in the manner and according to the terms set forth in the Certificate of Designation.

     The Company is authorized to issue more than one class of stock and the Company will furnish without charge to each Holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock and the qualifications, limitations or restrictions of such preferences and/or rights.

4

EX-4.8

EXHIBIT 4.8

REGISTRATION RIGHTS AGREEMENT

by and among

SANDRIDGE ENERGY, INC.

and

THE PURCHASERS SET FORTH ON
SCHEDULE I HERETO

     REGISTRATION RIGHTS AGREEMENT, dated as of March 20, 2007, among SandRidge Energy, Inc., a Delaware corporation (together with any successor entity, herein referred to as the “Company”), and the several purchasers (the “Purchasers”) under the Purchase Agreement (as defined below).

     Pursuant to the Stock Purchase Agreement, dated as of February 12, 2007, among the Company and the Purchasers party thereto (the “Purchase Agreement”), the Purchasers have agreed to purchase from the Company an aggregate of up to 13,888,888 shares of Common Stock (the “Purchased Securities”). To induce the Purchasers to purchase the Purchased Securities, the Company has agreed to provide the registration rights set forth in this Agreement pursuant to Section 2.03(e) of the Purchase Agreement.

     The parties hereby agree as follows:

     1. Definitions. Capitalized terms used in this Agreement without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized terms shall have the following meanings:

     “144A Registration Rights Agreement”: The Resale Registration Rights Agreement, dated December 21, 2005, between the Company and Banc of America Securities LLC.

     “144A Registration Statement”: A Shelf Registration Statement or Piggyback Registration Statement (as such terms are defined in the 144A Registration Rights Agreement).

     “Affiliate” of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Agreement”: This Registration Rights Agreement, as amended from time to time.

     “Amendment Effectiveness Deadline Date”: has the meaning set forth in Section 2(f)(i) hereof.

     “Applicable Period”: As defined in Section 5(b).

     “AREP”: AREP O&G Holdings LLC or its permitted assigns.

     “Ares”: Ares Corporate Opportunities Fund II, L.P.

     “Blue Sky Application”: As defined in Section 7(a)(i) hereof.

     “Business Day”: A day, other than a Saturday or Sunday, that in the City of New York, is not a day on which banking institutions are authorized or required by law, regulation or executive order to close.

     “Closing Date”: The date of the first issuance of the Purchased Securities.

     “Commission”: Securities and Exchange Commission.

     “Common Stock”: The common stock, par value $0.001, of the Company.

     “Company”: As defined in the preamble hereto.

     “Effectiveness Period”: As defined in Section 2(a)(iii) hereof.

     “Effectiveness Target Date”: As defined in Section 2(a)(ii) hereof.

     “Exchange Act”: Securities Exchange Act of 1934, as amended.

     “Holder”: A Person who owns, beneficially or otherwise, Transfer Restricted Securities.

     “Indemnified Holder”: As defined in Section 7(a) hereof.

     “Liquidated Damages”: As defined in Section 4(a) hereof.

     “Liquidated Damages Payment Date”: The date on which a Registration Default occurs and then each March 31, June 30, September 30 and December 31 until all Registration Defaults have been cured.

     “Losses”: As defined in Section 7(e) hereof.

     “Majority of Holders”: Holders holding over 50% of the Transfer Restricted Securities outstanding.

     “Managing Underwriter”: The investment banker or investment bankers and manager or managers that administer an underwritten offering as bookrunners, if any, conducted pursuant to Section 9 hereof.

     “NASD”: National Association of Securities Dealers, Inc.

     “Notice and Questionnaire”: A written notice executed by the respective Holder and delivered to the Company containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Annex A hereto.

     “Notice Holder”: On any date, any Holder of Transfer Restricted Securities that has delivered a Notice and Questionnaire to the Company on or prior to such date.

     “Person”: An individual, partnership, corporation, company, unincorporated organization, trust, joint venture or a government or agency or political subdivision thereof.

     “Piggyback Registration Statement”: As defined in Section 3(a) hereof.

     “Plan of Distribution”: As defined in Section 5(b).

2

     “Prior Holder”: A Person, other than the Company, who owns, beneficially or otherwise, Transfer Restricted Securities (as such term is defined in the Prior Registration Rights Agreements) or who is party to the Shareholders Agreement.

     “Prior Registration Rights Agreements”: The 144A Registration Rights Agreement and the Registration Rights Agreement, dated November 21, 2006, among the Company and the other parties named therein.

     “Prospectus”: The prospectus included in a Shelf Registration Statement or Subsequent Shelf Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such prospectus.

     “Purchase Agreement”: As defined in the preamble hereto.

     “Purchased Securities”: As defined in the preamble hereto.

     “Purchasers”: As defined in the preamble hereto.

     “Record Holder”: With respect to any Liquidated Damages Payment Date, each Person who is a Holder on the 15^th day preceding the relevant Liquidated Damages Payment Date.

     “Registration Default”: As defined in Section 4(a) hereof.

     “Securities Act”: Securities Act of 1933, as amended.

     “Shareholders Agreement” shall mean that certain Shareholders Agreement dated November 21, 2006 by and among the Company and certain shareholders of the Company named therein as in effect on the date hereof.

     “Shelf Filing Deadline”: The later of:

     (a) the date 90 days following the date that the first 144A Registration Statement is declared effective by the Commission; and

     (b) the date identified in a written notice from Ares to the Company delivered to the Company prior to the date indicated in clause (a).

     “Shelf Registration Statement”: As defined in Section 2(a)(i) hereof.

     “Subsequent Shelf Registration Statement” has the meaning set forth in Section 2(c) hereof.

     “Suspension Notice”: As defined in Section 5(c) hereof.

     “Suspension Period”: As defined in Section 5(b)(ii) hereof.

     “Transfer Agent”: American Stock Transfer & Trust Company.

3

     “Transfer Restricted Securities”: Each share of Common Stock constituting the Purchased Securities (including any shares of Common Stock issued in respect of stock splits, stock dividends, stock combinations and similar transactions affecting the Purchased Securities) until the earlier of:

     (a) the date on which such share of Common Stock has been resold pursuant to the Shelf Registration Statement, Subsequent Shelf Registration Statement or a Piggyback Registration Statement;

     (b) other than for the purposes of Sections 3 and 9 (and to the extent applicable thereto, Sections 5 and 7), the date on which such share of Common Stock is transferred in compliance with Rule 144 under the Securities Act or may be sold or transferred by a person who is not an affiliate of the Company pursuant to Rule 144 under the Securities Act (or any other similar provision then in force) without any volume or manner of sale restrictions thereunder; or

     (c) the date on which such share of Common Stock ceases to be outstanding (whether as a result of repurchase and cancellation or otherwise).

     “Underwriter”: Any underwriter of Common Stock in connection with an offering thereof under the Shelf Registration Statement.

     “Underwritten Registration”: A registration in which Common Stock of the Company is sold to an Underwriter or Underwriters for reoffering to the public.

     Unless the context otherwise requires, the singular includes the plural, and words in the plural include the singular.

     2. Shelf Registration.

     (a) The Company shall:

     (i) as promptly as practicable but in no event later than the Shelf Filing Deadline, cause to be filed a registration statement pursuant to Rule 415 under the Securities Act or any similar rule that may be adopted by the Commission (the “Shelf Registration Statement”), which Shelf Registration Statement shall provide for the registration and resales, on a continuous or delayed basis, of all Transfer Restricted Securities held by Holders that have provided the information required pursuant to the terms of Section 2(b) hereof); provided that the Company shall promptly advise Ares in writing of the effectiveness and effective date of the first 144A Registration Statement to be declared effective by the Commission;

     (ii) use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act by the Commission not later than 91 days following the Shelf Filing Deadline (the “Effectiveness Target Date”), it being understood that, should the Commission require the Company to reduce the number of Transfer Restricted Securities being registered pursuant to the Shelf Registration Statement in order for the offering to

4

be eligible under Rule 415(a)(1)(i) under the Securities Act, the Company may so reduce the number of Transfer Restricted Securities being registered and will have an additional 20 days to use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective; and

     (iii) use its commercially reasonable efforts to keep the Shelf Registration Statement or any Subsequent Shelf Registration Statement continuously effective, supplemented and amended as required by the Securities Act and by the provisions of Section 5(b) hereof to the extent necessary to ensure that (A) it is available for resales by the Notice Holders and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced from time to time, until the earlier of (x) the date four years from the date the Shelf Registration Statement is declared effective by the Commission and (y) the date on which all Purchased Securities registered on the Shelf Registration Statement have been sold (the “Effectiveness Period”).

     (b) At the time the Shelf Registration Statement or any Subsequent Shelf Registration Statement is declared effective, each Holder that became a Notice Holder on or prior to the date two (2) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Transfer Restricted Securities in accordance with applicable law.

     (c) If the Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Transfer Restricted Securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Transfer Restricted Securities), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Transfer Restricted Securities (a “Subsequent Shelf Registration Statement”). If a Subsequent Shelf Registration Statement is filed, the Company shall use its commercially reasonable efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or Subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period.

     (d) The Company shall supplement and amend the Shelf Registration Statement or Subsequent Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or Subsequent Shelf Registration Statement, if required by the Securities Act or as reasonably requested by any Holder of Transfer Restricted Securities covered by such Shelf Registration Statement.

     (e) The Company shall cause the Shelf Registration Statement and each Subsequent Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement and

5

each Subsequent Shelf Registration Statement and any such amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act, and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading.

     (f) Each Holder agrees that if such Holder wishes to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement or a Subsequent Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(f) and Section 5(b). Each Holder wishing to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement or a Subsequent Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least ten (10) Business Days prior to any intended distribution of Transfer Restricted Securities under the Shelf Registration Statement or a Subsequent Shelf Registration Statement. From and after the date the Shelf Registration Statement or a Subsequent Shelf Registration Statement is declared effective the Company shall, as promptly as practicable after the date a Notice and Questionnaire is delivered to it, and in any event upon the later of (x) ten (10) Business Days after such date (but no earlier than tenth Business Days after effectiveness) or (y) ten (10) Business Days after the expiration of any Suspension Period in effect when the Notice and Questionnaire is delivered or put into effect within five Business Days of such delivery date:

     (i) if required by applicable law, file with the Commission a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Transfer Restricted Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use its reasonable best efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the “Amendment Effectiveness Deadline Date”) that is forty-five (45) days after the date such post-effective amendment is required by this clause to be filed;

     (ii) provide such Holder copies of the any documents filed pursuant to Section 2(f)(i); and

     (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(f)(i);

provided that if such Notice and Questionnaire is delivered during a Suspension Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Suspension Period in

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accordance with Section 5(b). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Shelf Registration Statement or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to five Business Days from the Expiration of a Suspension Period (and the Company shall incur no obligation to pay Liquidated Damages during such extension) if such Suspension Period shall be in effect on the Amendment Effectiveness Deadline Date.

     3. Piggyback Registration.

     (a) If, after the date hereof, the Company proposes to file a registration statement under the Securities Act providing for a public offering of the Company’s securities, other than the Shelf Registration Statement, any shelf registration statement under the Prior Registration Rights Agreements or the Shareholders Agreement or a registration statement on Form S-8 or Form S-4 or any similar form hereafter adopted by the Commission as a replacement therefor (including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, the “Piggyback Registration Statement”), the Company will notify each Holder of the proposed filing if clause (i) or (ii) of the following sentence applies, or only those affected Holders if clause (iii) of the following sentence applies. If (i) the Piggyback Registration Statement relates to an Underwritten Registration, (ii) the Shelf Registration Statement is not then effective or (iii) there are outstanding Transfer Restricted Securities not included in an effective Shelf Registration Statement or Subsequent Shelf Registration Statement, then each Holder in the case of clause (i) and (ii), and each such affected Holder in the case of clause (iii), shall be given an opportunity to include in such Piggyback Registration Statement all or any part of such Holder’s Transfer Restricted Securities. Each such Holder desiring to include in any such Piggyback Registration Statement all or part of such Holder’s Transfer Restricted Securities shall, within ten (10) days after delivery of the above-described notice by the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Transfer Restricted Securities such Holder wishes to include in such Piggyback Registration Statement and provide, as a condition to such inclusion, such information regarding itself, its Transfer Restricted Securities and the intended method of disposition of such securities as is required pursuant to Regulation S-K promulgated under the Securities Act to effect the registration of the Transfer Restricted Securities. Any election by any Holder to include any Transfer Restricted Securities in such Piggyback Registration Statement will not affect the inclusion of such Transfer Restricted Securities in the Shelf Registration Statement or Subsequent Shelf Registration Statement until such Transfer Restricted Securities have been sold under the Piggyback Registration Statement; provided, however, that at such time, the Company may remove from the Shelf Registration Statement or Subsequent Shelf Registration Statement the Transfer Restricted Securities sold pursuant to the Piggyback Registration Statement. Subject to paragraph (g) below, a Holder’s right to include Transfer Restricted Securities in the Piggyback Registration Statement shall be subject to any superior rights contained in the Prior Registration Rights Agreements or the Shareholders Agreement.

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     (b) At any time, the Company may terminate or withdraw any Piggyback Registration Statement referred to in this Section 3, and without any obligation to any such Holder whether or not any Holder has elected to include Transfer Restricted Securities in such registration. The Company may suspend the effectiveness and use of any Piggyback Registration Statement at any time for an unlimited amount of time whether or not any Holder has elected to include Transfer Restricted Securities in such registration.

     (c) The Company shall advise the Holders of the Managing Underwriters participating in any Underwritten Registration proposed under the Piggyback Registration Statement. The right of any such Holder’s Transfer Restricted Securities to be included in any such Piggyback Registration Statement pursuant to this Section 3 shall be conditioned upon such Holder’s participation in such Underwritten Registration and the inclusion of such Holder’s Transfer Restricted Securities in the Underwritten Registration to the extent provided herein. All Holders proposing to distribute their Transfer Restricted Securities through such Underwritten Registration shall enter into an underwriting agreement in customary form with the Managing Underwriters selected for such underwriting and complete and execute any questionnaires, powers of attorney, indemnities, securities escrow agreements and other documents reasonably required under the terms of such underwriting, and furnish to the Company such information in writing as the Company may reasonably request for inclusion in the Piggyback Registration Statement; provided, however, that no Holder shall be required to make any representations or warranties to or regarding, or agreements with, the Company or the Underwriters other than representations, warranties or agreements that are customary and reasonably requested by the Underwriters, provided, that such representations and warranties shall not relate to Company or its business or operations. Notwithstanding any other provision of this Agreement, if the Managing Underwriters determine in good faith that marketing factors require a limitation on the number of securities to be included, then the Managing Underwriters may exclude securities (including Transfer Restricted Securities) from the Piggyback Registration Statement and the Underwritten Registration, and any securities included in the Piggyback Registration Statement and the Underwritten Registration shall be allocated: first, to the Company (if the registration statement is filed on behalf of the Company for an offering of newly issued shares by the Company); and second, to each of the Prior Holders requesting inclusion of their securities in such registration statement, but only to the extent such Prior Holders are entitled to priority over Holders of Transferred Restricted Securities under the Prior Registration Rights Agreements and the Shareholders Agreement; and third, each of the Holders requesting inclusion of their Transfer Restricted Securities in such Piggyback Registration Statement, on a pro rata basis based on the total number of such securities requested to be included. If any Holder disapproves of the terms of any Underwritten Registration, such Holder may elect to withdraw therefrom by written notice to the Company and the Managing Underwriters, delivered at least five (5) Business Days prior to the effective date of the Piggyback Registration Statement. Any Transfer Restricted Securities excluded or withdrawn from such Underwritten Registration shall be excluded and withdrawn from the Piggyback Registration Statement.

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     (d) By electing to include Transfer Restricted Securities in the Piggyback Registration Statement, if any, the Holder shall be deemed to have agreed not to effect any sale or distribution of securities of the Company of the same or similar class or classes of the securities included in the Piggyback Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during such periods as reasonably requested (but in no event for a period longer than sixty (60) days following the effective date of the Piggyback Registration Statement, provided each of the executive officers and directors of the Company that hold shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company are subject to the same restriction for the entire time period required of the Holders hereunder) by the representatives of the Underwriters, if an Underwritten Registration.

     (e) Upon any underwritten offering consummated pursuant to an Underwritten Registration, Holders that sell Transfer Restricted Securities pursuant to such Underwritten Registration will not be able to sell any remaining Transfer Restricted Securities not included in such Underwritten Registration for a period reasonably requested by the Underwriters not to exceed ninety (90) days following the effective date of such Underwritten Registration, provided that if (i) each of the executive officers and directors of the Company that hold shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company, and (ii) each of AREP or any holder of more than 5% of the outstanding shares of Common Stock of the Company that are selling in the offering are subject to a shorter or no restrictive period or exceptions from such restrictive period, the Holders of Transfer Restricted Securities shall be subject to such shorter or no restrictive period and be entitled to any such exception for the entire time.

     (f) The Company’s obligation to file the Shelf Registration Statement shall not be affected by the filing or effectiveness of the Piggyback Registration Statement.

     (g) Notwithstanding anything to the contrary in this Section 3, in the event that a Holder’s right to include Transfer Restricted Securities in a Piggyback Registration Statement are inferior to the rights held by Prior Holders pursuant to the Prior Registration Rights Agreements or the Shareholders Agreement, including without limitation by way of not being permitted to include Transfer Restricted Securities in connection with any such Piggyback Registration Statement, the Company hereby agrees to use its commercially reasonable efforts to obtain the required consents from Prior Holders in order to obtain rights for such Holder that are pari passu with the Prior Holders, including without limitation the right to include Transfer Restricted Securities in such Piggyback Registration Statement.

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     4. Liquidated Damages.

     (a) If:

     (i) the Shelf Registration Statement is not filed with the Commission prior to or on the Shelf Filing Deadline; or

     (ii) the Shelf Registration Statement has not been declared effective by the Commission prior to or on the Effectiveness Target Date or a post-effective amendment required to be filed by Section 2(f) is not tendered effective by the applicable Amendment Effectiveness Deadline Date; or

     (iii) after the Shelf Registration Statement has been declared effective, Transfer Restricted Securities may not be disposed of by a Holder as a result of the delivery of a Suspension Notice or the Shelf Registration Statement shall cease for any reason (except as provided in Section 5(b)(ii) hereof) to remain continuously effective, supplemented and amended as required by the Securities Act and by the provisions hereof to the extent necessary to ensure that (A) it is available for resales by the Holders of Transfer Restricted Securities and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced; or

     (iv) the Company fails to comply with Section 5(b)(xvii) at any time during the Effectiveness Period;

(each such event referred to in foregoing clauses (i) through (iv), a (“Registration Default”)), the Company hereby agrees to pay damages (“Liquidated Damages”) with respect to the Transfer Restricted Securities for a Registration Default in an amount per share of Common Stock equal to 0.25% of the offering price per share set forth on Schedule 2.02 of the Purchase Agreement; provided, that, should a Registration Default occur primarily as a result of the Company’s compliance with any customary “lock-up” requested by the Underwriters in connection with the effectiveness of the first 144A Registration Statement, the Company will not be obligated to pay the damages described in this sentence. Additional liquidated damages will accrue daily commencing on the date of such Registration Default at an annual rate per share equal to 0.5% of such offering price of the Common Stock with respect to the first 90-day period following the occurrence of such Registration Default and will increase by an additional 0.5% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured up to a maximum rate of 2.0% per annum with respect to all Registration Defaults.

     (b) All accrued Liquidated Damages shall be paid in cash in arrears to Record Holders by the Company on each Liquidated Damages Payment Date. Upon the cure of all Registration Defaults relating to any particular share of Common Stock, the accrual of Liquidated Damages with respect to such share of Common Stock will cease.

     All obligations of the Company set forth in this Section 4 that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer

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Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full.

     The Liquidated Damages set forth above shall be the exclusive monetary remedy available to the Holders of Transfer Restricted Securities for each Registration Default.

     5. Registration Procedures.

     (a) In connection with the Shelf Registration Statement or Subsequent Shelf Registration Statement or any registration statement pursuant to Section 3 or 9, the Company shall comply with all the provisions of Section 5(b) hereof and shall use its reasonable best efforts to effect such registration in accordance with the terms hereof to permit the sale of the Transfer Restricted Securities.

     (b) In connection with the Shelf Registration Statement or Subsequent Shelf Registration Statement or any registration statement pursuant to Section 3 or 9 and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities, the Company shall:

     (i) Subject to any notice by the Company in accordance with this Section 5(b) of the existence of any fact or event of the kind described in Section 5(b)(iv)(D), use its reasonable best efforts to keep the registration statement continuously effective during the Effectiveness Period (in the case of a Shelf Registration Statement or Subsequent Shelf Registration Statement) or until all securities to be sold thereunder have been sold pursuant to such registration statement (in the case of a registration statement pursuant to Section 3 or 9)(as applicable, the “Applicable Period”); upon the occurrence of any event that would cause the registration statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the Effectiveness Period, the Company shall file promptly an appropriate amendment to the registration statement, a supplement to the Prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its reasonable best efforts to cause such amendment to be declared effective and the registration statement and the related Prospectus to become usable for their intended purposes as soon as practicable thereafter.

     (ii) Notwithstanding Section 5(b)(i) hereof, the Company may suspend the effectiveness of the Shelf Registration Statement or any Subsequent Shelf Registration (each such period, a “Suspension Period”). Upon such suspension, the Company shall give notice to the Holders that the availability of the registration statement is suspended and, upon actual receipt of any such notice, each Holder agrees not to sell any Transfer Restricted Securities pursuant to the registration statement until such Holder’s receipt of copies of the supplemented or amended Prospectus provided for in Section 5(b) hereof. The Suspension Period shall not exceed an aggregate of 90 days in any 360-day period. The Company shall not be

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required to specify in the written notice to the Holders the nature of the event giving rise to the Suspension Period.

     (iii) Prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement, the Subsequent Shelf Registration Statement and any registration statement pursuant to Section 3 or 9 as may be necessary to keep the registration statement effective during the Applicable Period; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all Common Stock covered by the registration statement during the Applicable Period in accordance with the intended method or methods of distribution by the selling Holders thereof set forth in the registration statement or supplement to the Prospectus.

     (iv) Advise any selling Holder that has provided in writing to the Company a telephone or facsimile number and address for notice, promptly and, if requested by such selling Holder, to confirm such advice in writing (which notice pursuant to clauses (B) through (D) below shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension):

     (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective,

     (B) of any request by the Commission for amendments to the registration statement or amendments or supplements to the Prospectus or for additional information relating thereto,

     (C) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the threatening or initiation of any proceeding for any of the preceding purposes, or

     (D) of the existence of any fact or the happening of any event, during the Effectiveness Period, that makes any statement of a material fact made in the registration statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the registration statement or the Prospectus in order to make the statements therein not misleading.

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     (v) If at any time the Commission shall issue any stop order suspending the effectiveness of the registration statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time and will provide to each Holder who is named in the registration statement prompt notice of the withdrawal of any such order.

     (vi) Make available at reasonable times for inspection by one or more representatives of the selling Holders, designated in writing by a Majority of Holders whose Transfer Restricted Securities are included in the registration statement, and any attorney or accountant retained by such selling Holders, all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act, and cause the Company’s officers, directors, managers and employees to supply all information reasonably requested by any such representative or representatives of the selling Holders, attorney or accountant in connection therewith.

     (vii) If requested by any selling Holders, promptly incorporate in the registration statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders may reasonably request to have included therein, including, without limitation, information relating to the “Plan of Distribution” of the Transfer Restricted Securities.

     (viii) Deliver to each selling Holder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; subject to any notice by the Company in accordance with this Section 5(b) of the existence of any fact or event of the kind described in Section 5(b)(iv)(D), the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto.

     (ix) Before any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or blue sky laws of such jurisdictions in the United States as the selling Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the registration statement; provided, however, that the Company shall not be required (A) to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in any jurisdiction where it is not now so subject, other than service of process for suits arising out of any offering pursuant to the registration

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statement, or (B) to subject itself to general or unlimited service of process or to taxation in any such jurisdiction if they are not now so subject.

     (x) Unless any Transfer Restricted Securities shall be in book-entry form only, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws); and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders may request at least two Business Days before any sale of Transfer Restricted Securities.

     (xi) Use its commercially reasonable efforts to cause the Transfer Restricted Securities covered by the registration statement to be registered with or approved by such other U.S. governmental agencies or authorities as may be necessary to enable the selling Holders thereof to consummate the disposition of such Transfer Restricted Securities.

     (xii) Subject to Section 5(b)(ii) hereof, if any fact or event contemplated by Section 5(b)(iv)(B) through (D) hereof shall exist or have occurred, use its commercially reasonable efforts to prepare a supplement or post-effective amendment to the registration statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

     (xiii) Provide CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the registration statement and provide the Transfer Agent with certificates for Common Stock that are in a form eligible for deposit with The Depository Trust Company.

     (xiv) Cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any Underwriter that is required to be undertaken in accordance with the rules and regulations of the NASD.

     (xv) Otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission and all reporting requirements under the rules and regulations of the Exchange Act.

     (xvi) Make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act as soon as practicable after the effective date of the registration statement and in any event no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the registration statement.

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     (xvii) Use its commercially reasonable efforts to satisfy the criteria for listing and list or include (if the Company meets the criteria for listing on such exchange or market) the Common Stock on the New York Stock Exchange, American Stock Exchange, The Nasdaq Global Market or the Nasdaq Global Select Market (as soon as practicable) including seeking to cure in its listing or inclusion application any deficiencies cited by the exchange or market), and thereafter maintain the listing on such exchange.

     (xviii) Provide to each Holder upon written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act after the effective date of the Shelf Registration Statement, unless such document is available through the Commission’s EDGAR system.

     (xix) In connection with any underwritten offering conducted pursuant to Section 3 or 9 hereof, make such representations and warranties to the selling Holders and the Underwriters, in form, substance and scope as are customarily made by issuers to selling Holders and Underwriters in primary underwritten offerings.

     (xx) In connection with any underwritten offering conducted pursuant to Section 3 or 9 hereof, obtain opinions and negative assurances of counsel to the Company and updates thereof (which counsel and opinions and negative assurances (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters) addressed to each selling Holder and the Underwriters, if any, covering such matters as are customarily covered in opinions and negative assurances requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and Underwriters.

     (xxi) In connection with any underwritten offering conducted pursuant to Section 3 or 9 hereof, obtain “comfort” letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary or predecessor of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement or Subsequent Shelf Registration Statement), addressed to each selling Holder of securities registered thereunder and the Underwriters, in customary form and covering matters of the type customarily covered in “comfort” letters in connection with primary underwritten offerings.

     (xxii) In connection with any underwritten offering conducted pursuant to Section 3 or 9 hereof, deliver such documents and certificates as may be reasonably requested by a Majority of Holders and the Managing Underwriters, including those to evidence compliance with Section 5(b)(iii) and 5(b)(xii) hereof.

     (xxiii) In connection with underwritten offering conducted pursuant to Section 3 or 9 hereof, the Company shall, if requested, promptly include or incorporate in a Prospectus supplement or post-effective amendment to the

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Registration Statement such information as the Managing Underwriters reasonably agree should be included therein and to which the Company does not reasonably object and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment.

     (xxiv) Enter into customary agreements (including, if requested, an underwriting agreement in customary form) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Common Stock, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof.

     (c) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice (a “Suspension Notice”) from the Company of the existence of any fact of the kind described in Section 5(b)(ii) or (iv) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until:

     (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 5(b)(xii) hereof; or

     (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus.

If so directed by the Company, each Holder will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such Suspension Notice.

     (d) Each Holder agrees by acquisition of a Transfer Restricted Security, that no Holder shall be entitled to sell any of such Transfer Restricted Securities pursuant to a Shelf Registration Statement or Subsequent Shelf Registration Statement, or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(e) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. The Company may require each Notice Holder of Common Stock to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such Common Stock as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably request in writing. Any

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sale of any Transfer Restricted Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its Plan of Distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its Plan of Distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its Plan of Distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made not misleading. The Company may exclude from such Shelf Registration Statement or Subsequent Shelf Registration Statement the Common Stock of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. The Company shall not include in any registration statement any information regarding, relating to, or referring to any Holder or its Plan of Distribution without the approval of such Holder in writing (not to be unreasonably withheld).

     6. Registration Expenses.

     All expenses incident to the Company’s performance of or compliance with this Agreement shall be borne by the Company regardless of whether a registration statement becomes effective, including, without limitation:

     (a) all registration and filing fees and expenses (including filings made with the NASD);

     (b) all fees and expenses of compliance with federal securities and state blue sky or securities laws;

     (c) all expenses of printing (including printing of Prospectuses and, if applicable, certificates for the Common Stock) and the Company’s expenses for messenger and delivery services and telephone;

     (d) all fees and disbursements of counsel to the Company;

     (e) all application and filing fees in connection with listing (or authorizing for quotation) the Common Stock on a national securities exchange or automated quotation system pursuant to the requirements hereof; and

     (f) all fees and disbursements of independent certified public accountants of the Company.

     The Company shall bear its internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal, accounting or other duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. The Company shall pay all expenses customarily borne by issuers in an underwritten offering as set forth in Section 9(c) hereof.

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     7. Indemnification And Contribution.

     (a) The Company agrees to indemnify and hold harmless each Holder of Transfer Restricted Securities, its directors, officers, and employees, Affiliates and agents and each Person, if any, who controls any such Holder within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Holder”), against any loss, claim, damage, liability or expense, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to resales of the Transfer Restricted Securities), to which such Indemnified Holder may become subject, insofar as any such loss, claim, damage, liability or action arises out of, or is based upon:

     (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Shelf Registration Statement, any Subsequent Shelf Registration Statement or any registration statement pursuant to Section 9 as originally filed or in any amendment thereof, in any Prospectus, or in any amendment or supplement thereto, or (B) any blue sky application or other document or any amendment or supplement thereto prepared or executed by the Company (or based upon written information furnished by or on behalf of the Company expressly for use in such blue sky application or other document or amendment or supplement) filed in any jurisdiction specifically for the purpose of qualifying any or all of the Transfer Restricted Securities under the securities law of any state or other jurisdiction (such application or document being hereinafter called a “Blue Sky Application”); or

     (ii) the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading,

and agrees to reimburse each Indemnified Holder promptly upon demand for any legal or other expenses reasonably incurred by such Indemnified Holder in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company relating to a Holder by or on behalf of such Holder (or its related Indemnified Holder) specifically for use therein.

     The Company also agrees to indemnify as provided in this Section 7(a) or contribute as provided in Section 7(e) hereof to Losses (as defined below) of each Underwriter, if any, of Common Stock registered under a Shelf Registration Statement, any Subsequent Shelf Registration Statement or any registration statement pursuant to Section 3 or 9, their directors, officers, employees, Affiliates or agents and each person who controls such Underwriter on substantially the same basis as that of the indemnification of the selling Holders provided in this Section 7(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 5(b)(xxiv) hereof.

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     (b) Each Holder, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, officers and employees, Affiliates and agents and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion a registration statement. In no event shall any Holder, its directors, officers and employees, Affiliates and agents or any person who controls such Holder be liable or responsible for any amount in excess of net proceeds received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Shelf Registration Statement, Subsequent Shelf Registration Statement or registration statement pursuant to Section 3 exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers and employees, Affiliates and agents or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

     (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party (i) shall not relieve it from any liability which it may have under paragraphs (a) or (b) of this Section 7 unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses, and (ii) shall not, in any event, relieve it from any liability which it may have to an indemnified party otherwise than under paragraphs (a) or (b) of this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Holders shall have the right to employ a single counsel to represent jointly the Holders and their officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Holders against the Company under this Section 7 if the Holders seeking indemnification shall have been advised by legal counsel that there may be one or more legal defenses available to such Holders and their respective officers, employees and controlling persons that are different from or additional to those available to the Company, and in that event, the fees and expenses of such separate counsel shall be paid by the Company.

     (d) The indemnifying party under this Section 7 shall not be liable for any settlement of any proceeding effected without its written consent, which shall not be withheld unreasonably, but if settled with such consent or if there is a final judgment for

19

the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 7(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

     (e) If the indemnification provided for in this Section 7 shall for any reason be unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability (or action in respect thereof) referred to therein, each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the aggregate amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability (including legal or other expenses reasonably incurred in connection with investigating or defending any loss, claim, liability, damage or action) (collectively “Losses”) (or action in respect thereof):

     (i) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders on the other in connection with the statements or omissions or alleged statements or alleged omissions that resulted in such loss, claim, damage or liability (or action in respect, or

     (ii) if the allocation provided by Section 7(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative faults referred to in Section 7(d)(i) but also the relative benefits received by the Company from the offering and sale of the Transfer Restricted Securities on the one hand and a Holder with respect to the sale by such Holder of the Transfer Restricted Securities on the other), as well as any other relevant equitable considerations.

The relative benefits received by the Company on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the net proceeds from the offering of the Purchased Securities purchased under the Purchase Agreement (before deducting expenses) received by the Company, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Transfer Restricted Securities on the other. The relative fault of the parties shall be

20

determined by reference to whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or written information furnished to the Company by or on behalf of the Holders specifically for use in a registration statement on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder agree that it would not be just and equitable if the amount of contribution pursuant to this Section 7(e) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (e).

     The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim.

     No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to contribute as provided in this Section 7(d) are several and not joint.

     (f) The provisions of this Section 7 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive the sale by a Holder of Transfer Restricted Securities.

     8. Rule 144A and Rule 144. The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. From and after the time a registration statement covering the Common Stock of the Company is declared effective until such time as there are no longer any Transfer Restricted Securities, the Company shall cause its Common Stock to be registered under Section 12 of the Exchange Act.

     9. Underwritten Registrations.

     (a) Any Holder of Transfer Restricted Securities who desires to do so may sell Transfer Restricted Securities (in whole or in part) in an underwritten offering; provided that (i) Holders of at least 15.0% in aggregate amount of the Transfer Restricted Securities then covered by the Shelf Registration Statement shall request such an offering

21

and (ii) at least such aggregate amount of such Transfer Restricted Securities with an aggregate value of at least $35 million shall be included in such offering; and provided further that the Company shall not be obligated to participate in more than one underwritten offering pursuant to this Agreement in any twelve-month period during the Effectiveness Period. Upon receipt of such a request, the Company shall provide all Holders of Transfer Restricted Securities written notice of the request, which notice shall inform such Holders that they have the opportunity to participate in the offering. If any of the Transfer Restricted Securities covered by the Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by Holders of a majority of Transfer Restricted Securities requesting such underwritten offering. The Company shall make all such filings with the Commission, including filing all necessary post effective amendments and supplements, as necessary to effect the offer and sale of Transfer Restricted Securities sought to be sold in such underwritten effort.

     (b) No person may participate in any underwritten offering unless such person (i) agrees to sell such person’s Common Stock on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements; (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; and (iii) if such Holder is not then a Notice Holder, such Holder returns a completed and signed Notice and Questionnaire to the Company in accordance with Section 2(f) hereof within a reasonable amount of time before such underwritten offering. No securities other than Transfer Restricted Securities shall be offered in such underwriting.

     (c) The Holders participating in any underwritten offering shall be responsible for any underwriting discounts and commissions subject to Section 6 and Section 7 and fees and expenses of their own counsel. The Company shall pay all expenses customarily borne by issuers in an underwritten offering, including but not limited to filing fees, the fees and disbursements of its counsel and independent public accountants and any printing expenses incurred in connection with such underwritten offering. Notwithstanding the foregoing or the provisions of Section 5(b)(xxii) hereof, upon receipt of a request from the Managing Underwriter or a representative of holders of a majority of the Transfer Restricted Securities to be included in an underwritten offering to prepare and file an amendment or supplement to the Shelf Registration Statement and Prospectus in connection with an underwritten offering, the Company shall be entitled to suspend the effectiveness of the Shelf Registration statement pursuant to Section 5(b)(ii).

     (d) The Company shall take all such other actions as the Holders or the Managing Underwriters participating in an underwritten offering pursuant to this Section 9 may reasonably request in order to expedite or facilitate such offering of senior management of the Company to provide customary due diligence assistance in connection with any offering and to participate in customary “road show” presentations in connection with any underwritten offerings in substantially the same manner as they would in an underwritten primary registered public offering by the Company of its Common Stock. Each Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company

22

to and for the benefit of such Underwriters also be made to and for such Holder’s benefit and that any or all of the conditions precedent to the obligations of such Underwriters under such underwriting agreement also be conditions precedent to its obligations. No Holder shall be required to make any representations or warranties to or agreements with the Company or the Underwriters other than representations, warranties or agreements that are customary and reasonably requested by the Underwriters, provided, that such representations and warranties shall not relate to Company or its business or operations. If any Holder disapproves of the terms of an underwriting, such Holder may elect to withdraw therefrom by notice to the Company and the Managing Underwriters.

     (e) Notwithstanding anything to the contrary in this Agreement, on or after April 1, 2010, any Holder of Purchased Securities who desires to do so may request that the Company effect the registration of such Holder’s Purchased Securities (in whole or in part) in an underwritten offering; provided that (i) Holders of at least 15.0% in aggregate amount of the Purchased Securities shall request such registration, (ii) an amount of Purchased Securities with an aggregate value of at least $35 million shall be included in such offering and (iii) a 144A Registration Statement has not been declared effective by the Commission; and provided further that the Company shall not be obligated to effect more than one such underwritten offering. Upon receipt of any request for registration pursuant to this Section 9(e), the Company shall promptly provide all Holders of Purchased Securities written notice of the request, which notice shall inform such Holders that they have the opportunity to participate in the offering. The Managing Underwriters shall be selected by Holders of a majority of the Purchased Securities requesting such underwritten offering. The Company shall make all such filings with the Commission, including filing all necessary post effective amendments and supplements, as necessary to effect the offer and sale of the Purchased Securities sought to be sold in such underwritten effort.

     10. Miscellaneous.

     (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations hereunder may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely, and that, in the event of any such failure, in addition to being entitled to exercise all rights provided to it herein or in the Purchase Agreement or granted by law, including recovery of liquidated or other damages, any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations hereunder. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

     (b) Actions Affecting Transfer Restricted Securities. The Company shall not, directly or indirectly, take any action that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities in a registration undertaken pursuant to this Agreement.

     (c) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with

23

respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. In addition, the Company shall not after the date hereof grant to any of its securityholders (other than the Holders of Transfer Restricted Securities in such capacity) the right to include any of its securities in the Shelf Registration Statement, Subsequent Shelf Registration Statement or the Piggyback Registration Statement or other registration statement, if any, provided for in this Agreement other than the Transfer Restricted Securities, unless pursuant to such grant, such holder may include such securities on the Holders’ Shelf Registration Statement, Subsequent Shelf Registration Statement or any Piggyback Registration Statement or other registration statement only to the extent that the inclusion of such securities will not reduce the amount of Transfer Restricted Securities of the Holders that is included on the Shelf Registration Statement or such Piggyback Registration Statement.

     (d) Amendments and Waivers. This Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of a Majority of Holders; provided however that with respect to any matter that directly or indirectly adversely affects the rights of a Holder or Holders in a manner different that a manner in which it affects the rights of other holders, the Company shall obtain the written consent of such adversely affected Holders. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Shelf Registration Statement and does not directly or indirectly adversely affect the rights of other Holders, may be given by a Majority of Holders, determined on the basis of Common Stock being sold rather than registered under such Shelf Registration Statement.

     (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first class mail (registered or certified, return receipt requested), facsimile transmission, or air courier guaranteeing overnight delivery:

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     (i) if to Ares, to:

Ares Management
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Facsimile: 310-201-4157
Attention: Jeffrey Serota;

With a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP
1888 Century Park East
Los Angeles, California 90067-1725
Facsimile: 310-712-8800
Attention: Alison S. Ressler
                Patrick S. Brown; and

     (ii) if to the Company, initially at its address set forth in the Purchase Agreement,

With a copy (which shall not constitute notice) to:

Vinson & Elkins LLP
First City Tower
1001 Fannin Street, Suite 2300
Houston, Texas 77002
Facsimile: 713-615-5531
Attention: T. Mark Kelly

     All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

     Any party hereto may change the address for receipt of communications by giving written notice to the others.

     (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities. The Company hereby agrees to extend the benefit of this Agreement to any Holder and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto.

     (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

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     (h) Jurisdiction. The Company agrees that any suit, action or proceeding against the Company brought by any Holder, the directors, officers, employees, Affiliates and agents of any Holder, or by any person who controls any Holder, arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any State or U.S. federal court in The City of New York and County of New York, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding. The Company hereby appoints CT Corporation as its authorized agent (the “Authorized Agent”) upon whom process may be served in any suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated herein which may be instituted in any State or U.S. federal court in The City of New York and County of New York, by any Holder, the directors, officers, employees, Affiliates and agents of any Holder, or by any person who controls any Holder, and expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect so long as any of the securities remain Transfer Restricted Securities. To the extent that the Company may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law. Notwithstanding the foregoing, any action arising out of or based upon this Agreement may be instituted by any Holder, the directors, officers, employees, Affiliates and agents of any Holder, or by any Person who controls any Holder, in any court of competent jurisdiction.

     (i) Common Stock Held by the Company or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its Affiliates (other than subsequent Holders if such subsequent Holders are deemed to be Affiliates solely by reason of their holding of such Common Stock) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

     (j) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

     (k) Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

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     (l) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.

     (m) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

COMPANY: SANDRIDGE ENERGY, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

[Signature Page to Registration Rights Agreement]

THE PURCHASERS: ARES CORPORATE OPPORTUNITIES FUND II, L.P.
By:	ACOF OPERATING MANAGER II, L.P., its Manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary

ARES SANDRIDGE, L.P.
By:	ACOF OPERATING MANAGER II, L.P., its Manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary

ARES SANDRIDGE 892 INVESTORS, L.P.
By:	ACOF OPERATING MANAGER II, L.P., its Manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary

TLW PROPERTIES, L.L.C.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Manager

[Signature Page to Registration Rights Agreement]

Annex A

SANDRIDGE ENERGY, INC.

FORM OF SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

     The undersigned beneficial holder of securities of SandRidge Energy, Inc. (the “Company”) understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Transfer Restricted Securities, in accordance with the terms of the registration rights agreement, to be dated as of November 21, 2006 (the “Registration Rights Agreement”), between the Company and the Purchasers named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Registration Rights Agreement.

     Each beneficial holder of Transfer Restricted Securities (each a “beneficial owner”), is entitled to the benefits of the Registration Rights Agreement. In order to sell or otherwise dispose of any Transfer Restricted Securities pursuant to the Shelf Registration Statement or any Subsequent Shelf Registration Statement, a beneficial owner of Transfer Restricted Securities generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of Transfer Restricted Securities and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions as described below). Beneficial owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling securityholders in the prospectus and therefore will not be permitted to sell any Transfer Restricted Securities pursuant to the Shelf Registration Statement or any Subsequent Shelf Registration Statement. Beneficial owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the Shelf Registration Statement or any Subsequent Shelf Registration Statement so that such beneficial owners may be named as selling securityholders in the related prospectus at the time of effectiveness. Upon receipt of a completed Notice and Questionnaire from a beneficial owner following the effectiveness of the Shelf Registration Statement or any Subsequent Shelf Registration Statement, the Company will, within ten (10) business days after such receipt, file such amendments to the Shelf Registration Statement or any Subsequent Shelf Registration Statement or supplements to the related prospectus as are necessary to permit such holder to deliver such prospectus to purchasers of Transfer Restricted Securities. The Company has agreed to pay liquidated damages pursuant to the Registration Rights Agreement under certain circumstances set forth therein.

     Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement or any Subsequent Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Transfer Restricted Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement or any Subsequent Shelf Registration Statement and the related prospectus.

Annex A - 1

NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Transfer Restricted Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Transfer Restricted Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) pursuant to the Shelf Registration Statement or any Subsequent Shelf Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

     Pursuant to the Registration Rights Agreement, the undersigned has agreed to indemnify and hold harmless the Company’s directors and officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from and against certain losses arising in connection with statements concerning the undersigned made, with the approval of the undersigned, not to be unreasonably withheld, in the Company’s Shelf Registration Statement or any Subsequent Shelf Registration Statement or the related prospectus in reliance upon the information provided in this Notice and Questionnaire.

     If the Selling Securityholder transfers all or any portion of the Transfer Restricted Securities listed in Item 3 below after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.

Annex A - 2

QUESTIONNAIRE

          Please respond to every item, even if your response is “none.” If you need more space for any response, please attach additional sheets of paper. Please be sure to indicate your name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the following questions.

          If you have any questions about the contents of this Questionnaire or as to who should complete this Questionnaire, please contact the General Counsel of the Company at telephone number:

(405) 753-5600

          The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

1. Your Identity and Background as the Beneficial Owner of the Transfer Restricted Securities.

(a) Your full legal name:

(b) Your business address (including street address) (or residence if no business address), telephone number and facsimile number:

Address:

 Telephone No.:

Fax No.:

(c) Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?

o Yes.

o No.

(d) If your response to Item 1(c) above is no, are you an “affiliate” of a broker-dealer registered pursuant to Section 15 of the Exchange Act?

o Yes.

o No.

Annex A - 3

For the purposes of this Item 1(d), an “affiliate” of a registered broker-dealer includes any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such broker-dealer, and does not include any individuals employed by such broker-dealer or its affiliates.

(e) Full legal name of person through which you hold the Transfer Restricted Securities — (i.e., name of your broker or the DTC participant, if applicable, through which your Transfer Restricted Securities are held):

Name of Broker:

DTC No.:

Contact person:

Telephone No.:

2.      Your Relationship with the Company.

(a) Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

o Yes.

o No.

(b) If your response to Item 2(a) above is yes, please state the nature and duration of your relationship with the Company:

3.      Your Interest in the Transfer Restricted Securities.

(a) State the type and amount of Transfer Restricted Securities beneficially owned by you:

State the CUSIP No(s). of such Transfer Restricted Securities beneficially owned by you:

Annex A - 4

(b) Other than as set forth in your response to Item 3(a) above, do you beneficially own any other securities of the Company?

o Yes.

o No.

(c) If your answer to Item 3(b) above is yes, state the type, the aggregate amount and CUSIP No. of such other securities of the Company beneficially owned by you:

Type:

Aggregate amount:

CUSIP No.:

(d) Did you acquire the securities listed in Item 3(a) above in the ordinary course of business?

o Yes.

o No.

(e) At the time of your purchase of the securities listed in Item 3(a) above, did you have any agreements or understandings, direct or indirect, with any person to distribute the securities?

o Yes.

o No.

(f) If your response to Item 3(e) above is yes, please describe such agreements or understandings:

4.      Nature of your Beneficial Ownership.

   (a) Check if the beneficial owner set forth in your response to Item 1(a) is any of the below:

   (i) A reporting company under the Exchange Act. o

   (ii) A majority owned subsidiary of a reporting company under the Exchange Act. o

   (iii) A registered investment fund under the 1940 Act. o

Annex A - 5

(b) If the beneficial owner of the Transfer Restricted Securities set forth in your response to Item 1(a) above is a limited partnership, state the names of the general partners of such limited partnership:

     (i) With respect to each general partner listed in Item 4(b) above who is not a natural person and is not publicly-held, name each shareholder (or holder of partnership interests, if applicable) of such general partner. If any of these named shareholders are not natural persons or publicly-held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly-held entity.

(c) Name your controlling shareholder(s) (the “Controlling Entity”). If the Controlling Entity is not a natural person and is not a publicly-held entity, name each shareholder of such Controlling Entity. If any of these named shareholders are not natural persons or publicly-held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly-held entity.

     (i) (A) Full legal name of Controlling Entity(ies) or natural person(s) who have sole or shared voting or dispositive power over the Transfer Restricted Securities:

     (B) Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:

Telephone No.:

Fax No.:

(C) Name of shareholders:

(ii) (A) Full legal name of Controlling Entity(ies):

Annex A - 6

     (B) Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:

Telephone No.:

Fax No.:

(iii) Name of shareholders:

5. Plan of Distribution.

Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Transfer Restricted Securities listed above in Item 3 pursuant to the Shelf Registration Statement or Subsequent Shelf Registration Statement only as follows (if at all): Such Transfer Restricted Securities may be sold from time to time directly by the undersigned or, alternatively, through Underwriters, broker-dealers or agents. If the Transfer Restricted Securities are sold through Underwriters, broker-dealers or agents, the Selling Securityholder will be responsible for underwriting discounts or commissions or agents’ commissions in accordance with the Registration Rights Agreement. Such Transfer Restricted Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve block transactions) (i) on any national securities exchange or quotation service on which the Transfer Restricted Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market. The Selling Securityholder may pledge or grant a security interest in some or all of the Transfer Restricted Securities owned by it and, if it defaults in the performance of its securited obligations, the pledgees or secured parties may offer and sell the Transfer Restricted Securities from time to time pursuant to the prospectus. The Selling Securityholder also may transfer and donate the Transfer Restricted Securities in other

Annex A - 7

circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling securityholder for purposes of this prospectus.

State any exceptions here:

Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Transfer Restricted Securities without the prior written agreement of the Company.

                    The undersigned acknowledges its obligation to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Transfer Restricted Securities pursuant to the Registration Rights Agreement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

                    The undersigned beneficial owner and selling securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as set forth therein. Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify the undersigned beneficial owner and selling securityholder against certain liabilities.

                    In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement or Subsequent Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement or Subsequent Shelf Registration Statement remains effective.

                    All notices to the beneficial owner hereunder and pursuant to the Registration Rights Agreement shall be made in writing to the undersigned at the address set forth in Item 1(b) of this Notice and Questionnaire.

                    By signing below, the undersigned acknowledges that it is the beneficial owner of the Transfer Restricted Securities set forth herein, consents to the disclosure of the information contained in this Notice and Questionnaire and the inclusion of such information in the Shelf Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related prospectus.

                    Once this Notice and Questionnaire is executed by the undersigned beneficial owner and received by the Company, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the undersigned beneficial owner. This Notice and Questionnaire shall be

Annex A - 8

governed in all respects by the laws of the State of New York, without giving effect to rules governing the conflict of laws.

Annex A - 9

     IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

NAME OF BENEFICIAL OWNER:
	(Please Print)
Signature:
Date:

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND
QUESTIONNAIRE TO RIATA ENERGY, INC. AS FOLLOWS:

Riata Energy, Inc.
1601 NW Expressway, Suite 350
Oklahoma City, OK 73118
Attention: Matthew McCann
Fax: (405) 753-5975

Annex A - 10

EX-4.9

EXHIBIT 4.9

STOCK PURCHASE AGREEMENT

by and among

SANDRIDGE ENERGY, INC.

and

THE PURCHASERS SET FORTH ON
SCHEDULE 2.02 HERETO

Table of Contents

ARTICLE I DEFINITIONS	1
Section 1.01 Definitions	1
ARTICLE II SALE AND PURCHASE	7
Section 2.01 Sale and Purchase	7
Section 2.02 Closing.	7
Section 2.03 The Company’s Deliveries	7
Section 2.04 Purchasers’ Deliveries	8
Section 2.05 Independent Nature of Purchasers’ Obligations and Rights	8
Section 2.06 Additional Purchasers	8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	9
Section 3.01 No Registration	9
Section 3.02 No Integration	9
Section 3.03 Disclosure Document	9
Section 3.04 Authorization of the Purchase Agreement	9
Section 3.05 Authorization of the Purchased Securities	10
Section 3.06 Authorization and Enforceability of the Operative Documents; Compliance with Credit Agreements	10
Section 3.07 No Material Adverse Change	10
Section 3.08 Independent Accountants	10
Section 3.09 Preparation of the Financial Statements	11
Section 3.10 Incorporation and Good Standing of the Company and its Subsidiaries	11
Section 3.11 Capitalization and Other Capital Stock Matters	12
Section 3.12 Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required	12
Section 3.13 No Material Actions or Proceedings	13
Section 3.14 All Necessary Permits, etc.	13
Section 3.15 Title to Properties	14
Section 3.16 Condition of Properties	14
Section 3.17 Company Not an “Investment Company”	14
Section 3.18 Insurance.	14
Section 3.19 No Restriction on Distributions	15
Section 3.20 Related Party Transactions	15
Section 3.21 No General Solicitation	15
Section 3.22 Compliance with Environmental Laws	15
Section 3.23 Brokers	16
Section 3.24 Subsidiaries	16
Section 3.25 Taxes	16
Section 3.26 ERISA Matters	17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER	17
Section 4.01 Authorization	17

Section 4.02 No Conflicts	17
Section 4.03 Certain Fees	18
Section 4.04 Purchase in Ordinary Course	18
Section 4.05 Unregistered Securities	18
ARTICLE V CONDITIONS	20
Section 5.01 Conditions Precedent to the Obligations of the Purchasers at the Closing	20
Section 5.02 Conditions Precedent to the Obligations of the Company	21
ARTICLE VI ADDITIONAL AGREEMENTS	22
Section 6.01 Debt Covenant	22
Section 6.02 Bridge Credit Agreement Efforts	22
ARTICLE VII MISCELLANEOUS	22
Section 7.01 Termination by Mutual Consent	22
Section 7.02 Termination by Either Purchasers or the Company	22
Section 7.03 Interpretation; Severability	22
Section 7.04 Survival of Representations and Warranties	23
Section 7.05 Waivers; Remedies; Amendments	23
Section 7.06 Binding Effect; Assignment	23
Section 7.07 Non-Disclosure	24
Section 7.08 Communications	24
Section 7.09 Expenses	25
Section 7.10 Entire Agreement	25
Section 7.11 Governing Law	25
Section 7.12 Fees and Expenses	25
Section 7.13 Execution in Counterparts	25

Schedules and Exhibits

Schedule 2.02	Purchasers
Schedule 2.04	Wiring Instructions
Schedule 3.12(b)	Non-Contravention
Schedule 3.24	List of Significant Subsidiaries of the Company
Exhibit A	Form of Registration Rights Agreement
Exhibit B	Opinion of Vinson & Elkins L.L.P.
Exhibit C	Opinion of In-House Counsel
Exhibit D	Shareholders’ Agreement

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STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT, dated as of February 12, 2007 (this “Agreement”), is by and among SANDRIDGE ENERGY, INC., a Delaware corporation (the “Company”), and each of the investors signatory hereto and listed for convenience on Schedule 2.02 hereto (each a “Purchaser” and collectively, the “Purchasers”).

     WHEREAS, the Company desires to issue and sell up to 13,888,888 shares of its common stock, par value $0.001 per share (the “Common Stock”);

     WHEREAS, Ares Corporate Opportunity Fund II, L.P. (“Ares”) desires to purchase or to cause permitted assignees to purchase 11,111,111 shares of Common Stock from the Company subject to the terms and conditions of this Agreement;

     WHEREAS, TLW Properties, L.L.C. desires to purchase 2,777,777 shares of Common Stock from the Company subject to the terms and conditions of this Agreement;

     WHEREAS, pursuant to Section 5.01 of the Securities Purchase Agreement (“Securities Purchase Agreement”), dated November 20, 2006, by and among the Company. and the purchasers party thereto (“Prior Holders”), the Prior Holders have a right to purchase a number of shares of Common Stock (the “Preemptive Right Shares”) at the same price and on the same terms and conditions as set forth in this Agreement; and

     WHEREAS, pursuant to Section 5.01(c) of the Securities Purchase Agreement, in the event the Prior Holders do not elect to purchase all of the Preemptive Right Shares, the Company may sell any or all of the Preemptive Right Shares to any Person at the same price and on the same terms and conditions as set forth in this Agreement.

     NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

     Section 1.01 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings specified in this Section 1.01.

     “Accreted Value” has the meaning specified in the Certificate of Designations of the Preferred Stock.

     “Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

     “Agreement” has the meaning specified in the preamble to this Agreement.

     “Ares” has the meaning specified in the recitals to this Agreement.

     “Ares Shareholders Agreement” has the meaning specified in Section 2.03(e).

     “Bridge Credit Agreement” means the Credit Agreement, dated as of November 21, 2006, among the Company, each lender from time to time party thereto and Bank of America, N.A., as may be amended, modified or supplemented as of the date of this Agreement.

     “Business Day” means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in New York, New York.

     “Certificate of Designation” means the Certificate of Designation of Series A Convertible Preferred Stock of the Company, in the form filed with the Secretary of State of the State of Delaware on December 11, 2006.

     “Closing” has the meaning specified in Section 2.02.

     “Closing Date” shall mean the date that is the later of (i) March 1, 2007 and (ii) the fifth Business Day following the day on which the last to be satisfied or waived of the conditions set forth in Article V (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement, or at such other time and date as the parties hereto mutually shall agree.

     “Code” means the Internal Revenue Code of 1986.

     “Commission” means the United States Securities and Exchange Commission.

     “Common Stock” has the meaning set forth in the recitals to this Agreement.

     “Common Unit” means a purchase unit consisting of a number of shares of Common Stock and a Preferred Stock Warrant

     “Company” has the meaning specified in the preamble to this Agreement.

     “Company Principals” means Tom Ward, N. Malone Mitchell 3rd or their respective Affiliates; provided however, that in no event shall a “Company Principals” include the Company or any of its Subsidiaries.

     “Confidentiality Agreement” means the Confidentiality Agreement dated February 5, 2007 between the Company and ACOF Operating Manager II, L.P.

     “Conversion Price” has the meaning specified in the Certificate of Designations of the Preferred Stock.

     “Credit Agreement” means the Credit Agreement, dated as of November 21, 2006, among the Company, each lender from time to time party thereto and Bank of America, N.A., as

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administrative agent and L/C issuer, as may be amended, modified or supplemented as of the date of this Agreement.

     “Disclosure Document” means (i) in the case of Ares and its permitted assignees, the draft registration statement on Form S-1 provided by the Company on February 6, 2007, excluding the information set forth under the headings “Use of Proceeds,” “Principal and Selling Shareholders,” “Certain U.S. Tax Consequences to Non-U.S. Holders,” and “Underwriting,” and (ii) in the case of any other Purchasers, the disclosure document provided with such Purchaser’s Subscription Agreement.

     “Environmental Claims” has the meaning specified in Section 3.22.

     “Environmental Laws” has the meaning specified in Section 3.22.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; provided, however, that an item described in any of items (a) through (f) shall not constitute an ERISA Event unless it could reasonably be expected to result in a Material Adverse Effect or it relates to an event which could reasonably be expected to result in a Material Adverse Effect.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “Existing Instrument” has the meaning specified in Section 3.12(a).

     “GAAP” means generally accepted accounting principles in the United States in effect from time to time.

     “Governmental Authority” means, with respect to a particular Person, the country, state, county, city and political subdivisions in which such Person or such Person’s Property is located or that exercises valid jurisdiction over any such Person or such Person’s Property, and

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any court, agency, department, commission, board, bureau or instrumentality of any of them that exercises valid jurisdiction over any such Person or such Person’s Property.

     “Investment Company Act” means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “IPO” shall have the meaning set forth in the Certificate of Designation for the Preferred Stock.

     “Law” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation or common law.

     “Lien” means any lien, encumbrance, security interest, equity, charge or other interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based in Law or contract or other instrument, and whether such obligation or claim is fixed or contingent, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purpose of this Agreement, a Person shall be deemed to be the owner of any Property that it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in connection with a financing.

     “Material Adverse Change” has the meaning specified in Section 3.07.

     “Material Adverse Effect” has the meaning specified in Section 3.10.

     “Materials of Environmental Concern” has the meaning specified in Section 3.22.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Operative Documents” means this Agreement, the Registration Rights Agreement and the Ares Shareholders Agreement.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Pension Plan” means any “employee pension benefit plan” (as such term is define in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permits” means, with respect to the Company or any of the Subsidiaries, any licenses, permits, variances, consents, authorizations, waivers, grants, franchises, concessions,

4

exemptions, orders, registrations and approvals of Governmental Authorities or other Persons necessary for the ownership, leasing, operation, occupancy and use of its Properties and the conduct of its businesses as currently conducted.

     “Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Company or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Preemptive Right Shares” has the meaning specified in the recitals to this Agreement.

     “Preferred Stock” means shares of the Company’s Series A Convertible Preferred Stock, par value $0.001.

     “Preferred Stock Warrant” means the warrants to purchase Preferred Stock issued pursuant to the Securities Purchase Agreement.

     “Prior Holders” has the meaning specified in the recitals to this Agreement.

     “Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

     “Purchase Price” means, with respect to a particular Purchaser, the amount of such Purchaser’s Purchased Securities multiplied by $18.00.

     “Purchased Securities” means, with respect to a particular Purchaser, the number of shares of Common Stock set forth opposite such Purchaser’s name under the column entitled “Shares Purchased” on Schedule 2.02 hereto or in such Purchaser’s Subscription Agreement.

     “Purchaser” and “Purchasers” have the respective meanings specified in the preamble to this Agreement.

     “Registration Rights Agreement” means the Registration Rights Agreement by and between the Company and the Purchasers in the form attached hereto as Exhibit A.

     “Regulation D” has the meaning specified in Section 3.21.

     “Related Parties” shall mean with respect to any of Tom Ward and N. Malone Mitchell 3rd, his wife, children and grandchildren and any entities, trusts and other Affiliates, whether or not controlled, the sole beneficiaries or beneficial owners of which are Tom Ward or Malone, as applicable, his children and/or grandchildren (and/or such entities, trusts or Affiliates of which Tom Ward or N. Malone Mitchell 3rd, as applicable, his children and/or grandchildren their wives, children and grandchildren are the sole direct or indirect beneficiaries or beneficial

5

owners); provided, however, that in no event shall the Company or any of its Subsidiaries be deemed to be a “Related Party”.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than the events for which the 30 day notice period has been waived.

     “Representatives” of any Person means the officers, directors, employees, agents, counsel, accountants, investment bankers and other representatives of such Person.

     “Sale” (and “Sell” shall have a correlative meaning) means, with respect to any shares, the sale, transfer, assignment or similar disposition (excluding pledge, encumbrance or hypothecation) of such shares in which cash, securities or other property is received as consideration.

     “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

     “Securities Purchase Agreement” has the meaning specified in the recitals to this Agreement.

     “Shareholders Agreement” means the Shareholder Agreement, dated November 21, 2006, among the Company, the Company Principals and the other parties thereto as in effect on such date.

     “Significant Subsidiaries” has the meaning specified in Section 3.10.

     “Subscription Agreement” has the meaning specified in Section 2.06.

     “Subsidiary” or “Subsidiaries” shall mean, as to the Company, any entity (or those entities, as the case may be) of which securities or other ownership interests having ordinary voting power to elect a majority of the Board or other persons performing similar functions of that entity are at the time directly or indirectly owned by the Company.

     “Transfer” (and “Transferee” shall have a correlative meaning) means, directly or indirectly, to Sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the Sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any shares beneficially owned by a Person or any interest in any shares beneficially owned by a Person.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pensions Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

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ARTICLE II

SALE AND PURCHASE

     Section 2.01 Sale and Purchase. Subject to the terms and conditions hereof, the Company hereby agrees to issue and sell to each Purchaser, severally and not jointly and each Purchaser hereby agrees to purchase from the Company, the Purchased Securities for the Purchase Price.

     Section 2.02 Closing. The consummation of the sale and purchase of the Purchased Securities hereunder (the “Closing”) shall take place on the Closing Date, at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Suite 2500, Houston, Texas 77002.

     Section 2.03 The Company’s Deliveries. At the Closing, the Company will deliver, or cause to be delivered, to each Purchaser:

     (a) A certificate representing the Purchased Securities of such Purchaser;

     (b) A cross-receipt executed by the Company certifying that it has received a wire transfer as of the Closing Date in an amount equal to the Purchase Price of such Purchaser;

     (c) An Opinion of Vinson & Elkins L.L.P., as counsel to the Company, addressed to each of the Purchasers, substantially in the form attached hereto as Exhibit B;

     (d) An opinion of Matthew McCann, as in-house counsel for the Company, addressed to each of the Purchasers, substantially in the form attached hereto as Exhibit C;

     (e) A copy of the Shareholders Agreement, in the form attached hereto as Exhibit D (the “Ares Shareholders Agreement”), dated as of the Closing Date and executed by the Company;

     (f) A copy of the Registration Rights Agreement, in the form attached hereto as Exhibit A, dated as of the Closing Date and executed by the Company;

     (g) An executed consent of Banc of America Securities LLC pursuant to the Purchase Agreement, dated December 15, 2005;

     (h) A certificate of Secretary of the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Purchasers, certifying as to (i) the certificate of incorporation of the Company; (ii) the by-laws of the Company; (iii) the resolutions of the board of directors of the Company authorizing the execution and performance of this Agreement and the Registration Rights Agreement; (iv) validly adopted and effective resolutions of the board of directors of the Company increasing the number of directors of the Company by one and appointing an individual designated in writing by Ares at least two days prior to the Closing Date to serve as a director of the Company for a term running at least until the annual meeting of stockholders to be held during 2008; and (v)

7

incumbency and signatures of the officers of the Company executing this Agreement, the Registration Rights Agreement and any related certificates; and

     (i) A certificate of the Chief Executive Officer and Chief Financial Officer, dated as of the Closing Date, in form and substance reasonably satisfactory to the Purchasers, certifying to such matters as reasonably requested by the Purchasers.

     Section 2.04 Purchasers’ Deliveries. At the Closing, each Purchaser will deliver, or cause to be delivered, to the Company:

     (a) Payment to the Company of the Purchase Price of such Purchaser by wire transfer of immediately available funds to the account designated by the Company on Schedule 2.04;

     (b) A cross-receipt executed by such Purchaser and delivered to the Company certifying that it has received the Purchased Securities of such Purchaser as of the Closing Date, as evidenced by the certificate referenced in Section 2.03(a);

     (c) A copy of the Shareholders’ Agreement, in the form attached hereto as Exhibit D, dated as of the Closing Date and executed by the Company; and

     (d) A copy of the Registration Rights Agreement, dated as of the Closing Date and executed by such Purchaser.

     Section 2.05 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of the other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. The representations and warranties of each Purchaser under this Agreement are several and not joint with the representations and warranties of the other Purchasers, and no Purchaser shall be deemed to have made any representations and warranties with respect to any other Purchasers under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser’s obligation to purchase its Purchased Securities is not conditioned on the contemporaneous closing of the purchase of Purchased Securities by any other Purchaser and, if, for any reason, any Purchaser shall refuse to enter into this Agreement or shall fail to consummate its obligations hereunder, all obligations of any other Purchaser hereunder shall remain in full force and effect.

     Section 2.06 Additional Purchasers.

     (a) Promptly upon the execution of this Agreement, the Company shall comply with Section 5.01(b) of the Securities Purchase Agreement. To the extent any Prior Holder elects to

8

purchase any Preemptive Right Shares, such Prior Holder shall enter into an agreement (a “Subscription Agreement”) pursuant to which such Prior Holder agrees to purchase a specified amount of Preemptive Right Shares and become bound by the terms and conditions of this Agreement as if such Prior Holder was signatory hereto as a Purchaser on the date of this Agreement. Any Prior Holder who purchases Preemptive Right Shares shall be deemed a “Purchaser” for all purposes under this Agreement;

     (b) In the event any Prior Holders elect to purchase any Preemptive Right Shares, the number of shares to be purchased by Ares and its permitted assignees shall be reduced by the aggregate number of Preemptive Right Shares so purchased; provided, however, at the written request of Ares, the Company shall issue and sell additional shares of Common Stock to Ares and/or its permitted assignees in an amount necessary to permit them to purchase in the aggregate up to 11,111,111 shares of Common Stock.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Purchasers:

     Section 3.01 No Registration. Assuming the accuracy of the representations and warranties of the Purchasers contained in Article IV and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Purchased Securities to the Purchasers in the manner contemplated by this Agreement, to register the Purchased Securities under the Securities Act or any other securities Laws.

     Section 3.02 No Integration. None of the Company or any of its Subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any “security” (as defined in the Securities Act) that is or will be integrated with the sale of the Purchased Securities in a manner that would require registration under the Securities Act of the Purchased Securities.

     Section 3.03 Disclosure Document. The Disclosure Document and other information provided by the Company to each Purchaser for the purpose of deciding whether to acquire the Purchased Securities (other than the Company’s financial and other projections describing its proposed business), as of the date of such information and the date hereof, when read together, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial projections and other estimates delivered to the Purchasers by the Company were prepared in good faith by the Company based on its experience in the industry and on assumptions of fact and opinion as to future events that the Company believed to be reasonable at the time the projections and other estimates were delivered to the Purchasers and continues to believe are reasonable as of the date of this Agreement; however, the Company does not warrant that it will achieve such projection or has it assumed any obligations to update such projections.

     Section 3.04 Authorization of the Purchase Agreement. Each Operative Document has been duly authorized, executed and delivered by the Company and constitutes the valid and

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binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as to rights to indemnification thereunder may be limited by applicable Law.

     Section 3.05 Authorization of the Purchased Securities. The Purchased Securities have been duly authorized by the Company for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company to the Purchasers pursuant to this Agreement on the Closing Date, will be validly issued, fully paid and non-assessable, and such shares shall not be subject to any preemptive or similar right other than pursuant to Section 5.01 of the Securities Purchase Agreement.

     Section 3.06 Authorization and Enforceability of the Operative Documents; Compliance with Credit Agreements. Each of the Operative Documents has been duly authorized by the Company and, when executed and delivered by the Company, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as to rights to indemnification thereunder may be limited by applicable Law. The Company is in compliance in all material respects with the terms of the Credit Agreement and the Bridge Credit Agreement, and each representation and warranty contained in the Credit Agreement or the Bridge Credit Agreement was true and correct as of the date of such agreement.

     Section 3.07 No Material Adverse Change. Except as otherwise disclosed in the Disclosure Document, subsequent to the respective dates as of which information is given in the Disclosure Document: (i) there has been no material adverse change, effect or event or development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, assets or results of operations (other than as a result of developments affecting the oil and gas industry generally that do not have a disproportionate effect on the Company and its Subsidiaries taken as a whole), whether or not arising from transactions in the ordinary course of business, of the Company and its Subsidiaries taken as a whole (a “Material Adverse Change”), (ii) the Company and its Subsidiaries, taken as a whole, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered into any material transaction or agreement other than in the ordinary course of business; and (iii) there has been no cash dividend or distribution of any kind declared, paid or made by the Company or, except for (x) dividends paid to the Company or any wholly-owned Subsidiary of the Company, any of its Subsidiaries on any class of capital stock or other security or repurchase or redemption by the Company or any of its Subsidiaries of any class of capital stock or other security and (y) the cash dividend to be paid on February 15, 2007 with respect to the outstanding Preferred Stock.

     Section 3.08 Independent Accountants. PricewaterhouseCoopers LLP and Grant Thornton LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) and supporting schedules included in the Disclosure Document, are independent registered public accountants with respect

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to the Company as required by the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder.

     Section 3.09 Preparation of the Financial Statements. The financial statements of the Company included in the Disclosure Document present fairly the consolidated financial position of the Company and its consolidated Subsidiaries as of and at the dates indicated and present fairly the results of operations and cash flow of the Company and its consolidated subsidiaries of and at the dates indicated. The financial statements of NEG Oil & Gas, LLC included in the Disclosure Document present fairly the consolidated financial position of NEG Oil & Gas, LLC and its consolidated subsidiaries as of and at the dates indicated and present fairly the results of operations and cash flow of NEG Oil & Gas, LLC and its consolidated subsidiaries of and at the dates indicated. Such financial statements of the Company and NEG Oil & Gas, LLC comply as to form with the applicable accounting requirements of Regulation S-X and have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set forth in the Disclosure Document under the captions “Summary—Summary Consolidated Historical and Combined Pro Forma Financial Data”, “Capitalization”, and “Selected Historical Financial Data” fairly present the information set forth therein on a basis consistent with that of the complete financial statements or pro forma financial statements of the consolidated entity to which they relate contained in the Disclosure Document. The pro forma condensed consolidated financial statements of the Company and its subsidiaries and the related notes thereto and the other pro forma financial data included in the Disclosure Document have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly presented on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.

     Section 3.10 Incorporation and Good Standing of the Company and its Subsidiaries. Each of the Company and its significant subsidiaries, as defined by Rule 405 under the Securities Act (the “Significant Subsidiaries”), has been duly incorporated or otherwise formed and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, and has power and authority (corporate or otherwise) to own or lease, as the case may be, and operate its properties and to conduct its business as presently conducted and, in the case of the Company, to enter into and perform its obligations under each Operative Document. Each of the Company and each Significant Subsidiary is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result or reasonably be expected to result in a material adverse effect on the condition, financial or otherwise, or on the earnings, business, properties, assets or results of operations, whether or not arising from transactions in the ordinary course of business, of the Company and its Subsidiaries, taken as a whole (a “Material Adverse Effect”). All of the issued and outstanding shares of capital stock, or similar equity interest, of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company, directly or through subsidiaries, free and clear of any Lien, except that the Company’s obligations under the Credit Agreement are secured by a negative pledge on any of the Company’s non-mortgage properties.

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     Section 3.11 Capitalization and Other Capital Stock Matters. As of the date hereof, the authorized capital of the Company consists of: (i) 50,000,000 shares of preferred stock, par value of $0.001 per share, of which 2,625,000 shares are designated as Preferred Stock, 2,136,669 of which are issued as of the date of this Agreement, and (ii) 400,000,000 shares of Common Stock, 92,038,922 of which are issued as of the date of this Agreement without giving effect to the shares of Common Stock to be issued pursuant to this Agreement. Except for warrants issued as part of the Common Units issued pursuant to the Securities Purchase Agreement, 482,381 shares of Preferred Stock issuable upon the exchange of the Common Units issued pursuant to the Securities Purchase Agreement (based on an Accreted Value of $210.00 per share of Preferred Stock and assuming the surrender of 5,331,580 shares of Common Stock) and 21,366,680 shares of Common Stock issuable upon conversion of the shares of Preferred Stock issued pursuant to the Securities Purchase Agreement (based on a Conversion Price of $21.00 per share of Preferred Stock), the Company has not issued any other options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of its capital stock or other security. Except for pursuant to the terms of the Preferred Stock and other customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders), and except for the rights granted pursuant to Section 5.01(c) of the Securities Purchase Agreement or the Shareholder Agreement, the issuance and sale of the shares of Common Stock hereunder will not obligate the Company to issue shares of Common Stock or other securities to any Person or result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those described in the Disclosure Document. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Disclosure Document accurately presents and summarizes such plans, arrangements, options and rights.

     Section 3.12 Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required.

          (a) Except as set forth Schedule 3.12, neither the execution, performance nor the delivery of this any Operative Document by the Company or any of its Subsidiaries, nor the performance of its obligations hereunder or thereunder, (i) will result in a violation or breach of its charter or bylaws (or other applicable organizational document), (ii) will, with or without the giving of notice or the passage of time, or both, violate, or be in conflict with, breach of, or constitute a default under, or cause or permit the termination or the acceleration of the maturity of, any material indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or

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other instrument to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an “Existing Instrument”), (iii) will require notice to or the consent of any party to any agreement or commitment, including, without limitation, any lease or license to which the Company is a party, or by which it or its properties is bound or subject other than those notices or consents that have been given or received; (iv) result in the creation or imposition of any security interest, lien, or other encumbrance upon any property or assets of the Company under any agreement or commitment to which it is a party, or by which it or its properties is bound or subject; or (v) violate or breach any material statute or Law or any judgment, decree, order, regulation or rule of any court or Governmental Authority to which the Company, its Subsidiaries or their properties is bound or subject.

          (b) Except as set for the Schedule 3.12, the Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated hereby and thereby (i) have been duly authorized by all necessary corporate action; (ii) will not conflict with or constitute a breach of, or default under, or result in the termination (or a right of termination) under, the acceleration of any obligations under or the creation or imposition of any Lien upon any property or assets of the Company or any of its Subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument or contract or other agreement or instrument to which the Company or any of its Subsidiaries is a party and (iii) will not result in any violation of any material Law, regulation, judgment, order or decree, applicable to the Company or any of its Subsidiaries, of any Governmental Authority having jurisdiction over the Company or any of its Subsidiaries or any of its or their properties;

          (c) No consent, approval, authorization or other order of, or registration or filing with, any court or other Governmental Authority or agency is required for the Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated hereby or thereby, except (i) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act and the rules and regulations promulgated thereunder and (ii) such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws.

     Section 3.13 No Material Actions or Proceedings. Except as otherwise disclosed in the Disclosure Document, there are no legal or governmental actions, suits, hearings or investigtions or proceedings pending or, to the Company’s knowledge, threatened (i) against or affecting the Company or any of its Subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its Subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) it is reasonable likely that such action, suit or proceeding would be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to have a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement.

     Section 3.14 All Necessary Permits, etc. The Company and each Subsidiary possess such valid and current licenses, certificates, authorizations or permits issued by the appropriate local, state, federal or foreign regulatory agencies or Governmental Authority necessary to

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conduct their respective businesses except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of revocation or modification of, non-compliance with or proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, and in the case of a notice or proceedings, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect.

     Section 3.15 Title to Properties. Each of the Company and its Subsidiaries has (i) generally satisfactory title to its oil and gas properties, title investigations having been carried out by the Company or its Subsidiaries in accordance with the practice in the oil and gas industry in the areas in which the Company and its Subsidiaries operate, (ii) good and marketable title to all other real property owned by it (including pipeline and other easement rights) to the extent necessary to carry on its business, and (iii) good and marketable title to all personal property owned by it, in each case free and clear of all Liens and defects except such as are described in the Disclosure Document or such as do not materially affect the value of the properties of the Company and its Subsidiaries, taken as a whole, and do not interfere with the use made and proposed to be made of such properties, by the Company and its Subsidiaries, taken as a whole, and all of the easements, leases and subleases material to the business of the Company and its Subsidiaries, taken as a whole, and under which the Company or any of its Subsidiaries holds or uses properties described in the Disclosure Document, are in full force and effect, and neither the Company nor any of its Subsidiaries has any notice of any claim that has been asserted by anyone adverse to the rights of the Company or its subsidiaries under any of the easements, leases or subleases mentioned above, or affecting or questioning the rights of the Company or any Subsidiary thereof to the continued possession or use of the easement or leased or subleased premises that would reasonably be expected to have a Material Adverse Effect.

     Section 3.16 Condition of Properties. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the plants, buildings, structures and equipment owned by the Company and its Subsidiaries are in good operating condition and repair and have been reasonably maintained consistent with standards generally followed in the industry in which the Company and its Subsidiaries operate (giving due account to the age and length of use of same, ordinary wear and tear excepted), are adequate and suitable for their present uses and, in the case of plants, buildings and other structures, are structurally sound.

     Section 3.17 Company Not an “Investment Company”. The Company is not, and, after receipt of payment for the Purchased Securities and application of the proceeds of this offering will not be, required to register as an “investment company” within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act.

     Section 3.18 Insurance. Each of the Company and its Subsidiaries are insured by recognized, and to the knowledge of the Company, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against

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theft, damage, destruction, acts of terrorism or vandalism and earthquakes. All policies of insurance and fidelity or surety bonds insuring the Company or any of its Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its Subsidiaries are in compliance, in all material respects, with the terms of such policies and instruments; and there are no material claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such Subsidiary has, in the past three years, been refused any insurance coverage sought or applied for. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not have a Material Adverse Effect.

     Section 3.19 No Restriction on Distributions. No Subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company, except as described in or contemplated by the Disclosure Document.

     Section 3.20 Related Party Transactions. There are no business relationships or related-party transactions involving the Company or any of its Subsidiaries or any other person required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act in the Disclosure Document which have not been disclosed as required.

     Section 3.21 No General Solicitation. None of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation D”)), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with the offering of the Purchased Securities (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Purchased Securities except for this Agreement, and the Company will not enter into any such arrangement except for the Registration Rights Agreement and as may be contemplated thereby.

     Section 3.22 Compliance with Environmental Laws. Except as otherwise disclosed in the Disclosure Document (i) neither the Company nor any of its Subsidiaries is in violation of any Law, order, permit or other requirement relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, “Environmental Laws”), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its Subsidiaries under

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applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its Subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its Subsidiaries is in violation of any Environmental Law, except, in each case, as would not, individually or in the aggregate, have a Material Adverse Effect; (ii) there is no claim, action or cause of action filed with a court or Governmental Authority, no investigation with respect to which the Company has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its Subsidiaries, now or in the past (collectively, “Environmental Claims”), pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) to the Company’s knowledge, there are no past, present or anticipated future actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law, require expenditures to be incurred pursuant to Environmental Law, except as would not, individually or in the aggregate, have a Material Adverse Effect; and (iv) neither the Company nor any of its Subsidiaries is subject to any pending or, to the Company’s knowledge, threatened proceeding under Environmental Law to which a governmental authority is a party and which is reasonably likely to result in monetary sanctions of $100,000 or more.

     Section 3.23 Brokers. Except as otherwise disclosed in the Disclosure Document, there is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

     Section 3.24 Subsidiaries. The Subsidiaries listed on Schedule 3.24 attached hereto are the only Significant Subsidiaries of the Company.

     Section 3.25 Taxes. The Company and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect.

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     Section 3.26 ERISA Matters.

          (a) Each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws except for such events of noncompliance which could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (b) There are no pending or, to the best knowledge of the Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

          (c) With respect to each Plan, (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; in each case, which could not reasonably be expected to result in a Material Adverse Effect.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER

     Each Purchaser, severally and not jointly, represents and warrants to the Company, as to itself only, that:

     Section 4.01 Authorization. Such Purchaser (a) is duly incorporated or formed, as applicable, validly existing and in good standing under the laws of its jurisdiction of organization and (b) has all requisite corporate, limited liability company or partnership, as applicable, power and authority, and has all governmental licenses, authorizations, consents and approvals to execute and deliver this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby.

     Section 4.02 No Conflicts. The execution, delivery and performance by such Purchaser of this Agreement and the Registration Rights Agreement and compliance by such Purchaser with the terms and provisions hereof and thereof, and the purchase of the Purchased Securities by such Purchaser do not and will not constitute a breach of, or a default under, the certificate of incorporation, bylaws, partnership agreement or similar organizational documents of such Purchaser, or any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which such Purchaser is a party or by which it may be bound or to which its properties is subject, nor will any such action result in any violation of any

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existing Law (assuming compliance with the Securities Act and applicable securities and Blue Sky Laws of any other jurisdiction) to which such Purchaser or its property is subject.

     Section 4.03 Certain Fees. No fees or commissions for which the Company could be liable are or will be payable by such Purchaser to brokers, finders, or investment bankers with respect to the purchase of any of its Purchased Securities or the consummation of the transactions contemplated by this Agreement. Such Purchaser agrees that it will indemnify and hold harmless the Company from and against any and all claims, demands, or liabilities for broker’s, finder’s, placement, or other similar fees or commissions arising through such Purchaser in connection with the purchase of such Purchaser’s Purchased Securities or the consummation of the transactions contemplated by this Agreement.

     Section 4.04 Purchase in Ordinary Course. Such Purchaser is purchasing its Purchased Securities in the ordinary course of its business and neither Purchaser has entered into any arrangement with any person to resell its Purchased Securities or to participate in the distribution of such Purchased Securities.

     Section 4.05 Unregistered Securities.

     (a) Investment. The Purchased Securities are being acquired for its own account and with no intention of distributing the Purchased Securities or any part thereof other than in accordance with the Securities Act and other applicable securities and blue sky laws, and the Purchaser has no present intention of selling or granting any participation in or otherwise distributing the same in any transaction in violation of the Securities Act or the securities or blue sky laws of any other jurisdiction. If such Purchaser should in the future decide to dispose of any of the Purchased Securities, such Purchaser understands and hereby agrees that it may do so only in compliance with the Securities Act and applicable securities and blue sky laws of any other jurisdiction, as then in effect, which may include a sale contemplated by any Disclosure Document pursuant to which the Purchased Securities are then being offered.

     (b) Exemption. Such Purchaser understands that (i) the Purchased Securities (A) have not been registered under the Securities Act or any state securities Laws, (B) will be issued in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof and/or Regulation D promulgated thereunder and (C) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings, and (ii) the Purchaser must therefore bear the economic risk of such investment indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt therefrom.

     (c) Nature of Purchasers. Such Purchaser represents and warrants to the Company that it is one of the following as indicated on such Purchaser’s signature page hereto:

          (i) (A) an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act and a “qualified institutional buyer” as defined in Rule 144A

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promulgated under the Securities Act and (B) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Securities, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment;

          (ii) (A) not a U.S. Person (as defined in Regulation S under the Securities Act, which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee, respectively, is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the United States) and is not purchasing the Purchased Securities on behalf of, or for the account or benefit of, a person in the United States or a U.S. Person; (B) the Purchased Securities have not been offered to such Purchaser in the United States, and the individuals making the order to purchase the Purchased Securities and executing and delivering this Agreement on behalf of such Purchaser were not in the United States when the order was placed and this Agreement was executed and delivered; (C) it undertakes and agrees that it will not offer, sell or otherwise transfer the Purchased Securities except: (1) to the Company, (2) outside the United States in accordance with Rule 903 or 904 of Regulation S under the Securities Act, and in compliance with applicable local laws and regulations, (3) inside or outside the United States after one year pursuant to the exemption from registration under the Securities Act provided by Rule 144 thereunder, (4) to a person it reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, (5) inside the United States, in any other transaction exempt from registration under the Securities Act and, in any event, in compliance with any applicable state securities laws of the United States, provided that prior to any transfer pursuant to this clause (5), the Company may require a legal opinion reasonably satisfactory to the Company that such transfer is exempt from registration under the Securities Act and any applicable state securities laws or (6) pursuant to a Disclosure Document effective under the Securities Act and covering such offer, sale or transfer; and (D) it agrees not to engage in hedging transactions involving the Purchased Securities unless in compliance with the Securities Act; or

          (iii) an institutional “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities Act and (B) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Securities, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment.

     (d) Receipt of Information; Authorization. Such Purchaser acknowledges that it has (a) had access to the Disclosure Document and (b) been provided a reasonable opportunity to ask questions of and receive answers from Representatives of the Company, and to be furnished requested information, regarding such matters sufficient to

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enable such Purchaser to evaluate the risks and merits of purchasing the Purchased Securities and consummating the transactions contemplated by this Agreement.

     (e) Legend. It is understood that any certificates evidencing the Purchased Securities will bear the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS, (II) SUCH TRANSACTION IS PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (III) AN OPINION OF COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH OPINION STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT SUCH REGISTRATION.”

Certificates evidencing the Purchased Securities and the certificates representing shall not be required to contain such legend or any other legend after (i) such securities are registered for resale under the Securities Act, (ii) following any sale of such securities pursuant to and in accordance with Rule 144, (iii) if such securities are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Staff of the SEC).

     (f) No Other Representations or Warranties. Such Purchaser acknowledges and agrees that the Company is not making and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Agreement.

ARTICLE V
CONDITIONS

     Section 5.01 Conditions Precedent to the Obligations of the Purchasers at the Closing. The obligation of the Purchasers to acquire the Purchased Securities at the Closing is subject to the satisfaction by the Purchasers, at or before the Closing, of each of the following conditions:

     (a) Representations and Warranties. The representations and warranties of the Company contained herein shall in the aggregate be true and correct in all material respects (without giving effect to any qualifications as to materiality therein) as of the date when made and as of the Closing Date as though made on and as of such date (except for those that are limited to a certain date);

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     (b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing, including, without limitation, delivering or causing the delivery of those items required to be delivered pursuant to Section 2.03;

     (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by this Agreement;

     (d) Ares Board Appointment. At or prior to Closing, an individual selected by Ares shall have been appointed to the board of directors of the Company effective upon consummation of the Closing;

     (e) Banc of America Securities Consent. The consent to the issuance and sale of the Purchased Securities of Banc of America Securities LLC pursuant to the Purchase Agreement, dated December 15, 2005 shall have been duly obtained prior to the Closing; and

     (f) Antitrust. The applicable waiting period and any extension thereof and any approvals under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, shall have terminated, expired or been received.

     Section 5.02 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Purchased Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

     (a) Representations and Warranties. The representations and warranties of the Purchasers contained herein shall in the aggregate be true and correct in all material respects (without giving effect to any qualifications as to materiality therein) as of the date when made and as of the Closing Date as though made on and as of such date (except for those that are limited to a certain date); and

     (b) Performance. The Purchasers shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing, including, without limitation, delivering or causing the delivery of those items required to be delivered pursuant to Section 2.04; and

     (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by this Agreement.

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ARTICLE VI
ADDITIONAL AGREEMENTS

     Section 6.01 Debt Covenant. The Company covenants and agrees that the Company and its Subsidiaries shall not incur debt for borrowed money in violation of the debt incurrence limitations set forth in Section 10(a)(ii) and 10(a)(iii) of the Certificate of Designations, unless either (x) Ares shall have consented to such debt incurrence in writing or (y) a valid amendment, modification, or waiver of the provisions of Section 10(a)(ii) and/or 10(a)(iii) of the Certificate of Designations, or vote or consent by the holders of a majority of the outstanding Preferred Stock, permit the incurrence of such debt for borrowed money in excess of that currently permitted under Section 10(a); provided, however, that this Section 6.01 shall expire and be of no further force and effect upon the earlier to occur of (i) the expiration of Section 10(a)(ii) or 10(a)(iii) of the Certificate of Designations, as the case may be, in each case in accordance with Section 10(b) of the Certificate of Designations and (ii) Ares and its permitted assignees ceasing to beneficially own at least 5,555,556 shares of Purchased Securities.

     Section 6.02 Bridge Credit Agreement Efforts. The Company agrees to use its commercially reasonable efforts to obtain prior to Closing a waiver from the required lenders pursuant to Section 10.01 of the Bridge Credit Agreement. Such waiver shall waive any requirement under the Bridge Credit Agreement that any proceeds from the purchase and sale of the Purchased Securities be used to pay down any loans outstanding under the Bridge Credit Agreement.

ARTICLE VII
MISCELLANEOUS

     Section 7.01 Termination by Mutual Consent. This Agreement may be terminated and the sale and purchase of the Purchased Securities hereunder may be abandoned at any time prior to the Closing, by mutual written consent of (a) the Company and (b) the Purchasers purchasing at least a majority of the Purchased Securities.

     Section 7.02 Termination by Either Purchasers or the Company. This Agreement may be terminated and the sale and purchase of the Purchased Securities may be abandoned at any time prior to the Closing by action of either (a) the Company or (b) the Purchasers purchasing at least a majority of the Purchased Securities if the Closing shall not have been consummated by June 30, 2007; provided that the right to terminate this Agreement pursuant to this Section 7.02 shall not be available to any party that has breached its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure of a condition to the consummation of the sale and purchase of the Purchased Securities.

     Section 7.03 Interpretation; Severability. Article, Section, Schedule, and Exhibit references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any party has an obligation under this Agreement, the expense of complying with that obligation shall be an expense of such party unless otherwise specified. If any provision of

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this Agreement is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions shall remain in full force and effect.

     Section 7.04 Survival of Representations and Warranties. The representations and warranties set forth in Section 3.05 hereunder shall survive the execution and delivery of this Agreement indefinitely. The remainder of the representations or warranties set forth in this Agreement shall survive the execution and delivery of this Agreement until the earlier of (i) ten (10) Business Days following the delivery of audited financial statements of the Company for the year ended December 31, 2007 and (ii) an IPO (as defined in the Certificate of Designations). . The covenants made in this Agreement shall survive the Closing and remain operative and in full force and effect regardless of acceptance of any of the Purchased Securities by the Purchasers and payment therefor and repayment, conversion, exercise or repurchase thereof. The Company shall indemnify, defend, protect and hold harmless each Purchaser and the officers, directors, partners, members, agents, employees and Affiliates of each of them from and against any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, costs of preparation and reasonable attorneys’ fees of one counsel to the Purchasers, promptly as incurred, arising out of or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any certificate, instrument or document contemplated hereby to the extent such losses, claims, damages, liabilities, settlement costs and expenses exceed $36.36 million in the aggregate, or (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any certificate, instrument or document contemplated hereby.

     Section 7.05 Waivers; Remedies; Amendments.

     (a) No Waiver; Remedies Cumulative. No failure or delay on the part of any party in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any right, power, or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

     (b) Amendments and Modifications. Except as otherwise provided herein, no amendment, waiver, consent or modification, of any provision of this Agreement shall be effective unless signed by each of the parties hereto affected by such amendment, waiver, consent or modification. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party hereto from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on any party hereto in any case shall entitle any party hereto to any other or further notice or demand in similar or other circumstances.

     Section 7.06 Binding Effect; Assignment. This Agreement shall be binding upon the Company, the Purchasers, and their respective successors and permitted assigns. Except as

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expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns. For the avoidance of doubt, following the date hereof but prior to the Closing Date, Ares may assign portions of its right to purchase Purchased Securities hereunder to one or more Qualified Institutional Buyers (as such term is defined in Rule 144A under the Securities Act; provided that each such assignee shall agree in writing with the Company to be bound by the term and conditions hereof as if an original signatory hereto, upon which any such assignee shall be deemed a “Purchaser” for all purposes under this Agreement; provided further that no such assignment shall relieve Ares of its obligation to purchase all of its Purchased Securities in the event any such assignee defaults in its obligation to purchase any such portion of the Purchased Securities.

     Section 7.07 Non-Disclosure. Notwithstanding anything herein to the contrary, each Confidentiality Agreement shall remain in full force and effect according to its terms regardless of any termination of this Agreement.

     Section 7.08 Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

     (a) If to a Purchaser, to the contact information set forth on such Purchaser’s signature page hereto.

     (b) If to the Company:

1601 NW Expressway, Suite 1600
Oklahoma City, Oklahoma 73118
Attention: General Counsel
Facsimile: (405) 753-5975

with a copy (which shall not constitute notice) to:

Vinson & Elkins L.L.P.
First City Tower
1001 Fannin, Suite 2500
Houston, Texas 77002
Attention: James M. Prince
Facsimile: (713) 615-5531

or to such other address as the Company or such Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified mail, return receipt requested, or regular mail, if mailed; when receipt acknowledged, if sent via facsimile; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

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     Section 7.09 Expenses. Upon the Closing, all costs and expenses incurred by Purchasers in connection with this Agreement and the transactions contemplated hereby shall be paid by the Company.

     Section 7.10 Entire Agreement. This Agreement and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those set forth or referred to herein or therein with respect to the rights granted by the Company or any of its Affiliates or each of the Purchasers or any of their Affiliates set forth herein or therein. This Agreement and the other agreements and documents referred to herein supersede all prior agreements and understandings between the parties with respect to such subject matter.

     Section 7.11 Governing Law. This Agreement will be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflicts of laws.

     Section 7.12 Fees and Expenses. The Company shall bear its own expenses and legal fees incurred on their behalf with respect to this Agreement and the transactions contemplated hereby. If the Closing occurs, the Company shall promptly upon submission of invoices reimburse to Ares the direct out-of-pocket expenses incurred by Ares in connection with the the transactions contemplated hereby, including legal fees incurred by Ares with respect to this Agreement and the transactions contemplated hereby. If the Closing does not occur, Ares shall bear its own expenses and legal fees incurred on their behalf with respect to this Agreement and the transactions contemplated hereby.

     Section 7.13 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth.

SANDRIDGE ENERGY, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer

[Signature Page to Purchase Agreement]

THE PURCHASERS:
ARES CORPORATE OPPORTUNITIES FUND II, L.P.
By:	ACOF Operating Manager II, L.P., its manager
By:	/s/ Jeff Serota
Name:	Jeff Serota
Title:	Vice President

Amount of Purchased Securities	11,111,111
Aggregate Purchase Price ($18/share)	$                          199,999,998.00
Address for Notice	1999 Avenue of the Stars
	Suite 1900
	Los Angeles, CA 90067
	c/o Ares Management
	Facsimile: (310) 201-4157

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

TLW PROPERTIES, L.L.C.
By:	/s/ Tom L. Ward
Name:	Tom L. Ward
Title:	Manager

Amount of Purchased Securities	2,777,777
Aggregate Purchase Price ($18/share)	$                             49,999,986
Address for Notice	SandRidge Energy, Inc.
	1601 Northwest Expressway, Suite 1600
	Oklahoma City, Oklahoma 73118
	Attention: Tom L. Ward
	Facsimile No.: (405) 848-5143
	with a copy to:
	(which shall not constitute notice)
	Vinson & Elkins LLP
	1001 Fannin Street, Suite 2500
	Houston, Texas 77002
	Attention: T. Mark Kelly, Esq.                   James M. Prince, Esq.
	Facsimile No.: (713) 615-5962

The Purchaser referenced above hereby certifies that it is (check one):

o a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

[Signature Page to Purchase Agreement]

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: TLW PROPERTIES, L.L.C.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Manager

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	156,448
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	632,180
Aggregate Purchase Price ($18/share)	$11,379,240.00
Address for Notice	Tom L. Ward
	P.O. Box 54525
	Oklahoma City, OK 73154-1525
	Facsimile: (405)848-5143

The Purchaser referenced above hereby certifies that it is (check one):

¨ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

þ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: SILVER OAK CAPITAL, L.L.C.
By:	/s/ Michael L. Gordon
	Name:	Michael L. Gordon
	Title:	Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	41,096
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	166,063
Aggregate Purchase Price ($18/share)	$2,989,134.00
Address for Notice	245 Park Avenue — 26th Floor
	New York, NY 10167
	Facsimile: (212)867-6395

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: LEONARDO, L.P.
By:	/s/ Michael L. Gordon
	Name:	Michael L. Gordon
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	17,229
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	69,619
Aggregate Purchase Price ($18/share)	$1,253,142.00
Address for Notice	245 Park Avenue, 26th Floor
	New York, NY 10167
	Facsimile: (212)867-6395

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: BLUE RIDGE INVESTMENTS, L.L.C.
By:	/s/ Raymond Cubero
	Name:	Raymond Cubero
	Title:	Vice President

Number of Additional Preemptive Shares
to be purchased (cannot exceed amount
of Additional Preemptive Shares as
indicated on Schedule A)	45,347 (subject to cutback to be in compliance with NASD 2710 rules)
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	132,614
Aggregate Purchase Price ($18/share)	$2,387,052.00
Address for Notice	Daven Patel
	214 N Tryon Street
	Charlotte, NC 28255
	NC1-027-14-01
	Facsimile: (704)387-3621

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: CENTAURUS CAPITAL LLC
By:	/s/ John Arnold
	Name:	John Arnold
	Title:	President

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	28,342
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	86,183
Aggregate Purchase Price ($18/share)	$2,061,450.00
Address for Notice	3050 Post Oak Blvd. #291
	Houston, TX 77056
	Facsimile: (713)554-1350

The Purchaser referenced above hereby certifies that it is (check one):

¨ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

þ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: CREDIT SUISSE SECURITIES (USA) LLC
By:	/s/ Jeff Andreski
	Name:	Jeff Andreski
	Title:	Managing Director

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	20,939
Aggregate Purchase Price ($18/share)	$376,902.00
Address for Notice	Greg Grimaldi
	c/o Credit Suisse
	11 Madison Avenue
	New York, NY 10010
	Facsimile: (646)935-7716

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: FARALLON CAPITAL PARTNERS, L.P. By: Farallon Partners, LLC,        Its General Partner
Name:	/s/ Monica R. Landry
	Title: Monica R. Landry            Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	11,253
Aggregate Purchase Price ($18/share)	$2,002,554.00
Address for Notice	Farallon Capital Management LLC
	One Maritime Plaza, Suite 2100
	San Francisco, CA 94111
	Facsimile: (415)421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P. By: Farallon Partners, LLC,        Its General Partner
Name:	/s/ Monica R. Landry
	Title: Monica R. Landry            Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	88,717
Aggregate Purchase Price ($18/share)	$1,596,906.00
Address for Notice	Farallon Capital Management LLC
	One Maritime Plaza, Suite 2100
	San Francisco, CA 94111
	Facsimile: (415)421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7)  under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P. By: Farallon Partners, LLC,        Its General Partner
Name:	/s/ Monica R. Landry
	Title: Monica R. Landry            Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	7,040
Aggregate Purchase Price ($18/share)	$126,720.00
Address for Notice	Farallon Capital Management LLC
	One Maritime Plaza, Suite 2100
	San Francisco, CA 94111
	Facsimile: (415)421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P. By: Farallon Partners, LLC,        Its General Partner
Name:	/s/ Monica R. Landry
	Title: Monica R. Landry            Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	4,222
Aggregate Purchase Price ($18/share)	$75,996.00
Address for Notice	Farallon Capital Management LLC
	One Maritime Plaza, Suite 2100
	San Francisco, CA 94111
	Facsimile: (415)421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

¨ a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

¨ an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: TINICUM PARTNERS, L.P.
By:	Farallon Partners, LLC,
	Its General Partner
Name:	/s/ Monica R. Landry
	Title:	Monica R. Landry
		Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	4,222
Aggregate Purchase Price ($18/share)	$75,996.00
Address for Notice	Farallon Capital Management LLC
	One Maritime Plaza, Suite 2100
	San Francisco, CA 94111
	Facsimile: (415)421-2133

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: GOLDMAN, SACHS & CO.
By:	/s/ Gaurav Bhandari
	Name:	Gaurav Bhandari
	Title:	Managing Member

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	222,222.2 shares*
Aggregate Purchase Price ($18/share)	$4,000,000.00
Address for Notice	Sabrina Liak and Gaurav Bhandari
	1 New York Plaza
	New York, NY 10004
	Facsimile: (212)256-4869

The Purchaser referenced above hereby certifies that it is (check one):

o  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

* not to exceed NASD 2710 proportionate ownership limits

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: HBK FUND L.P.
BY:	HBK SERVICES LLC, INVESTMENT ADVISOR
By:	/s/ J. Baker Gentry, Jr.
	Name:	J. Baker Gentry, Jr.
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	215,459
Aggregate Purchase Price ($18/share)	$3,878,262.00
Address for Notice	c/o HBK Services LLC
	300 Crescent Court, Suite 700
	Dallas, TX 75201
	Facsimile: (214)758-1207

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: HBK FUND L.P.
By:	HBK SERVICES LLC, INVESTMENT ADVISOR
By:	/s/ Kevin O’Neal
	Name:	Kevin O’Neal
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	70,885
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	286,314
Aggregate Purchase Price ($18/share)	$5,153,652
Address for Notice	c/o HBK Services LLC
	300 Crescent Court, Suite 700
	Dallas, TX 75201
	Facsimile: (214)758-6107

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: TEMPO MASTER FUND LP
By:	/s/ Donald P. McCarthy
	Name:	Donald P. McCarthy
	Title:	CFO

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	46,988
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	189,871
Aggregate Purchase Price ($18/share)	$3,417,678.00
Address for Notice	c/o JD Capital Management LLC
	Two Greenwich Plaza , 2nd Floor
	Greenwich, CT 06830
	Facsimile: (203)485-8920

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: MAGNETAR CAPITAL FUND, LTD
By:	Magnetar Financial LLC
Its	Investment Manager
By:	/s/ Paul Smith
	Name:	Paul Smith
	Title:	General Counsel

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	142,883
Aggregate Purchase Price ($18/share)	$2,571,894.00
Address for Notice	c/o Magnetar Capital LLC
	1603 Orrington Ave., 13th Floor
	Evanston, IL 60201
	Facsimile: (847)905-5639

The Purchaser referenced above hereby certifies that it is (check one):

o  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: MAGNETAR CAPITAL FUND, LP
By:	Magnetar Financial LLC
Its	Investment Manager
By:	/s/ Paul Smith
	Name:	Paul Smith
	Title:	General Counsel

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	172,370
Aggregate Purchase Price ($18/share)	$3,102,660
Address for Notice	c/o Magnetar Capital LLC
	1603 Orrington Ave., 13th Floor
	Evanston, IL 60201
	Facsimile: (847)905-5639

The Purchaser referenced above hereby certifies that it is (check one):

o  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

þ  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: DALEA PARTNERS
By:	/s/ N. Malone Mitchell 3rd
	Name:	N. Malone Mitchell 3rd
	Title:	Partner

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	4,548
Aggregate Purchase Price ($18/share)	$81,864.00
Address for Notice	701 S. Taylor, Ste 500
	Amarillo, TX 79101
	Facsimile: (806)373-3454

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: OSPRAIE SPECIAL OPPORTUNITIES MASTER ALTERNATIVE HOLDINGS LLC
By:	/s/ Richard Puma
	Name:	Richard Puma
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	35,427
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	143,155
Aggregate Purchase Price ($18/share)	$2,576,790
Address for Notice	c/o Ospraie Advisors, L.P.
	320 Park Ave., 27th Floor
	New York, NY 10022
	Attn: David Blue
	Facsimile: (212)822-9722

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: OSPRAIE SANDRIDGE HOLDINGS, LLC
BY:	THE OSPRAIE FUND, L.P.
ITS	MANAGING MEMBER
BY:	OSPRAIE GROUP, LLC,
ITS	GENERAL PARTNER
By:	/s/ Richard Puma
	Name:	Richard Puma
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	35,427
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	143,155
Aggregate Purchase Price ($18/share)	$2,576,790
Address for Notice	c/o Ospraie Advisors, L.P.
	320 Park Ave., 27th Floor
	New York, NY 10022
	Attn: David Blue
	Facsimile: (212)822-9773

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: KINGS ROAD INVESTMENTS LTD.
BY:	POLYGON INVESTMENT PARTNERS LP
By:	/s/ Erik Casporson
	Name:	Erik Casporson
	Title:	Co-Head Private Investments

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	109,639
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	443,033
Aggregate Purchase Price ($18/share)	$7,974,594
Address for Notice	598 Madison Avenue.
	14th Floor
	New York, NY 10022
	Attn: David Blue
	Facsimile: (212)359-7303

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: QRA SR, LTD.
BY:	QUELLOS PRIVATE CAPITAL MARKETS, L.P.,
ITS	INVESTMENT ADVISOR
BY:	QUELLOS CAPITAL MANAGEMENT L.P.,
ITS	GENERAL PARTNER
By:	/s/ Norm D. Bontie
	Name:	Norm D. Bontie
	Title:	Principal and Chief Financial Officer
By:	/s/ Dan McNamara
	Name: Dan McNamara
	Title:	Principal and Controller

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	14,171
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	57,264
Aggregate Purchase Price ($18/share)	$1,030,752
Address for Notice	Quellos Private Capital Markets, L.P.
	Attention: Robert Ellsworth
	601 Union Street, 56th Floor
	Seattle, WA 98101
	Facsimile: (206)613-8411

The Purchaser referenced above hereby certifies that it is (check one):

o  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: INVESTMENT PARTNERS (C), LTD.
BY:	QUELLOS CAPITAL MANAGEMENT, L.P.,
ITS	INVESTMENT MANAGER
By:	/s/ Norm D. Bontie
	Name:	Norm D. Bontie
	Title:	Principal and Chief Financial Officer
By:	/s/ Dan McNamara
	Name: Dan McNamara
	Title:	Principal and Controller

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	51,319
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	233,484
Aggregate Purchase Price ($18/share)	$4,202,712
Address for Notice	Quellos Capital Management, L.P.
	Attention: Robert Ellsworth
	601 Union Street, 56th Floor
	Seattle, WA 98101
	Facsimile: (206)613-8411

The Purchaser referenced above hereby certifies that it is (check one):

o  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

þ  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: RCG CARPATHIA MASTER FUND, LTD. (“CARPATHIA”) RCG BALDWIN, L.P. (“BALDWIN”) PORTSIDE GROWTH AND OPPORTUNITY FUND (“PORTSIDE”) RCG ENERGY, LLC (“RCG ENERGY”)
BY:	RAMOUS CAPITAL GROUP L.L.C., INVESTMENT MANAGER OF PORTSIDE AND CARPATHIA, MANAGING MEMBER OF RCG ENERGY AND GENERAL PARTNER OF BALDWIN
By:	/s/ Jeffrey M. Solomon
	Name:	Jeffrey M. Solomon
	Title:	Authorized Signatory

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	31,326
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	126,583
Aggregate Purchase Price ($18/share)	$2,278,494
Address for Notice	Ramous Capital Group, L.L.C.
	666 Third Ave., 26th Floor
	New York, NY 10017
	Facsimile: (212)845-7995

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SIGNATURE PAGE AND ELECTION FORM

     Upon the execution and delivery to SandRidge Energy, Inc. of this Signature Page and Election Form, the undersigned hereby irrevocably agrees to become a party to, and bound by the terms of that certain Stock Purchase Agreement dated February 12, 2007 (the “SPA”) with Ares Corporate Opportunities Fund II, L.P. (“Ares”) and TLW Properties, L.L.C., and, when executed and delivered at the Closing contemplated under the SPA, the Registration Rights Agreement in the form attached to the SPA as an exhibit, as if such party was signatory thereto, with respect to the amount of Preemptive Shares to be purchased as set forth below, which shall be included on Schedule 2.02 to the SPA.

PURCHASER: STANFIELD OFFSHORE LEVERAGED ASSETS, LTD.
By:	/s/ Chris Pucillo
	Name:	Chris Pucillo
	Title:	Partner

Number of Additional Preemptive Shares to be purchased (cannot exceed amount of Additional Preemptive Shares as indicated on Schedule A)	99,197
Total Number of Additional Preemptive Shares and Preemptive Shares to be purchased (includes Previously Elected Preemptive Shares as indicated on Schedule A)	400,839 (301,642 + 99,197)
Aggregate Purchase Price ($18/share)	$7,215,102.00
Address for Notice	Stanfield Capital Partners.
	430 Park Avenue, 11th Floor
	New York, New York 10022
	Attn: Ryan Rolfert
	Facsimile: (212)898-9625

The Purchaser referenced above hereby certifies that it is (check one):

þ  a “Qualified Institutional Buyer” (as defined in Rule 144A under the Securities Act) and an “accredited investor” (as defined in Rule 501(a) under the Securities Act)

o  a non-“U.S. Person” (as defined in Regulation S under the Securities Act)

o  an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)

SCHEDULE 2.02

Purchaser	Purchased Securities
Ares Corporate Opportunities Fund II, L.P.		11,111,111	*
TLW Properties, L.L.C		2,777,777
Total		13,888,888	*

* Subject to adjustment pursuant to Section 2.06 of this Agreement.

Schedule 2.02

SCHEDULE 2.04

Schedule 2.04

SCHEDULE 3.06

Lariat Services, Inc.	Texas corporation
PetroSource Energy Company, L.P.	Texas limited partnership
ROC Gas Company	Texas corporation
NEG Oil & Gas LLC	Delaware limited liability company

Schedule 3.06

SCHEDULE 3.12

1. Consent of Banc of America Securities LLC pursuant to the Purchase Agreement, dated December 15, 2005.

2. Filings and the expiration or termination of the waiting period are required under Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.

Schedule 3.12

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

[Filed as Exhibit 4.8 to the Registration Statement on Form S-1 (File No. 333-144004)]

A-1

EXHIBIT B

OPINION OF VINSON & ELKINS L.L.P.

EXHIBIT C

OPINION OF IN-HOUSE COUNSEL

EXHIBIT D

SHAREHOLDERS AGREEMENT

[Filed as Exhibit 4.10 to the Registration Statement on Form S-1 (File No. 333-144004)]

D-1

EX-4.10

Exhibit 4.10

SHAREHOLDERS’ AGREEMENT

among

SandRidge Energy, Inc.

and

Certain Common Shareholders of SandRidge Energy, Inc.

Dated as of March 20, 2007

TABLE OF CONTENTS

		Page
RECITALS			1
ARTICLE I     DEFINITIONS			1
SECTION 1.1	Certain Defined Terms		1
SECTION 1.2	Other Definitional Provisions		4
ARTICLE II     TAG-ALONG RIGHTS; OTHER MATTERS			4
SECTION 2.1	Tag-Along Rights.		4
SECTION 2.2	Rights and Obligations of Transferees		5
SECTION 2.3	Number of Securities		6
ARTICLE III     LIMITED PREEMPTIVE RIGHTS			6
SECTION 3.1	Limited Preemptive Right.		6
ARTICLE IV     MISCELLANEOUS			7
SECTION 4.1	Election of Director		7
SECTION 4.2	Amendments and Modifications		7
SECTION 4.3	Successors, Assigns and Transferees		7
SECTION 4.4	Legend		7
SECTION 4.5	Notices		8
SECTION 4.6	Further Assurances		9
SECTION 4.7	Entire Agreement		9
SECTION 4.8	Conflicting Agreements		9
SECTION 4.9	Delays or Omissions		9
SECTION 4.10	Governing Law; Waiver of Jury Trial		9
SECTION 4.11	Severability		9
SECTION 4.12	Enforcement		9
SECTION 4.13	Agents for Shareholders		10
SECTION 4.14	Titles and Subtitles		10
SECTION 4.15	Counterparts; Facsimile Signatures		10

     This SHAREHOLDERS’ AGREEMENT (this “Agreement”) is entered as of March 20, 2007, among SandRidge Energy, Inc., a Delaware corporation (the “Company”), and the other parties listed on the signature pages hereto.

RECITALS

     WHEREAS, pursuant to the Stock Purchase Agreement, dated as of February 12, 2007 (the “Purchase Agreement”), by and among the Company, Tom L. Ward, and certain Purchasers, the Purchasers agreed to purchase an aggregate of 17,780,655 shares of Common Stock ;

     WHEREAS, the number of shares of Common Stock and any other Company Equity Securities owned by Tom L. Ward and his respective Permitted Transferees on the date hereof are identified on Schedule A hereto;

     WHEREAS, the Company and certain shareholders, including Tom L. Ward, entered into a previous Shareholder Agreement dated as of November 21, 2006 which, among other terms, contains certain tag-along and pre-emptive rights provisions (the “Existing Shareholder Agreement”);

     WHEREAS, the Company and certain other shareholders, including Tom L. Ward, entered into a previous Securities Purchase Agreement dated as of November 21, 2006, which, among other terms, contains certain tag-along and pre-emptive rights provisions (the “Existing Purchase Agreement”); and

     WHEREAS, each of the parties hereto desires to promote the interests of the Company and the mutual interests of the parties hereto by establishing herein certain terms and conditions upon which the shares of Common Stock and any other Company Equity Securities (hereinafter defined) will be held.

     NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

          SECTION 1.1 Certain Defined Terms. Terms not otherwise defined herein shall have the same meaning as provided in the Purchase Agreement. As used herein, the following terms shall have the following meanings:

     “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person.

     “Agreement” has the meaning assigned to such term in the preamble.

     “Ares” shall mean Ares Corporate Opportunities Fund II, L.P.

     “Ares Agent” has the meaning assigned to such term in Section 4.13.

     “beneficial owner” or “beneficially own” has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of Shares shall be calculated in accordance with the provisions of such Rule; provided, however, that for purposes of determining beneficial ownership, no Person shall be deemed to beneficially own any security solely as a result of such Person’s execution of this Agreement.

     “Board” means the board of directors of the Company.

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

     “Company” has the meaning assigned to such term in the preamble.

     “Company Equity Securities” means (i) Common Stock, (ii) Equity Interest Equivalents of the Company and (iii) any other capital stock of the Company.

     “control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

     “Equity Interest Equivalents” means all rights, warrants, options, convertible securities (including the Preferred Stock) or indebtedness, exchangeable securities or other instruments, or other rights that are outstanding and exercisable for or convertible or exchangeable into, directly or indirectly, any shares of Common Stock; provided that the Common Units and related Preferred Stock Warrants shall be treated as Equity Interest Equivalents only to the extent of Common Stock issued pursuant to the Existing Purchase Agreement as part of a Common Unit.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Existing Agreements” means collectively the Existing Shareholder Agreement and the Existing Purchase Agreement.

     “Existing Shareholder Agreement” has the meaning assigned to such term in the recitals.

     “Existing Purchase Agreement” has the meaning assigned to such term in the recitals.

     “IPO” shall have the meaning set forth in the Certificate of Designation .

     “Permitted Transferee” shall mean (i) with respect to Ward, his wife, children and grandchildren and any entities, trusts and other Affiliates, whether or not controlled, the sole beneficiaries or beneficial owners of which are Ward, his wife, children and grandchildren (and such entities, trusts or Affiliates of which Ward, his wife, children and grandchildren are the sole direct or indirect beneficiaries or beneficial owners), or (ii) with respect to any Shareholder (other than Ward), an Affiliate of such Shareholder; provided, however, that in each case such Transferee shall agree in a writing in the form attached as Exhibit A hereto to be bound by and to

2

comply with all applicable provisions of this Agreement; provided, further, however, that in no event shall a “Permitted Transferee” be the Company or any of its Subsidiaries.

     “Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof.

     “Preemptive Notice” has the meaning assigned to such term in Section 3.1(b).

     “Preemptive Right Proportionate Number” has the meaning assigned to such term in Section 3.1(a).

     “Purchase Agreement” has the meaning assigned to such term in the recitals.

     “Purchasers” means (i) Ares and (ii) any Person to whom Ares Transfers Shares on or prior to the 30th day following the Closing Date and who, upon such Transfer, agrees in a writing in the form attached as Exhibit A hereto to be bound by and to comply with all applicable provisions of this Agreement.

     “Purchaser Sale Notice” has the meaning assigned to such term in Section 2.1(a).

     “Purchaser Tag-along Period” shall mean that period beginning as of the date of this Agreement and expiring on the date that is two years from the date of a Qualified Public Offering.

     “Purchaser Tag-along Sale” has the meaning assigned to such term in Section 2.1(a).

     “Qualified Public Offering” shall have the meaning set forth in the Existing Shareholder Agreement.

     “Response Period” has the meaning assigned to such term in Section 2.1(a).

     “SEC” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Shares” means, as of any date, (i) with respect to Ward and his Permitted Transferees, the shares of Common Stock and any other Company Equity Securities held by such Persons as of such date, and (ii) with respect to the Purchasers and their Permitted Transferees, the shares of Common Stock which were acquired by Purchasers pursuant to the Purchase Agreement or pursuant to an exercise of pre-emptive rights hereunder and held by Purchasers and their Permitted Transferees as of such date.

     “Shareholder” means any holder of Common Stock which is a party to this Agreement.

     “Taggable Shares” has the meaning assigned to such term in Section 2.1(a).

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     “Tagging Shareholder” means a shareholder entitled to tag-along rights under this Agreement or either of the Existing Agreements, as the case may be.

     “TW Agent” has the meaning assigned to such term in Section 4.13.

     “Ward” means Tom L. Ward and his Permitted Transferees.

          SECTION 1.2 Other Definitional Provisions. (a) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article and Section references are to this Agreement unless otherwise specified.

               (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

               (c) All references in this Agreement to “Common Stock”, “Company Equity Securities” and “Shares” shall include any securities of the Company issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization

               (d) For the avoidance of doubt, with respect to the provisions of this Agreement requires the calculation of the number or percentage of Common Stock, Company Equity Securities or Shares on a fully diluted basis, such calculation shall assume the conversion or exercise of any convertible securities, options, warrants or similar securities.

ARTICLE II

TAG-ALONG RIGHTS; OTHER MATTERS

          SECTION 2.1 Tag-Along Rights.

               (a) In the event that, in connection with a proposed Sale of Shares by Ward or any of his Permitted Transferees during the Purchaser Tag-along Period (any such proposed Sale by Ward or any of his Permitted Transferees, a “Purchaser Tag-along Sale”), Purchasers will be afforded a tag-along right to participate in such proposed Sale in accordance with this Section 2.1. Ward agrees to use his commercially reasonable efforts to structure any such Sale in such a manner so as to afford each Purchaser that desires to Sell on the terms provided herein the right to Sell the same percentage of the total number of Shares owned by such Purchaser as the percentage that the Shares proposed to be sold by Ward and his Permitted Transferees represent of their aggregate beneficial Share ownership. In the event that the full number of Shares cannot be sold by Purchasers due to the exercise of prior tag-along rights under the Existing Agreements or otherwise, then Ward shall, and he shall cause his Permitted Transferees to, reduce the number of Shares they propose to Sell to a number of Shares such that the percentage of their aggregate beneficial Share ownership to be sold by Ward and his Permitted Transferees is equal to the highest percentage of Shares that may be sold by a Purchaser who has elected to Sell Shares (allocating the Company Equity Securities available to be Sold by the Purchasers based on the relative numbers of Shares sought to be sold by each such

4

Purchaser in their Purchaser Tag-along Notice). In the event no Shares can be sold by Purchasers electing to Sell Shares, Ward shall not, and he shall not permit his Permitted Transferees to, consummate any such Purchaser Tag-along Sale. If Ward or any of his Permitted Transferees proposes a Sale of Shares during the Purchaser Tag-along Period, Ward shall deliver to each of the Purchasers a written notice (a “Purchaser Sale Notice”), which notice shall state (i) the name of the proposed Transferee, (ii) the number of shares to be sold (“Taggable Shares”) and the percentage of aggregate beneficial ownership proposed to be sold in such Sale by Ward and his Permitted Transferees, (iii) the proposed purchase price therefor, including a description of any non-cash consideration (along with any reports and other material documents (and summaries of any other material oral information) relevant to the valuation of such non-cash consideration which Ward or its Permitted Transferees has, so long as the Purchaser agrees to keep such reports, documents and information confidential), and (iv) the other material terms and conditions of the proposed Sale, including the proposed closing date (which date may not be less than fifteen (15) Business Days after delivery of the Purchaser Sale Notice). Each Purchaser desiring to participate in any such Sale shall deliver to Ward, within fifteen (15) Business Days after the delivery to all Purchasers of the Purchaser Sale Notice (the “Response Period”), a written notice (a “Purchaser Tag-along Notice”), which notice shall state that such Purchaser elects to exercise its tag-along rights under this Section 2.1 and shall state the maximum number of Shares sought to be sold by such Purchaser.

               (b) Each Purchaser, if it has elected to exercise its tag-along rights provided under this Section 2.1, shall participate in the Sale by delivering to Ward at the closing of the Sale of the Shares of Ward and/or his Permitted Transferees to the Transferee certificates representing the Shares to be sold by the Tagging Shareholder, duly endorsed for transfer, against payment of the aggregate purchase price therefor.

               (c) Transfers by Ward to his Permitted Transferees or by one of his Permitted Transferees to him or another of his Permitted Transferees shall not be subject to the tag-along rights provided under this Section 2.1.

               (d) Notwithstanding the other provisions of this Section 2.1, with respect to any Block Trade of a Substantial Block (both as defined in the Existing Shareholders Agreement) under a registration statement pursuant to Article IV of the Existing Shareholders Agreement, (i) the fifteen (15) Business Day period referred to in Section 2.1(a) shall be reduced to a three (3) Business Day period and (ii) the Purchaser Sale Notice may omit the name of the proposed Transferee and may specify the proposed minimum purchase price (in lieu of the purchase price).

               (e) This Section 2.1 shall terminate without any further force and effect upon expiration of the Purchaser Tag-along Period.

          SECTION 2.2 Rights and Obligations of Transferees. No Transferee of any Purchaser (except a Permitted Transferee) shall be entitled to any rights under this Agreement except as provided in this Section 2.2. A Permitted Transferee shall be permitted to exercise all rights of the Transferring Purchaser under this Agreement, and shall be required to assume all of the obligations of the Transferring Purchaser under this Agreement, with respect to the Shares Transferred.

5

          SECTION 2.3 Number of Securities. Ward hereby represents and warrants as of the date hereof that set forth on Schedule A is the number of Shares and any other Company Equity Securities beneficially owned by Ward and his Permitted Transferees as of the date of this Agreement. If any provision of this Agreement which requires the calculation of the number of Shares and any other Company Equity Securities beneficially owned by any Shareholder and its Permitted Transferees becomes applicable after the date hereof, such Shareholder shall provide to the other Shareholders the number of Shares and any other Company Equity Securities beneficially owned by such Shareholder and its Permitted Transferees.

ARTICLE III

LIMITED PREEMPTIVE RIGHTS

          SECTION 3.1 Limited Preemptive Right.

               (a) If at any time prior to the completion of an IPO, the Company proposes to Sell, issue or otherwise Transfer any Company Equity Security (but, in the event such sale, issuance or transfer is pursuant to a public offering or occurs concurrently with a public offering, less the underwriters’ discount or commissions for such public offering), then each Purchaser shall have the right to purchase the Preemptive Right Proportionate Number of Company Equity Securities being offered at the same price and terms as those offered by the Company, provided that the preemptive right provided under this Section 3.1 shall not be applicable to sales or issuances of Excluded Stock (as defined in the Certificate of Designation). The “Preemptive Right Proportionate Number” shall be, at any given time, a number equal to (i) the number of Shares beneficially owned by such Purchaser at such time multiplied by (ii) a fraction, the numerator of which is the total number of shares of Common Stock or other Company Equity Securities proposed to be issued or sold by the Company at such time and the denominator of which is the total number of Shares outstanding immediately prior to the date of the Preemptive Notice. For the avoidance of doubt, this Section 3.1 shall not be applicable to the conversion or exercise of any convertible securities, warrants, options or similar securities so long as the sale or issuance of such securities was made in accordance with this Section 3.1.

               (b) In the event the Company proposes to undertake a sale or issuance of Company Equity Securities to which this Section 3.1 applies, it shall provide each Purchaser written notice (the “Preemptive Notice”) of its intention to do so (attaching copies of the most current drafts of any term sheets, agreements or other documents relating thereto), specifying the proposed price (it being understood that the form of consideration shall be cash or tangible assets only), the identity of the purchaser and the material terms upon which the Company proposes to Sell, issue or otherwise Transfer the same. The Purchaser shall have five (5) Business Days from the delivery date of any Preemptive Notice to agree to purchase (if the form of consideration is tangible assets, at such Purchaser’s option, for cash and/or the same type of tangible assets of equal value), on the same closing date as the Company an amount of Company Equity Securities up to the Preemptive Right Proportionate Number (in each case calculated prior to the issuance) for the price and upon the terms specified in the Preemptive Notice by giving written notice to the Company and stating therein the amount of Company Equity Securities to be purchased. If a definitive agreement for the purchase of such Company Equity Securities is not provided along with the Preemptive Notice, Purchaser’s election to purchase Company Equity Securities

6

pursuant to such Preemptive Notice shall not be binding until a definitive agreement is executed (but, subject to Section 3.1(c), an election to not purchase shall be binding).

               (c) In the event Purchasers do not purchase all of the Preemptive Right Proportionate Number of Company Equity Securities pursuant to this Section 3.1, the Company shall have 180 days after the date of the Preemptive Notice to consummate the sale or issuance of the Company Equity Securities with respect to which Purchasers’ preemptive rights were not exercised to any Person at or above the price and upon terms not more favorable in any material respect (it being understood and agreed that any increase in the number of Company Equity Securities or any decrease in the price thereof shall be deemed material for this purpose) than the terms specified in the initial Preemptive Notice given in connection with such sale or issuance.

ARTICLE IV

MISCELLANEOUS

          SECTION 4.1 Election of Director. The Company shall, upon request of Ares, cause a director designated by Ares pursuant to the Purchase Agreement to be placed on the ballot for reelection on any proxy statement prepared by the Company and its management for the Company’s Annual Meeting of Stockholders to be held in 2008. Ward agrees to vote, and to use reasonable efforts to cause his Permitted Transferees to vote, in favor of the Ares designee for director at the 2008 Annual Meeting of Stockholders. From and after the date hereof, the Company agrees to use its commercially reasonable efforts to obtain from Malone Mitchell for the benefit of Ares a voting agreement commensurate with Ward’s agreement in the immediately preceding sentence. Notwithstanding the foregoing, neither the Company nor Ward shall have any obligations pursuant to this Section 4.1 on and following the date that Ares and its Permitted Transferees cease to beneficially own at least 5,555,556 Shares (subject to adjustment for any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization).

          SECTION 4.2 Amendments and Modifications. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective without the approval of the Company and each Shareholder; provided, that the Company or any Shareholder may waive (in writing) the benefit of any provision of this Agreement with respect to itself for any purpose. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

          SECTION 4.3 Successors, Assigns and Transferees. This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. Shareholders may assign their respective rights and obligations hereunder to any Transferees only to the extent expressly provided herein.

          SECTION 4.4 Legend. (a) All certificates (if any) representing the Shares held by Ward and his Permitted Transferees shall bear a legend substantially in the following form:

7

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY SUCH SHAREHOLDERS AGREEMENT.

               (b) Upon the termination of this Agreement, the certificates representing such Shares shall be replaced, at the expense of the Company, with certificates or instruments not bearing the legends required by this Section 4.4.

          SECTION 4.5 Notices. All notices and other communications hereunder shall be in writing and delivered (i) personally, (ii) by overnight courier or (iii) facsimile (with a PDF or other copy by electronic mail), and shall be deemed duly given on the date of delivery. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

If to the Company or Ward	SandRidge Energy, Inc.
	1601 Northwest Expressway, Suite 1600
	Oklahoma City, OK 73118
	Attention: General Counsel
	Facsimile No.: (405) 753- 5975
	Email: mmccann@sdrge.com
with a copy to:	Vinson & Elkins LLP
(which shall not	1001 Fannin Street, Suite 2500
constitute notice)	Houston, Texas 77024
	Attention: T. Mark Kelly, Esq.
	James M. Prince, Esq.
	Facsimile No.: (713) 615-5962
	Email: mkelly@velaw.com
	Email: jprince@velaw.com
If to Ares	Ares Management
	1999 Avenue of the Stars, Suite 1900
	Los Angeles, California 90067
	Attention: Jeffrey Serota
	Facsimile No.: (310) 201-4157
with a copy to:	Sullivan & Cromwell LLP
(which shall not	1888 Century Park East
constitute notice)	Los Angeles, California 90067-1725
	Attention: Alison S. Ressler, Esq.
	Patrick S. Brown, Esq.
	Facsimile No.: (310) 712-8800
	Email: resslera@sullcrom.com
	Email: brownp@sullcrom.com

8

          SECTION 4.6 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

          SECTION 4.7 Entire Agreement. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way (including, without limitation, the Letter of Intent).

          SECTION 4.8 Conflicting Agreements. Each party hereto represents to the other parties hereto that such party has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with any provision of this Agreement.

          SECTION 4.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

          SECTION 4.10 Governing Law; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. Further, each party hereto hereby waives all right to trial by jury in any claim, action, proceeding or counterclaim by any party hereto on any matters arising out of or in any way connected with this Agreement.

          SECTION 4.11 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

          SECTION 4.12 Enforcement. Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that

9

in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.

          SECTION 4.13 Agents for Shareholders. (a) Ward or another Person named in any written notice to the other parties hereto after the date hereof and signed by Ward and all of his Permitted Transferees (the “TW Agent”) shall act as the sole agent for Ward and each of his Permitted Transferees and shall be authorized to exercise all rights of Ward and his Permitted Transferees hereunder. The TW Agent shall have sole power and authority to take any action on behalf of Ward and his Permitted Transferees pursuant to this Agreement, including delivering any notice or granting any waiver or consent hereunder, and each party hereto shall be entitled to rely on any action taken by the TW Agent as being taken on behalf of Ward or any of his Permitted Transferees. Any notice required to be delivered hereunder to Ward or any of his Permitted Transferees shall be delivered to the TW Agent.

               (b) Ares or another Person named in any written notice to the other parties hereto after the date hereof and signed by Ares and its Permitted Transferees (the “Ares Agent”) shall act as the sole agent for Ares and each of its Permitted Transferees and shall be authorized to exercise all rights of Ares and its Permitted Transferees hereunder. Ares shall have sole power and authority to take any action on behalf of Ares and its Permitted Transferees pursuant to this Agreement, including delivering any notice or granting any waiver or consent hereunder, and each party hereto shall be entitled to rely on any action taken by Ares as being taken on behalf of Ares or any of its Permitted Transferees. Any notice required to be delivered hereunder to Ares or any of its Permitted Transferees shall be delivered to the Ares Agent.

          SECTION 4.14 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

          SECTION 4.15 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s).

[Remainder of page intentionally left blank]

10

          IN WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement as of the date set forth in the first paragraph hereof.

SANDRIDGE ENERGY, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
ARES CORPORATE OPPORTUNITIES FUND II, L.P. By:  ACOF OPERATING MANAGER II, L.P.,         its manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary
ARES SANDRIDGE, L.P. By:  ACOF OPERATING MANAGER II, L.P.,         its manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary
ARES SANDRIGDGE 892 INVESTORS, L.P. By:  ACOF OPERATING MANAGER II, L.P.,         its manager
By:	/s/ Michael D. Weiner
	Name:	Michael D. Weiner
	Title:	Vice President, General Counsel and Secretary

[Shareholders Agreement Signature Page]

/s/ Tom L. Ward
TOM L. WARD
192 INVESTMENTS, LLC
By:	/s/ William R. Blaik
	Name:	William R. Blaik
	Title:	Manager

[Shareholders Agreement Signature Page]

Exhibit A

ASSIGNMENT AND ASSUMPTION AGREEMENT

     Pursuant to the Shareholders Agreement, dated as of ___, ___and (the “Shareholders Agreement”), among SandRidge Energy, Inc., a Delaware corporation (the “Company”), and each of the Shareholders of the Company whose name appears on the signature pages listed therein (each, a “Shareholder” and collectively, the “Shareholders”), ___, (the “Transferor”) hereby assigns to the undersigned the rights that may be assigned thereunder with respect to the Shares so Transferred, and the undersigned hereby agrees that, having acquired Shares as permitted by the terms of the Shareholders Agreement, the undersigned shall assume the obligations of the Transferor under the Shareholders Agreement with respect to the Shares so Transferred. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Shareholders Agreement.

     Listed below is information regarding the Shares:

Number of shares of
Common Stock

     IN WITNESS WHEREOF, the undersigned has executed this Assumption Agreement as of ___ ___, 20__.

[NAME OF TRANSFEREE]
By:
	Name:
	Title:

Acknowledged by:
SANDRIDGE ENERGY, INC.
By:
	Name:
	Title:

\

Schedule A

Common Stock and other Company Equity Securities held by Ward

Number of shares of
Common Stock

35,229,631

Number of shares of
Preferred Stock

262,857

EX-4.11

Exhibit 4.11

[name]
[address line]
[city state zip]

June 13, 2006

Riata Energy, Inc.	VIA FAX: (806) 376-9216
701 S. Taylor, Suite 426
Amarillo, TX 79116
Attn: Matthew McCann, General Counsel

Dear Mr. McCann

     Reference is hereby made to the resale registration rights agreement, dated December 21, 2005 (the “Resale Registration Rights Agreement”) between Riata Energy, Inc., a Texas corporation (the “Company”), and Banc of America Securities LLC, as representative of the several initial purchasers under the a purchase agreement, dated as of December 15, 2005. The undersigned hereby represents that it is the beneficial holder as of June 13, 2006 of the number of shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) set forth below its name below, all of which constitute Transfer Restricted Securities as defined in the Resale Registration Rights Agreement. The Company has asked for a nine month extension in which to register the Common Stock covered by the Resale Registration Rights Agreement. The undersigned hereby consents to the following amendments to the Resale Registration Rights Agreement:

• The amendment of the definition of “Effectiveness Target Date” in Section 2(a)(ii) to mean no later than April 15, 2007.

Very truly yours

Shareholder Name:

Name:

Title:

Number of Transfer Restricted Shares of Common Stock held

EX-4.12

Exhibit 4.12

[name]
[address line]
[city state zip]

VIA FACSIMILE (405) 753-5988

April 23, 2007

SandRidge Energy, Inc.
1601 NW Expressway, Suite 1600
Oklahoma City, OK 73118
Attn: V. Bruce Thompson

Dear Mr. Thompson:

     Reference is hereby made to the resale registration rights agreement, dated December 21, 2005 (the “Resale Registration Rights Agreement”) between SandRidge Energy, Inc. (f/k/a Riata Energy, Inc.) (the “Company”), and Banc of America Securities LLC, as representative of the several initial purchasers under the purchase agreement, dated as of December 15, 2005. The undersigned hereby represents that it is the beneficial holder of the number of shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) set forth below its name below as of the date of this letter, all of which constitute Transfer Restricted Securities as defined in the Resale Registration Rights Agreement.

     The Company has asked for a waiver of any Liquidated Damages due under Section 4 for failing to register the Common Stock covered by the Resale Registration Rights Agreement by the Effectiveness Target Date, provided the Registration Statement for the Common Stock is declared effective by December 20, 2007. The Company has also asked for a waiver of Section 10(c)(ii), which would permit the Company to register the shares of common stock underlying the Company’s Series A Convertible Preferred Shares no later than December 31, 2007. In return the Company has offered to extend the time period referred to in Section 2(a)(iii)(3) by two years, which could obligate the Company to keep the Registration Statement effective until December 21, 2009. In the absence of such amendment, the Company’s obligation to keep the Registration Statement effective ends December 21, 2007.

     The undersigned hereby consents to the following amendments to the Resale Registration Rights Agreement:

• Section 4(b) shall be replaced with the following: “If the Shelf Registration Statement has been declared effective by the Commission no later than December 21, 2007, then no Liquidated Damages shall be due. However, if the Shelf Registration Statement has not been declared effective by December 21, 2007, then all accrued Liquidated Damages which have accrued from the Effectiveness Target Date through December 21, 2007, along with any Liquidated Damages that accrue after December 21, 2007, shall be paid in arrears to Record Holders by the Company on each Liquidated Damages Payment Date, beginning with December 31, 2007. Upon the cure of all Registration Defaults relating to any particular share of Common Stock, the accrual of Liquidated Damages with respect to such share of Common Stock will cease.”

• Section 10(c)(ii) shall be stricken.

• Section 2(a)(iii)(3) shall be amended to replace the words “second anniversary” with the words “fourth anniversary.”

Very truly yours

Shareholder Name:

Name:

Title:

Number of Transfer Restricted Shares
of Common Stock held

2

EX-10.1

Exhibit 10.1

SANDRIDGE ENERGY, INC. 401(k) PLAN

401(k) Plan CL2005

Restated March 1, 2007

Your plan is an important legal document. This sample plan has been prepared based on our understanding of the desired provisions. It may not fit your situation. You should consult with your lawyer on the plan’s legal end tax implications. Neither Principal Life Insurance Company nor its agents can be responsible for the legal or tax aspects of the plan nor its appropriateness for your situation. If you wish to change the provisions of this sample plan, you may ask us to prepare new sample wording for you and your lawyer to review.

TABLE OF CONTENTS

INTRODUCTION

ARTICLE I FORMAT AND DEFINITIONS

Section 1.01 — Format

Section 1.02 — Definitions

ARTICLE II PARTICIPATION

Section 2.01 — Active Participant

Section 2.02 — Inactive Participant

Section 2.03 — Cessation of Participation

Section 2.04 — Adopting Employers — Single Plan

ARTICLE III CONTRIBUTIONS

Section 3.01 — Employer Contributions

Section 3.01A — Rollover Contributions

Section 3.02 — Forfeitures

Section 3.03 — Allocation

Section 3.04 — Contribution Limitation

Section 3.05 — Excess Amounts

ARTICLE IV INVESTMENT OF CONTRIBUTIONS

Section 4.01 — Investment and Timing of Contributions

Section 4.01A — Investment in Qualifying Employer Securities

ARTICLE V BENEFITS

Section 5.01 — Retirement Benefits

Section 5.02 — Death Benefits

Section 5.03 — Vested Benefits

Section 5.04 — When Benefits Start

Section 5.05 — Withdrawal Benefits

Section 5.06 — Loans to Participants

Section 5.07 — Distributions Under Qualified Domestic Relations Orders

ARTICLE VI DISTRIBUTION OF BENEFITS

Section 6.01 — Form of Distribution

Section 6.02 — Election Procedures

Section 6,03 — Notice Requirements

RESTATEMENT MARCH 1, 2007 3 TABLE OF CONTENTS (6-14161)

ARTICLE VII REQUIRED MINIMUM DISTRIBUTIONS

Section 7.01 — Application

Section 7.02 — Definitions

Section 7.03 — Required Minimum Distributions

Section 7.04 — Transition Rules

ARTICLE VIII TERMINATION OF THE PLAN

ARTICLE IX ADMINISTRATION OF THE PLAN

Section 9.01 — Administration

Section 9.02 — Expenses

Section 9.03 — Records

Section 9.04 — Information Available

Section 9.05 — Claim Procedures

Section 9.06 — Delegation of Authority

Section 9.07 — Exercise of Discretionary Authority

Section 9.08 — Transaction Processing

Section 9.09 — Voting and Tender of Qualifying Employer Securities

ARTICLE X GENERAL PROVISIONS

Section 10.01 — Amendments

Section 10.02 — Direct Rollovers

Section 10.03 — Mergers and Direct Transfers

Section 10.04 — Provisions Relating to the Insurer and Other Parties

Section 10.05 — Employment Status

Section 10.06 — Rights to Plan Assets

Section 10.07 — Beneficiary

Section 10.08 — Nonalienation of Benefits

Section 10.09 — Construction

Section 10.10 — Legal Actions

Section 10.11 — Small Amounts

Section 10.12 — Word Usage

Section 10.13 — Change in Service Method

Section 10.14 — Military Service

ARTICLE XI TOP-HEAVY PLAN REQUIREMENTS

Section 11.01 — Application

Section 11.02 — Definitions

Section 11.03 — Modification of Vesting Requirements

Section 11.04 — Modification of Contributions

PLAN EXECUTION

RESTATEMENT MARCH 1, 2007 4 TABLE OF CONTENTS (6-14161)

INTRODUCTION

     The Primary Employer previously established a 401 (k) savings plan on October 1, 1997.

     The Primary Employer is of the opinion that the plan should be changed. It believes that the best means to accomplish these changes is to completely restate the plan’s terms, provisions and conditions. The restatement, effective March 1, 2007, is set forth in this document and is substituted in lieu of the prior document with the exception of any good faith compliance amendment and any model amendment. Such amendment(s) shall continue to apply to this restated plan until such provisions are integrated into the plan or such amendment(s) are superseded by another amendment.

     The restated plan continues to be for the exclusive benefit of employees of the Employer. All persons covered under the plan on February 28, 2007, shall continue to be covered under the restated plan with no loss of benefits.

     It is intended that the plan, as restated, shall qualify as a profit sharing plan under the Internal Revenue Code of 1986, including any later amendments to the Code.

     This plan includes changes made to reflect the statutory, regulatory, and guidance changes specified in the 2005 Cumulative List of Changes in Plan Qualification Requirements (2005 Cumulative List) contained in Internal Revenue Service Notice 2005-101 and the qualification requirements and guidance published before the issuance of such list. The provisions of this plan apply as of the effective date of the restatement unless otherwise specified.

RESTATEMENT MARCH 1, 2007 5 INTRODUCTION (6-14161)

ARTICLE I

FORMAT AND DEFINITIONS

SECTION 1.01—FORMAT.

     Words and phrases defined in the DEFINITIONS SECTION of Article I shall have that defined meaning when used in this Plan, unless the context clearly indicates otherwise.

     These words and phrases have an initial capital letter to aid in identifying them as defined terms.

SECTION 1.02—DEFINITIONS.

Account means, for a Participant, his share of the Plan Fund. Separate accounting records are kept for those parts of his Account that result from:

(a)	Pre-tax Elective Deferral Contributions
(b)	Matching Contributions
(c)	Qualified Nonelective Contributions
(d)	Other Employer Contributions
(e)	Rollover Contributions

If the Participant’s Vesting Percentage is less than 100% as to any of the Employer Contributions, a separate accounting record will be kept for any part of his Account resulting from such Employer Contributions and, if there has been a prior Forfeiture Date, from such Contributions made before a prior Forfeiture Date.

A Participant’s Account shall be reduced by any distribution of his Vested Account and by any Forfeitures. A Participant’s Account shall participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund. His Account is subject to any minimum guarantees applicable under the Annuity Contract or other investment arrangement and to any expenses associated therewith.

ACP Test means the nondiscrimination test described in Code Section 401(m)(2) as provided for in subparagraph (d) of the EXCESS AMOUNTS SECTION of Article III.

Active Participant means an Eligible Employee who is actively participating in the Plan according to the provisions in the ACTIVE PARTICIPANT SECTION of Article II.

Adopting Employer means an employer which is a Controlled Group member and which is listed in the ADOPTING EMPLOYERS — SEPARATE PLANS SECTION of Article II.

RESTATEMENT MARCH 1, 2007 6 ARTICLE I (6-14161)

ADP Test means the nondiscrimination test described in Code Section 401(k)(3) as provided for in subparagraph (c) of the EXCESS AMOUNTS SECTION of Article III.

Affiliated Service Group means any group of corporations, partnerships or other organizations of which the Employer is a part and which is affiliated within the meaning of Code Section 414(m) and the regulations thereunder. Such a group includes at least two organizations one of which is either a service organization (that is, an organization the principal business of which is performing services), or an organization the principal business of which is performing management functions on a regular and continuing basis. Such service is of a type historically performed by employees. In the case of a management organization, the Affiliated Service Group shall include organizations related, within the meaning of Code Section 144(a)(3), to either the management organization or the organization for which it performs management functions. The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group.

Alternate Payee means any spouse, former spouse, child, or other dependent of a Participant who is recognized by a qualified domestic relations order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to such Participant.

Annual Compensation means, for a Plan Year, the Employee’s Compensation for the Compensation Year ending with or within the consecutive 12-month period ending on the last day of the Plan Year.

Annual Compensation shall only include Compensation received while an Active Participant.

Annuity Contract means the annuity contract or contracts into which the Trustee or the Primary Employer enters with the Insurer for guaranteed benefits, for the investment of Contributions in separate accounts, and for the payment of benefits under this Plan.

Annuity Starting Date means, for a Participant, the first day of the first period for which an amount is payable as an annuity or any other form.

Beneficiary means the person or persons named by a Participant to receive any benefits under the Plan when the Participant dies. See the BENEFICIARY SECTION of Article X.

Catch-up Contributions means Elective Deferral Contributions made to the Plan that are in excess of an otherwise applicable Plan limit and that are made by Participants who are age 50 or older by the end of the taxable year. An otherwise applicable Plan limit is a limit in the Plan that applies to Elective Deferral Contributions without regard to Catch-up Contributions, such as the limits on the Maximum Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of Article III, the dollar limitation on Elective Deferral Contributions under Code Section 402(g) (not counting Catch-up Contributions), and the limit imposed by the ADP Test.

Catch-up Contributions are not subject to the limits on the Maximum Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of Article III, are not counted in the ADP Test, and are not counted in determining the minimum allocation under Code Section 416 (but Catch-up Contributions made in prior years are counted in determining whether the Plan is top-heavy).

Claimant means any person who makes a claim for benefits under this Plan. See the CLAIM PROCEDURES SECTION of Article IX.

RESTATEMENT MARCH 1, 2007 7 ARTICLE I (6-14161)

Code means the Internal Revenue Code of 1986, as amended.

Compensation means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III and Article XI, the total earnings, except as modified in this definition, paid or made available to an Employee by the Employer during any specified period.

“Earnings” in this definition means wages within the meaning of Code Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. Earnings must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). The type of compensation that is reported in the “Wages, Tips and Other Compensation” box on Form W-2 satisfies this definition.

For any Self-employed Individual, Compensation means Earned Income.

Compensation shall exclude the following:

• reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation (other than elective contributions), and welfare benefits

• taxable value of qualified or nonqualified stock options

• severance pay

• non-performance based bonuses, such as retention bonuses, relocation pay, signing bonus and holiday type bonuses

For purposes of the EXCESS AMOUNTS SECTION of Article III, Compensation shall not exclude those items listed above unless such Compensation is nondiscriminatory in accordance with the regulations under Code Section 414(s).

Compensation shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount which is contributed or deferred by the Employer at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125, 132(f)(4), or 457. Compensation shall also include employee contributions “picked up” by a governmental entity and, pursuant to Code Section 414(h)(2), treated as Employer contributions.

For Plan Years beginning on and after January 1, 2005, payments made within 2 1/2 months after Severance from Employment will be Compensation if they are payments that, absent a Severance from Employment, would have been paid to the Employee while the Employee continued in employment with the Employer and are regular compensation for services during the Employee’s regular working hours, compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar compensation, and payments for accrued bona fide sick, vacation, or other leave, but only if the Employee would have been able to use the leave if employment had continued. Any payments not described above are not considered compensation if paid after Severance from Employment, even if they are paid within 2 1/2 months following Severance from Employment, except for payments to an individual who does not currently perform services for the Employer by reason of qualified military service (within the meaning ot Code Section 414(u)(1)) to the

RESTATEMENT MARCH 1, 2007 8 ARTICLE I (6-14161)

extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

For purposes of the EXCESS AMOUNTS SECTION of Article III, the Employer may elect to use an alternative nondiscriminatory definition of Compensation in accordance with the regulations under Code Section 414(s).

For Plan Years beginning on or after January 1, 2002, the annual Compensation of each Participant taken into account in determining contributions and allocations shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code Section 401 (a)|17)(B). The cost-of-living adjustment in effect for a calendar year applies to any determination period beginning in such calendar year.

If a determination period consists of fewer than 12 months, the annual compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction. The numerator of the fraction is the number of months in the short determination period, and the denominator of the fraction is 12.

If Compensation for any prior determination period is taken into account in determining a Participant’s contributions or allocations for the current Plan Year, the Compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that determination period. For this purpose, in determining contributions and allocations in Plan Years beginning on or after January 1, 2002, the annual compensation limit in effect for determination periods beginning before that date is $200,000.

Compensation means, for a Leased Employee, Compensation for the services the Leased Employee performs for the Employer, determined in the same manner as the Compensation of Employees who are not Leased Employees, regardless of whether such Compensation is received directly from the Employer or from the leasing organization.

Compensation Year means the consecutive 12-month period ending on the last day of each Plan Year, including corresponding periods before October 1, 1997.

Contributions means

Elective Deferral Contributions
Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions
Rollover Contributions

as set out in Article III, unless the context clearly indicates only specific contributions are meant.

Controlled Group means any group of corporations, trades, or businesses of which the Employer is a part that is under common control. A Controlled Group includes any group of corporations, trades, or businesses, whether or not incorporated, which is either a parent-subsidiary group, a brother-sister group, or a combined group within the meaning of Code Section 414(b), Code Section 414(c) and the regulations thereunder and, for purposes of determining contribution limitations under the

RESTATEMENT MARCH 1, 2007 9 ARTICLE I (6-14161)

CONTRIBUTION LIMITATION SECTION of Article III, as modified by Code Section 415(h). The term Controlled Group, as it is used in this Plan, shall include the term Affiliated Service Group and any other employer required to be aggregated with the Employer under Code Section 414(o) and the regulations thereunder.

Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

Discretionary Contributions means discretionary contributions made by the Employer to fund this Plan. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Distributee means an Employee or former Employee. In addition, the Employee’s (or former Employee’s) surviving spouse and the Employee’s (or former Employee’s) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse.

Earned Income means, for a Self-employed Individual, net earnings from self-employment in the trade or business for which this Plan is established if such Self-employed Individual’s personal services are a material income producing factor for that trade or business. Net earnings shall be determined without regard to items not included in gross income and the deductions properly allocable to or chargeable against such items. Net earnings shall be reduced for the employer contributions to the Employer’s qualified retirement plan(s) to the extent deductible under Code Section 404.

Net earnings shall be determined with regard to the deduction allowed to the Employer by Code Section 164(f) for taxable years beginning after December 31, 1989.

Elective Deferral Contributions means contributions made by the Employer to fund this Plan in accordance with elective deferral agreements between Eligible Employees and the Employer.

Elective deferral agreements shall be made, changed, or terminated according to the provisions of the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Elective Deferral Contributions shall be 100% vested and subject to the distribution restrictions of Code Section 401 (k) when made. See the WHEN BENEFITS START SECTION of Article V.

Elective Deferral Contributions means Pre-tax Elective Deferral Contributions.

Eligibility Service means an Employee’s Period of Service. Eligibility Service shall be measured from his Employment Commencement Date to his most recent Severance Date. This Period of Service shall be reduced by any Period of Severance that occurred prior to his most recent Severance Date, unless such Period of Severance is included under the service spanning rule below. This period of Eligibility Service shall be expressed as months (on the basis that 30 days equal one month).

However, Eligibility Service is modified as follows:

RESTATEMENT MARCH 1, 2007 10 ARTICLE I (6-14161)

Service with a Predecessor Employer that did not maintain this Plan included:

An Employee’s service with a Predecessor Employer that did not maintain this Plan shall be included as service with the Employer. This service excludes service performed while a proprietor or partner.

Period of Military Duty included:

A Period of Military Duty shall be included as service with the Employer to the extent it has not already been credited.

Period of Severance included (service spanning rule):

A Period of Severance shall be deemed to be a Period of Service under either of the following conditions:

(a)	the Period of Severance immediately follows a period during which an Employee is not absent from work and ends within 12 months; or
(b)	the Period of Severance immediately follows a period during which an Employee is absent from work for any reason other than quitting, being discharged, or retiring (such as a leave of absence or layoff ) and ends within 12 months of the date he was first absent.

Controlled Group service included:

An Employee’s service with a member firm of a Controlled Group while both that firm and the Employer were members of the Controlled Group shall be included as service with the Employer.

Eligible Employee means any Employee of the Employer excluding the following:

Bargaining class. Represented for collective bargaining purposes by any collective bargaining agreement between the Employer and employee representatives, if retirement benefits were the subject of good faith bargaining and if two percent or less of the Employees who are covered pursuant to that agreement are professionals as defined in section 1.410(b)-9 of the regulations. For this purpose, the term “employee representatives” does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

Nonresident alien, within the meaning of Code Section 7701(b)(1)(B), who receives no earned income, within the meaning of Code Section 911(d)(2), from the Employer that constitutes income from sources within the United States, within the meaning of Code Section 861(a)(3), or who receives such earned income but it is all exempt from income tax in the United States under the terms of an income tax convention.

Leased Employee.

RESTATEMENT MARCH 1, 2007 11 ARTICLE I (6-14161)

An Employee considered by the Employer to be an independent contractor, or the employee of an independent contractor, who is later determined by the Internal Revenue Service to be an Employee.

Resident of Puerto Rico.

Not on the Employer’s payroll as a common law Employee even if later determined to be an Employee.

Eligible Retirement Plan means an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), an annuity contract described in Code Section 403(b), or a qualified plan described in Code Section 401(a), that accepts the Distributee’s Eligible Rollover Distribution. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a qualified domestic relations order, as defined in Code Section 414(p).

If any portion of an Eligible Rollover Distribution is attributable to payments or distributions from a designated Roth account, an Eligible Retirement Plan with respect to such portion shall include only another designated Roth account of the individual from whose Account the payments or distributions were made under an annuity plan described in Code Section 403(a) or a qualified plan described in Code Section 401(a), or a Roth IRA described in Code Section 408A of such individual.

Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; (ii) any distribution to the extent such distribution is required under Code Section 401(a)(9); (iii) any hardship distribution; (iv) the portion of any other distribution(s) that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and (v) any other distribution(s) that is reasonably expected to total less than $200 during a year.

A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of the portion of a designated Roth account that is not includible in a Participant’s gross income. However, such portion may be transferred only to a Roth IRA described in Code Section 408A or to a designated Roth account under a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately

RESTATEMENT MARCH 1, 2007 12 ARTICLE I (6-14161)

accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

If the distribution includes any portion of a designated Roth account, in determining if (v) above applies: (i) any portion of the distribution from the designated Roth account shall not be treated as an Eligible Rollover Distribution if it is reasonably expected to total less than $200 during a year and (ii) the balance of the distribution, if any, shall not be treated as an Eligible Rollover Distribution if it is reasonably expected to total less than $200 during a year. However, all Eligible Rollover Distributions are combined in determining a mandatory distribution of an Eligible Rollover Distribution greater than $1,000 in the DIRECT ROLLOVERS SECTION of Article X.

Employee means an individual who is employed by the Employer or any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o). A Controlled Group member is required to be aggregated with the Employer.

The term Employee shall include any Self-employed Individual treated as an employee of any employer described in the preceding paragraph as provided in Code Section 401(c)(1). The term Employee shall also include any Leased Employee deemed to be an employee of any employer described in the preceding paragraph as provided in Code Section 414(n) or (o).

Employer means, except for purposes of the CONTRIBUTION LIMITATION SECTION of Article III, the Primary Employer. This will also include any successor corporation or firm of the Employer which shall, by written agreement, assume the obligations of this Plan or any Predecessor Employer that maintained this Plan.

Employer Contributions means

Elective Deferral Contributions
Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions

as set out in Article III and contributions made by the Employer to fund this Plan in accordance with the provisions of the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI, unless the context clearly indicates only specific contributions are meant.

Employment Commencement Date means the date an Employee first performs an Hour of Service.

Entry Date means the date an Employee first enters the Plan as an Active Participant. See the ACTIVE PARTICIPANT SECTION of Article II.

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

Fiscal Year means the Primary Employer’s taxable year. The last day of the Fiscal Year is December 31.

Forfeiture means the part, if any, of a Participant’s Account that is forfeited. See the FORFEITURES SECTION of Article III.

RESTATEMENT MARCH 1, 2007 13 ARTICLE I (6-14161)

Forfeiture Date means, as to a Participant, the last day of five consecutive one-year Periods of Severance (the date the Participant incurs five consecutive Vesting Breaks in Service when the hours method is used to determine Vesting Service).

Highly Compensated Employee means any Employee who:

(a) was a 5-percent owner at any time during the year or the preceding year, or

(b) for the preceding year had compensation from the Employer in excess of $80,000 and, if the Employer so elects, was in the top-paid group for the preceding year. The $80,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period is the calendar quarter ending September 30, 1996.

For this purpose the applicable year of the plan for which a determination is being made is called a determination year and the preceding 12-month period is called a look-back year. If the Employer makes a calendar year data election, the look-back year shall be the calendar year beginning with or within the look-back year. The Plan may not use such election to determine whether Employees are Highly Compensated Employees on account of being a 5-percent owner.

In determining who is a Highly Compensated Employee, the Employer does not make a top-paid group election. In determining who is a Highly Compensated Employee, the Employer does not make a calendar year data election.

Calendar year data elections and top-paid group elections, once made, apply for all subsequent years unless changed by the Employer. If the Employer makes one election, the Employer is not required to make the other. If both elections are made, the look-back year in determining the top-paid group must be the calendar year beginning with or within the look-back year. These elections must apply consistently to the determination years of all plans maintained by the Employer which reference the highly compensated employee definition in Code Section 414(q), except as provided in Internal Revenue Service Notice 97-45 (or superseding guidance).

The determination of who is a highly compensated former Employee is based on the rules applicable to determining Highly Compensated Employee status as in effect for that determination year, in accordance with section 1.414(q)-1T, A-4 of the temporary Income Tax Regulations and Internal Revenue Service Notice 97-45.

The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the compensation that is considered, and the identity of the 5-percent owners, shall be made in accordance with Code Section 414(q) and the regulations thereunder.

Hour of Service means, for the elapsed time method of crediting service in this Plan, each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer. Hour of Service means, for the hours method of crediting service in this Plan, the following:

(a) Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period.

RESTATEMENT MARCH 1, 2007 14 ARTICLE I (6-14161)

(b) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time in which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding provisions of this subparagraph (b), no credit will be given to the Employee:

(1)	for more than 501 Hours of Service under this subparagraph (b) on account of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period); or
(2)	for an Hour of Service for which the Employee is directly or indirectly paid, or entitled to payment, on account of a period in which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker’s or workmen’s compensation, or unemployment compensation, or disability insurance laws; or
(3)	for an Hour of Service for a payment which solely reimburses the Employee for medical or medically related expenses incurred by him.

For purposes of this subparagraph (b), a payment shall be deemed to be made by, or due from the Employer, regardless of whether such payment is made by, or due from the Employer, directly or indirectly through, among others, a trust fund or insurer, to which the Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be credited both under subparagraph (a) or subparagraph (b) above (as the case may be) and under this subparagraph (c). Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in subparagraph (b) above will be subject to the limitations set forth in that subparagraph.

The crediting of Hours of Service above shall be applied under the rules of paragraphs (b) and (c) of the Department of Labor Regulation 2530.200b-2 (including any interpretations or opinions implementing such rules); which rules, by this reference, are specifically incorporated in full within this Plan. The reference to paragraph (b) applies to the special rule for determining hours of service for reasons other than the performance of duties such as payments calculated (or not calculated) on the basis of units of time and the rule against double credit. The reference to paragraph (c) applies to the crediting of hours of service to computation periods.

Hours of Service shall be credited for employment with any other employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m), or (o) and the regulations thereunder for purposes of eligibility and vesting. Hours of Service shall also be credited for any individual who is considered an employee for purposes of this Plan pursuant to Code Section 414(n) or (o) and the regulations thereunder.

Solely for purposes of determining whether a one-year break in service has occurred for eligibility or vesting purposes, during a Parental Absence an Employee shall be credited with the Hours of Service

RESTATEMENT MARCH 1, 2007 15 ARTICLE I (6-14161)

which would otherwise have been credited to the Employee but for such absence, or in any case in which such hours cannot be determined, eight Hours of Service per day of such absence. The Hours of Service credited under this paragraph shall be credited in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period; or in all other cases, in the following computation period.

Inactive Participant means a former Active Participant who has an Account. See the INACTIVE PARTICIPANT SECTION of Article II.

Insurer means Principal Life Insurance Company or the insurance company or companies named by (i) the Primary Employer or (ii) the Trustee in its discretion or as directed under the Trust Agreement.

Investment Fund means the total of Plan assets, excluding the guaranteed benefit policy portion of any Annuity Contract. All or a portion of these assets may be held under, or invested pursuant to, the terms of a Trust Agreement.

The Investment Fund shall be valued at current fair market value as of the Valuation Date. The valuation shall take into consideration investment earnings credited, expenses charged, payments made, and changes in the values of the assets held in the Investment Fund.

The Investment Fund shall be allocated at all times to Participants, except as otherwise expressly provided in the Plan. The Account of a Participant shall be credited with its share of the gains and losses of the Investment Fund. That part of a Participant’s Account invested in a funding arrangement that establishes one or more accounts or investment vehicles for such Participant thereunder shall be credited with the gain or loss from such accounts or investment vehicles. The part of a Participant’s Account that is invested in other funding arrangements shall be credited with a proportionate share of the gain or loss of such investments. The share shall be determined by multiplying the gain or loss of the investment by the ratio of the part of the Participant’s Account invested in such funding arrangement to the total of the Investment Fund invested in such funding arrangement.

Investment Manager means any fiduciary (other than a trustee or Named Fiduciary)

(a) who has the power to manage, acquire, or dispose of any assets of the Plan;

(b) who (i) is registered as an investment adviser under the Investment Advisers Act of 1940; (ii) is not registered as an investment adviser under such Act by reason of paragraph (1) of section 203A(a) of such Act, is registered as an investment adviser under the laws of the state (referred to in such paragraph (1)) in which it maintains its principal office and place of business, and, at the time it last filed the registration form most recently filed by it with such state in order to maintain its registration under the laws of such state, also filed a copy of such form with the Secretary of Labor; (iii) is a bank, as defined in that Act; or (iv) is an insurance company qualified to perform services described in subparagraph (a) above under the laws of more than one state; and

(c) who has acknowledged in writing being a fiduciary with respect to the Plan.

RESTATEMENT MARCH 1, 2007 16 ARTICLE I (6-14161)

Late Retirement Date means the first day of any month that is after a Participant’s Normal Retirement Date and on which retirement benefits begin. If a Participant continues to work for the Employer after his Normal Retirement Date, his Late Retirement Date shall be the earliest first day of the month on or after the date he has a Severance from Employment. An earlier Retirement Date may apply if the Participant so elects. A later Retirement Date may apply if the Participant so elects. See the WHEN BENEFITS START SECTION of Article V.

Leased Employee means any person (other than an employee of the recipient) who, pursuant to an agreement between the recipient and any other person (“leasing organization”), has performed services for the recipient (or for the recipient and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided by the leasing organization to a Leased Employee, which are attributable to service performed for the recipient employer, shall be treated as provided by the recipient employer.

A Leased Employee shall not be considered an employee of the recipient if:

(a) such employee is covered by a money purchase pension plan providing (i) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code Section 415(c)(3), (ii) immediate participation, and (iii) full and immediate vesting, and

(b) Leased Employees do not constitute more than 20 percent of the recipient’s nonhighly compensated work force.

Loan Administrator means the person(s) or position(s) authorized to administer the Participant loan program.

The Loan Administrator is the Benefits Coordinator.

Matching Contributions means contributions made by the Employer to fund this Plan that are contingent on a Participant’s Elective Deferral Contributions. See the EMPLOYER CONTRIBUTIONS SECTION of Article III.

Monthly Date means each Yearly Date and the same day of each following month during the Plan Year beginning on such Yearly Date.

Named Fiduciary means the person or persons who have authority to control and manage the operation and administration of the Plan.

The Named Fiduciary is the Employer.

Nonhighly Compensated Employee means an Employee of the Employer who is not a Highly Compensated Employee.

Nonvested Account means the excess, if any, of a Participant’s Account over his Vested Account.

Normal Retirement Age means the age at which the Participant’s normal retirement benefit becomes nonforfeitable if he is an Employee. A Participant’s Normal Retirement Age is 65.

RESTATEMENT MARCH 1, 2007 17 ARTICLE I (6-14161)

Normal Retirement Date means the earliest first day of the month on or after the date the Participant reaches his Normal Retirement Age. Unless otherwise provided in this Plan, a Participant’s retirement benefits shall begin on a Participant’s Normal Retirement Date if he has had a Severance from Employment on such date and has a Vested Account. Even if the Participant is an Employee on his Normal Retirement Date, he may choose to have his retirement benefit begin on such date.

Owner-employee means a Self-employed Individual who, in the case of a sole proprietorship, owns the entire interest in the unincorporated trade or business for which this Plan is established. If this Plan is established for a partnership, an Owner-employee means a Self-employed Individual who owns more than 10 percent of either the capital interest or profits interest in such partnership.

Parental Absence means an Employee’s absence from work:

(a)	by reason of pregnancy of the Employee,
(b)	by reason of birth of a child of the Employee,

(c) by reason of the placement of a child with the Employee in connection with adoption of such child by such Employee, or

(d) for purposes of caring for such child for a period beginning immediately following such birth or placement.

Participant means either an Active Participant or an Inactive Participant.

Period of Military Duty means, for an Employee

(a) who served as a member of the armed forces of the United States, and

(b) who was reemployed by the Employer at a time when the Employee had a right to reemployment in accordance with seniority rights as protected under Chapter 43 of Title 38 of the U.S. Code,

the period of time from the date the Employee was first absent from active work for the Employer because of such military duty to the date the Employee was reemployed.

Period of Service means a period of time beginning on an Employee’s Employment Commencement Date or Reemployment Commencement Date (whichever applies) and ending on his Severance Date.

Period of Severance means a period of time beginning on an Employee’s Severance Date and ending on the date he again performs an Hour of Service.

A one-year Period of Severance means a Period of Severance of 12 consecutive months.

Solely for purposes of determining whether a one-year Period of Severance has occurred for eligibility or vesting purposes, the consecutive 12-month period beginning on the first anniversary of the first date of a Parental Absence shall not be a one-year Period of Severance.

RESTATEMENT MARCH 1, 2007 18 ARTICLE I (6-14161)

Plan means the 401(k) savings plan of the Employer set forth in this document, including any later amendments to it.

Plan Administrator means the person or persons who administer the Plan.

The Plan Administrator is the Employer.

Plan Fund means the total of the Investment Fund and the guaranteed benefit policy portion of any Annuity Contract. The Investment Fund shall be valued as stated in its definition. The guaranteed benefit policy portion of any Annuity Contract shall be determined in accordance with the terms of the Annuity Contract and, to the extent that such Annuity Contract allocates contract values to Participants, allocated to Participants in accordance with its terms. The total value of all amounts held under the Plan Fund shall equal the value of the aggregate Participants’ Accounts under the Plan.

Plan Year means a period beginning on a Yearly Date and ending on the day before the next Yearly Date.

Plan-year Quarter means a period beginning on a Quarterly Date and ending on the day before the next Yearly Date.

Predecessor Employer means a firm of which the Employer was once a part (e.g., due to a spinoff or change of corporate status) or a firm absorbed by the Employer because of a merger or acquisition (stock or asset, including a division or an operation of such company) that maintained this Plan or that is named below:

Riata Drilling Company, Inc.
Symbol Energy, Inc.
TLW Investments Inc.
National Energy Group, Inc.
Lariat Services, Inc.
PetroSource, Inc.
Alsate Management & Investment Company
ROC Gas Company, Inc.

Pre-tax Elective Deferral Contributions means a Participant’s Elective Deferral Contributions that are not includible in the Participant’s gross income at the time deferred.

Primary Employer means SandRidge Energy, Inc.

Qualified Nonelective Contributions means contributions made by the Employer to fund this Plan (other than Elective Deferral Contributions) that are 100% vested when made to the Plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions. See the EMPLOYER CONTRIBUTIONS SECTION of Article III and the WHEN BENEFITS START SECTION of Article V.

Qualifying Employer Securities means any security which is issued by the Employer or any Controlled Group member and which meets the requirements of Code Section 409(I) and ERISA Section 407(d)(5). This shall also include any securities that satisfied the requirements of the definition when these securities were assigned to the Plan.

RESTATEMENT MARCH 1, 2007 19 ARTICLE I (6-14161)

Qualifying Employer Securities Fund means that part of the assets of the Trust Fund that are designated to be held primarily or exclusively in Qualifying Employer Securities for the purpose of providing benefits for Participants.

Quarterly Date means each Yearly Date and the third, sixth, and ninth Monthly Date after each Yearly Date that is within the same Plan Year.

Reemployment Commencement Date means the date an Employee first performs an Hour of Service following a Period of Severance.

Reentry Date means the date a former Active Participant reenters the Plan. See the ACTIVE PARTICIPANT SECTION of Article II.

Retirement Date means the date a retirement benefit will begin and is a Participant’s Normal or Late Retirement Date, as the case may be.

Rollover Contributions means the Rollover Contributions which are made by an Eligible Employee or an Inactive Participant according to the provisions of the ROLLOVER CONTRIBUTIONS SECTION of Article III.

Self-employed Individual means, with respect to any Fiscal Year, an individual who has Earned Income for the Fiscal Year (or who would have Earned Income but for the fact the trade or business for which this Plan is established did not have net profits for such Fiscal Year).

Severance Date means the earlier of:

(a) the date on which an Employee quits, retires, dies, or is discharged, or

(b) the first anniversary of the date an Employee begins a one-year absence from service (with or without pay). This absence may be the result of any combination of vacation, holiday, sickness, disability, leave of absence, or layoff.

Solely to determine whether a one-year Period of Severance has occurred for eligibility or vesting purposes for an Employee who is absent from service beyond the first anniversary of the first day of a Parental Absence, Severance Date is the second anniversary of the first day of the Parental Absence. The period between the first and second anniversaries of the first day of the Parental Absence is not a Period of Service and is not a Period of Severance.

Severance from Employment means an Employee has ceased to be an Employee of the Employer. The Plan Administrator shall determine if a Severance from Employment has occurred in accordance with section 1.401(k)-1(d)(2) of the regulations.

Totally and Permanently Disabled means that a Participant is disabled, as a result of sickness or injury, to the extent that he is prevented from engaging in any substantial gainful activity, and is eligible for and receives a disability benefit under Title II of the Federal Social Security Act.

RESTATEMENT MARCH 1, 2007 20 ARTICLE I (6-14161)

Trust Agreement means an agreement or agreements of trust between the Primary Employer and Trustee established for the purpose of holding and distributing the Trust Fund under the provisions of the Plan. The Trust Agreement may provide for the investment of all or any portion of the Trust Fund in the Annuity Contract or any other investment arrangement.

Trust Fund means the total funds held under an applicable Trust Agreement. The term Trust Fund when used within a Trust Agreement shall mean only the funds held under that Trust Agreement.

Trustee means the party or parties named in the applicable Trust Agreement.

Valuation Date means the date on which the value of the assets of the Investment Fund is determined. The value of each Account that is maintained under this Plan shall be determined on the Valuation Date. In each Plan Year, the Valuation Date shall be the last day of the Plan Year. At the discretion of the Plan Administrator, Trustee, or Insurer (whichever applies), assets of the Investment Fund may be valued more frequently. These dates shall also be Valuation Dates.

Vested Account means the vested part of a Participant’s Account. The Participant’s Vested Account is determined as follows.

If the Participant’s Vesting Percentage is 100%, his Vested Account equals his Account.

If the Participant’s Vesting Percentage is not 100%, his Vested Account equals the sum of (a) and (b) below:

(a) The part of the Participant’s Account resulting from Employer Contributions made before a prior Forfeiture Date and all other Contributions that were 100% vested when made.

(b) The balance of the Participant’s Account in excess of the amount in (a) above multiplied by his Vesting Percentage.

If the Participant has withdrawn any part of his Account resulting from Employer Contributions, other than the vested Employer Contributions included in (a) above, the amount determined under this subparagraph (b) shall be equal to P(AB + D) — D as defined below:

P            The Participant’s Vesting Percentage.
AB         The balance of the Participant’s Account in excess of the amount in (a) above.
D	The amount of the withdrawal resulting from Employer Contributions, other than the vested Employer Contributions included in (a) above.

Vesting Break in Service means a Vesting Computation Period in which an Employee is credited with 500 or fewer Hours of Service. An Employee incurs a Vesting Break in Service on the last day of a Vesting Computation Period in which he has a Vesting Break in Service.

Vesting Computation Period means a consecutive 12-month period ending on the last day of each Plan Year, including corresponding consecutive 12-month periods before October 1, 1997.

RESTATEMENT MARCH 1, 2007 21 ARTICLE I (6-14161)

Vesting Percentage means the percentage used to determine the nonforfeitable portion of a Participant’s Account attributable to Employer Contributions that were not 100% vested when made.

A Participant’s Vesting Percentage is shown in the following schedule opposite the number of whole years of his Vesting Service.

VESTING SERVICE	VESTING
(whole years)	PERCENTAGE
Less than 1	0
1	25
2	50
3	75
4 or more	100

The Vesting Percentage for a Participant who is an Employee on or after the date he reaches Normal Retirement Age shall be 100%. The Vesting Percentage for a Participant who is an Employee on the date he dies shall be 100%. The Vesting Percentage for a Participant who is an Employee on the date he becomes disabled shall be 100% if such disability is subsequently determined to meet the definition of Totally and Permanently Disabled.

If the schedule used to determine a Participant’s Vesting Percentage is changed, the new schedule shall not apply to a Participant unless he is credited with an Hour of Service on or after the date of the change and the Participant’s nonforfeitable percentage on the day before the date of the change is not reduced under this Plan. The amendment provisions of the AMENDMENTS SECTION of Article X regarding changes in the computation of the Vesting Percentage shall apply.

Vesting Service means the sum of (a), (b), and (c) below:

(a) One year of service for each Vesting Computation Period ending before March 1, 2007, in which an Employee is credited with at least 1,000 Hours of Service.

(b) For the Vesting Computation Period in which March 1, 2007, falls, the greater of

(1)	the service that would have been credited to the Employee as of March 1, 2007, using the hours method, or
(2)	that part of an Employee’s Period of Service credited within such period.

(c) That part of an Employee’s Period of Service credited after the end of the Vesting Computation Period in which March 1, 2007, falls.

An Employee’s Period of Service shall be measured from his Employment Commencement Date to his most recent Severance Date. This Period of Service shall be reduced by all or any part of a Period of Service that is not counted. This Period of Service shall also be reduced by any Period of Severance, unless such Period of Severance is included under the service spanning rule below. This Period of Service shall be expressed as years and fractional parts of a year (to four decimal places) on the basis that 365 days equal one year.

RESTATEMENT MARCH 1, 2007 22 ARTICLE I (6-14161)

However, Vesting Service is modified as follows:

Service with a Predecessor Employer that did not maintain this Plan included:

An Employee’s service with a Predecessor Employer that did not maintain this Plan shall be included as service with the Employer. This service excludes service performed while a proprietor or partner.

Period of Military Duty included:

A Period of Military Duty shall be included as service with the Employer to the extent it has not already been credited.

Period of Severance included (service spanning rule):

A Period of Severance shall be deemed to be a Period of Service under either of the following conditions:

(a)	the Period of Severance immediately follows a period during which an Employee is not absent from work and ends within 12 months; or
(b)	the Period of Severance immediately follows a period during which an Employee is absent from work for any reason other than quitting, being discharged, or retiring (such as a leave of absence or layoff) and ends within 12 months of the date he was first absent.

Controlled Group service included:

An Employee’s service with a member firm of a Controlled Group while both that firm and the Employer were members of the Controlled Group shall be included as service with the Employer.

Yearly Date means October 1, 1997, and each following January 1.

Years of Service means an Employee’s Vesting Service disregarding any modifications that exclude service.

RESTATEMENT MARCH 1, 2007 23 ARTICLE I (6-14161)

ARTICLE II

PARTICIPATION

SECTION 2.01—ACTIVE PARTICIPANT.

(a) An Employee shall first become an Active Participant (begin active participation in the Plan) on the earliest Quarterly Date on which he is an Eligible Employee and has met both of the eligibility requirements set forth below. This date is his Entry Date.

(1)	He has completed two months of Eligibility Service before his Entry Date.
(2)	He is age 21 or older.

Each Employee who was an Active Participant on February 28, 2007, shall continue to be an Active Participant if he is still an Eligible Employee on March 1, 2007, and his Entry Date shall not change.

If service with a Predecessor Employer is counted for purposes of Eligibility Service, an Employee shall be credited with such service on the date he becomes an Employee and shall become an Active Participant on the earliest Quarterly Date on which he is an Eligible Employee and has met all of the eligibility requirements above. This date is his Entry Date.

If a person has been an Eligible Employee who has met all of the eligibility requirements above, but is not an Eligible Employee on the date that would have been his Entry Date, he shall become an Active Participant on the date he again becomes an Eligible Employee. This date is his Entry Date.

In the event an Employee who is not an Eligible Employee becomes an Eligible Employee, such Eligible Employee shall become an Active Participant immediately if such Eligible Employee has satisfied the eligibility requirements above and would have otherwise previously become an Active Participant had he met the definition of Eligible Employee. This date is his Entry Date.

(b) An Inactive Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour of Service as an Eligible Employee. This date is his Reentry Date.

Upon again becoming an Active Participant, he shall cease to be an Inactive Participant.

(c) A former Participant shall again become an Active Participant (resume active participation in the Plan) on the date he again performs an Hour of Service as an Eligible Employee. This date is his Reentry Date.

     There shall be no duplication of benefits for a Participant under this Plan because of more than one period as an Active Participant.

RESTATEMENT MARCH 1, 2007 24 ARTICLE II (6-14161)

SECTION 2.02—INACTIVE PARTICIPANT.

     An Active Participant shall become an Inactive Participant (stop accruing benefits under the Plan) on the earlier of the following:

(a)	the date the Participant ceases to be an Eligible Employee, or
(b)	the effective date of complete termination of the Plan under Article VIII.

     An Employee or former Employee who was an Inactive Participant under the Plan on February 28, 2007, shall continue to be an Inactive Participant on March 1, 2007. Eligibility for any benefits payable to the Participant or on his behalf and the amount of the benefits shall be determined according to the provisions of the prior document, unless otherwise stated in this document.

SECTION 2.03—CESSATION OF PARTICIPATION.

     A Participant shall cease to be a Participant on the date he is no longer an Eligible Employee and his Account is zero.

SECTION 2.04—ADOPTING EMPLOYERS — SINGLE PLAN.

     Each of the Controlled Group members listed below is an Adopting Employer. Each Adopting Employer listed below participates with the Employer in this Plan. An Adopting Employer’s agreement to participate in this Plan shall be in writing.

     The Employer has the right to amend the Plan. An Adopting Employer does not have the right to amend the Plan.

     If the Adopting Employer did not maintain its plan before its date of adoption specified below, its date of adoption shall be the Entry Date for any of its Employees who have met the requirements in the ACTIVE PARTICIPANT SECTION of this article as of that date. Service with and Compensation from an Adopting Employer shall be included as service with and Compensation from the Employer. Transfer of employment, without interruption, between an Adopting Employer and another Adopting Employer or the Employer shall not be considered an interruption of service. The Employer’s Fiscal Year defined in the DEFINITIONS SECTION of Article I shall be the Fiscal Year used in interpreting this Plan for Adopting Employers.

     Contributions made by an Adopting Employer shall be treated as Contributions made by the Employer. Forfeitures arising from those Contributions shall be used for the benefit of all Participants.

     An employer shall not be an Adopting Employer if it ceases to be a Controlled Group member. Such an employer may continue a retirement plan for its Employees in the form of a separate document. This Plan shall be amended to delete a former Adopting Employer from the list below.

     If (i) an employer ceases to be an Adopting Employer or the Plan is amended to delete an Adopting Employer and (ii) the Adopting Employer does not continue a retirement plan for the benefit of its Employees, partial termination may result and the provisions of Article VIII shall apply.

RESTATEMENT MARCH 1, 2007 25 ARTICLE II (6-14161)

ADOPTING EMPLOYERS

NAME	DATE OF ADOPTION
Alsate Management & Investment Company	July 31, 2003
Lariat Services, Inc.	July 31, 2003
Riagra Land & Cattle Company	July 31, 2003
TransPecos Logging, LLC	July 31, 2003
Integra Energy, LLC	July 31, 2003
Riata Energy Operating, LLC	July 31, 2003
Chaparral Supply, LLC	July 31, 2003
TLW Investments, Inc.	August 1, 2006
PetroSouce, Inc.	March 1, 2007

RESTATEMENT MARCH 1, 2007 26 ARTICLE II (6-14161)

ARTICLE III

CONTRIBUTIONS

SECTION 3.01—EMPLOYER CONTRIBUTIONS.

     Employer Contributions shall be made without regard to current or accumulated net income, earnings, or profits of the Employer. Notwithstanding the foregoing, the Plan shall continue to be designed to qualify as a profit sharing plan for purposes of Code Sections 401(a), 402, 412, and 417. Such Contributions shall be equal to the Employer Contributions as described below:

(a)	The amount of each Elective Deferral Contribution for a Participant shall be equal to a portion of Compensation as specified in the elective deferral agreement. An Employee who is eligible to participate in the Plan for purposes of Elective Deferral Contributions may file an elective deferral agreement with the Employer. The Participant shall modify or terminate the elective deferral agreement by filing a new elective deferral agreement. The elective deferral agreement may not be made retroactively and shall remain in effect until modified or terminated.
	The elective deferral agreement to start or modify Elective Deferral Contributions shall be effective as soon as administratively feasible following the date on which the Participant’s Entry Date (Reentry Date, if applicable) or any following Quarterly Date occurs. The elective deferral agreement must be entered into on or before the date it is effective.
	The elective deferral agreement to stop Elective Deferral Contributions may be entered into on any date. Such elective deferral agreement shall be effective as soon as administratively feasible following the date on which the elective deferral agreement is entered into.
	Elective Deferral Contributions must be a whole percentage of Compensation and cannot be more than 75% of Compensation. A Participant who is eligible to make Catch-up Contributions shall not be limited to the maximum deferral percentage unless his Elective Deferral Contributions, including Catch-up Contributions, exceed this limit plus the dollar amount of Catch-up Contributions permitted.
	A separate elective deferral agreement may be made for performance bonuses. A Participant may not defer more than 75% of his performance bonus Compensation for the Plan Year.
	A Participant who is age 50 or older by the end of the taxable year shall be eligible to make Catch-up Contributions.
	The Plan provides for an automatic election to have Elective Deferral Contributions made. The automatic Elective Deferral Contribution shall be Pre-tax Elective Deferral Contributions and shall be 3% of Compensation, not including bonus Compensation. The Participant may affirmatively elect a different percentage or elect not to make Elective Deferral Contributions.
	Elective Deferral Contributions are 100% vested and nonforfeitable.

RESTATEMENT MARCH 1, 2007 27 ARTICLE III (6-14161)

(b) Matching Contributions.

(1)	The Employer shall make Matching Contributions in an amount equal to 100% of Elective Deferral Contributions. Elective Deferral Contributions that are over 15% of Compensation won’t be matched.
	Matching Contributions are calculated based on Elective Deferral Contributions and Compensation for the pay periods ending with or within each Plan-year Quarter. Matching Contributions shall be made for all persons who were Active Participants at any time during the Plan-year Quarter.
(2)	The Employer may make additional Matching Contributions if the total Matching Contributions determined below are greater than the amount of Matching Contributions determined in (1) above for the Plan Year. Additional Matching Contributions, if any, shall be made for all persons who were Active Participants at any time during the Plan Year.
	Total Matching Contributions for the Plan Year shall be a percentage of Elective Deferral Contributions and shall be calculated based on Elective Deferral Contributions and Compensation for the Plan Year. The percentage shall be determined by the Employer. The percentage must be equal to or greater than the percentage specified in (1) above.
	Elective Deferral Contributions that are over a percentage of Compensation won’t be matched. The percentage is the percentage specified in (1) above or a greater percentage determined by the Employer.

The amount of additional Matching Contributions, if any, shall be determined by subtracting the Matching Contributions determined in (1) above for the Plan Year from total Matching Contributions for the Plan Year.

Any percentage determined by the Employer shall apply to all eligible persons for the entire Plan Year.

Matching Contributions are subject to the Vesting Percentage.

(b)

Qualified Nonelective Contributions may be made for each Plan Year in an amount determined by the Employer.

Discretionary Qualified Nonelective Contributions may be made for each Plan Year in an amount determined by the Employer to be used to reduce Excess Aggregate Contributions and Excess Contributions, as defined in the EXCESS AMOUNTS SECTION of this article. If the Plan is treated as separate plans because it is mandatorily disaggregated under the regulations of Code Section 401(k), a separate Qualified Nonelective Contribution may be determined for each separate plan. Such Contributions are in addition to the Qualified Nonelective Contributions determined above, if any.

RESTATEMENT MARCH 1, 2007 28 ARTICLE III (6-14161)

Qualified Nonelective Contributions are 100% vested and are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions.

(d) Discretionary Contributions may be made for each Plan Year in an amount determined by the Employer.

Discretionary Contributions are subject to the Vesting Percentage.

     No Participant shall be permitted to have Elective Deferral Contributions, as defined in the EXCESS AMOUNTS SECTION of this article, made under this Plan, or any other plan, contract, or arrangement maintained by the Employer, during any calendar year, in excess of the dollar limitation contained in Code Section 402(g) in effect for the Participant’s taxable year beginning in such calendar year. The dollar limitation in the preceding sentence shall be increased by the dollar limit on Catch-up Contributions under Code Section 414(v)(2)(B)(i) for the taxable year for any Participant who will be age 50 or older by the end of the taxable year.

     The dollar limitation contained in Code Section 402(g) is $10,500 for taxable years beginning in 2000 and 2001, increasing to $11,000 for taxable years beginning in 2002, and increasing by $1,000 for each year thereafter up to $15,000 for taxable years beginning in 2006 and later years. After 2006, the $15,000 limit will be adjusted by the Secretary of the Treasury for cost-of-living increases under Code Section 402(g)(4). Any such adjustments will be in multiples of $500.

     Catch-up Contributions for a Participant for a taxable year may not exceed the dollar limit on Catch-up Contributions under Code Section 414(v)(2)(B)(i) for the taxable year. The dollar limit on Catch-up Contributions under Code Section 414(v)(2)(B)(i) is $1,000 for taxable years beginning in 2002, increasing by $1,000 for each year thereafter up to $5,000 for taxable years beginning in 2006 and later years. After 2006, the $5,000 limit will be adjusted by the Secretary of the Treasury for cost-of-living increases under Code Section 414(v)(2)(C). Any such adjustments will be in multiples of $500.

     The Plan provides for an automatic election to have Pre-tax Elective Deferral Contributions made. Such automatic election shall apply when a Participant first becomes eligible to make Elective Deferral Contributions (or again becomes eligible after a period during which he was not an Active Participant). The Participant shall be provided a notice that explains the automatic election and his right to elect a different rate of Elective Deferral Contributions or to elect not to make Elective Deferral Contributions. The notice shall include the procedure for exercising that right and the timing for implementing any such election. The Participant shall be given a reasonable period thereafter to elect a different rate of Elective Deferral Contributions or to elect not to make Elective Deferral Contributions.

     Each Active Participant affected by the automatic election shall be provided an annual notice that explains the automatic election and his right to elect a different rate of Elective Deferral Contributions or to elect not to make Elective Deferral Contributions. The notice shall include the procedure for exercising those rights and the timing for implementing such elections.

     An elective deferral agreement (or change thereto) must be made in such manner and in accordance with such rules as the Employer may prescribe (including by means of voice response or other electronic system under circumstances the Employer permits) and may not be made retroactively.

RESTATEMENT MARCH 1, 2007 29 ARTICLE III (6-14161)

     Employer Contributions are allocated according to the provisions of the ALLOCATION SECTION of this article.

     The Employer may make all or any portion of the following Contributions, which are to be invested in Qualifying Employer Securities, to the Trustee in the form of Qualifying Employer Securities:

Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions

     A portion of the Plan assets resulting from Employer Contributions (but not more than the original amount of those Contributions) may be returned if the Employer Contributions are made because of a mistake of fact or are more than the amount deductible under Code Section 404 (excluding any amount which is not deductible because the Plan is disqualified). The amount involved must be returned to the Employer within one year after the date the Employer Contributions are made by mistake of fact or the date the deduction is disallowed, whichever applies. Except as provided under this paragraph and Article VIII, the assets of the Plan shall never be used for the benefit of the Employer and are held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for defraying reasonable expenses of administering the Plan.

SECTION 3.01A—ROLLOVER CONTRIBUTIONS.

     A Rollover Contribution may be made by an Eligible Employee or an Inactive Participant if the following conditions are met:

(a)	Beginning January 1, 2002, the Contribution is a Participant Rollover Contribution or a direct rollover of a distribution made after December 31, 2001 from the types of plans specified below.
	Direct Rollovers. The Plan will accept a direct rollover of an Eligible Rollover Distribution from (i) a qualified plan described in Code Section 401(a) or 403(a), including after-tax employee contributions and excluding any portion of a designated Roth account; (ii) an annuity contract described in Code Section 403(b), excluding after-tax employee contributions and any portion of a designated Roth account; and (iii) an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.
	Participant Rollover Contributions from Other Plans. The Plan will accept a Participant contribution of an Eligible Rollover Distribution from (i) a qualified plan described in Code Section 401(a) or 403(a), excluding distributions of a designated Roth account; (ii) an annuity contract described in Code Section 403(b), excluding any distribution of a designated Roth account; and (iii) an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state.
	Participant Rollover Contributions from IRAs. The Plan will accept a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or individual retirement annuity described in Code Section 408(a) or (b) that is eligible to be rolled over and would otherwise be includible in the Participant’s gross income.

RESTATEMENT MARCH 1, 2007 30 ARTICLE III (6-14161)

(b)	The Contribution is of amounts that the Code permits to be transferred to a plan that meets the requirements of Code Section 401 (a).
(c)	The Contribution is made in the form of a direct rollover under Code Section 401(a)(31) or is a rollover made under Code Section 402(c) or 408(d)(3)(A) within 60 days after the Eligible Employee or Inactive Participant receives the distribution.
(d)	The Eligible Employee or Inactive Participant furnishes evidence satisfactory to the Plan Administrator that the proposed rollover meets conditions (a), (b), and (c) above.
(e)	In the case of an Inactive Participant, the Contribution must be of an amount distributed from another plan of the Employer, or a plan of a Controlled Group member, that satisfies the requirements of Code Section 401(a).

     A Rollover Contribution shall be allowed in cash only and must be made according to procedures set up by the Plan Administrator.

     If the Eligible Employee is not an Active Participant when the Rollover Contribution is made, he shall be deemed to be an Active Participant only for the purpose of investment and distribution of the Rollover Contribution. Employer Contributions shall not be made for or allocated to the Eligible Employee until the time he meets all of the requirements to become an Active Participant.

     Rollover Contributions made by an Eligible Employee or an Inactive Participant shall be credited to his Account. The part of the Participant’s Account resulting from Rollover Contributions is 100% vested and nonforfeitable at all times. Separate accounting records shall be maintained for those parts of his Rollover Contributions consisting of (i) voluntary contributions which were deducted from the Participant’s gross income for Federal income tax purposes and (ii) after-tax employee contributions, including the portion that would not have been includible in the Participant’s gross income if the contributions were not rolled over into this Plan.

SECTION 3.02—FORFEITURES.

     The Nonvested Account of a Participant shall be forfeited as of the earlier of the following:

(a)	the date the record keeper is notified that the Participant died (if prior to such date he has had a Severance from Employment), or
(b)	the Participant’s Forfeiture Date.

All or a portion of a Participant’s Nonvested Account shall be forfeited before such earlier date if, after he has a Severance from Employment, he receives, or is deemed to receive, a distribution of his entire Vested Account or a distribution of his Vested Account derived from Employer Contributions which were not 100% vested when made, under the RETIREMENT BENEFITS SECTION of Article V, the VESTED BENEFITS SECTION of Article V, or the SMALL AMOUNTS SECTION of Article X. The forfeiture shall occur as of the date the Participant receives, or is deemed to receive, the distribution. If a Participant receives, or is deemed to receive, his entire Vested Account, his entire Nonvested Account shall be forfeited. If a Participant receives a distribution of his Vested Account from Employer Contributions that were not 100% vested when made, but less than his entire Vested Account, the amount to be forfeited shall be determined by multiplying his Nonvested Account from such Contributions by a fraction. The numerator of the fraction is the amount of

RESTATEMENT MARCH 1, 2007 31 ARTICLE III (6-14161)

the distribution derived from Employer Contributions that were not 100% vested when made and the denominator of the fraction is his entire Vested Account derived from such Contributions on the date of the distribution.

     A Forfeiture shall also occur as provided in the EXCESS AMOUNTS SECTION of this article.

          Forfeitures shall be determined at least once during each Plan Year. Forfeitures may first be used to pay administrative expenses. Forfeitures of Matching Contributions that relate to excess amounts as provided in the EXCESS AMOUNTS SECTION of this article, that have not been used to pay administrative expenses, shall be applied to reduce the earliest Employer Contributions made after the Forfeitures are determined. Any other Forfeitures that have not been used to pay administrative expenses shall be applied to reduce the earliest Employer Contributions made after the Forfeitures are determined. Upon their application to reduce Employer Contributions, Forfeitures shall be deemed to be Employer Contributions.

     If a Participant again becomes an Eligible Employee after receiving a distribution which caused all or a portion of his Nonvested Account to be forfeited, he shall have the right to repay to the Plan the entire amount of the distribution he received (excluding any amount of such distribution resulting from Contributions which were 100% vested when made). The repayment must be made in a single sum (repayment in installments is not permitted) before the earlier of the date five years after the date he again becomes an Eligible Employee or the end of the first period of five consecutive one-year Periods of Severance which begin after the date of the distribution.

     If the Participant makes the repayment above, the Plan Administrator shall restore to his Account an amount equal to his Nonvested Account that was forfeited on the date of distribution, unadjusted for any investment gains or losses. If no amount is to be repaid because the Participant was deemed to have received a distribution, or only received a distribution of Contributions which were 100% vested when made, and he again performs an Hour of Service as an Eligible Employee within the repayment period, the Plan Administrator shall restore the Participant’s Account as if he had made a required repayment on the date he performed such Hour of Service. Restoration of the Participant’s Account shall include restoration of all Code Section 411(d)(6) protected benefits with respect to the restored Account, according to applicable Treasury regulations. Provided, however, the Plan Administrator shall not restore the Nonvested Account if (i) a Forfeiture Date has occurred after the date of the distribution and on or before the date of repayment and (ii) that Forfeiture Date would result in a complete forfeiture of the amount the Plan Administrator would otherwise restore.

     The Plan Administrator shall restore the Participant’s Account by the close of the Plan Year following the Plan Year in which repayment is made. The permissible sources for restoration of the Participant’s Account are Forfeitures or special Employer Contributions. Such special Employer Contributions shall be made without regard to profits. The repaid and restored amounts are not included in the Participant’s Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article.

SECTION 3.03—ALLOCATION.

     A person meets the allocation requirements of this section if he was an Active Participant at any time during the Plan Year.

RESTATEMENT MARCH 1, 2007 32 ARTICLE III (6-14161)

     Elective Deferral Contributions shall be allocated to the Participants for whom such Contributions are made under the EMPLOYER CONTRIBUTIONS SECTION of this article. Such Contributions shall be allocated when made and credited to the Participant’s Account.

     Matching Contributions shall be allocated to the persons for whom such Contributions are made under the EMPLOYER CONTRIBUTIONS SECTION of this article. Such Contributions calculated based on Elective Deferral Contributions and Compensation for the pay periods ending with or within each Plan-year Quarter shall be allocated when made and credited to the person’s Account. Such Contributions calculated based on Elective Deferral Contributions and Compensation for the Plan Year shall be allocated as of the last day of the Plan Year and shall be credited to the person’s Account.

     The discretionary Qualified Nonelective Contributions to be used to reduce excess amounts, as described in the EMPLOYER CONTRIBUTIONS SECTION of this article, which are in addition to any other Qualified Nonelective Contributions described in such section shall be allocated as of the last day of the Plan Year only to Nonhighly Compensated Employees who were Active Participants at any time during the Plan Year. Such Contributions (or separate Contributions) shall be allocated first to the eligible person under the Plan (or separate plan) with the lowest Annual Compensation for the Plan Year, then to the eligible person under the Plan (or separate plan) with the next lowest Annual Compensation, and so forth, in each case subject to the applicable limits of the CONTRIBUTION LIMITATION SECTION of this article. This amount shall be credited to the person’s Account.

     Qualified Nonelective Contributions other than the discretionary Qualified Nonelective Contributions to be used to reduce excess amounts, as described in the EMPLOYER CONTRIBUTIONS SECTION of this article, shall be allocated as of the last day of the Plan Year to each person who was an Active Participant at any time during the Plan Year. Such Qualified Nonelective Contributions shall be allocated only to Nonhighly Compensated Employees. The amount allocated to such person for the Plan Year shall be equal to such Qualified Nonelective Contributions multiplied by the ratio of such person’s Annual Compensation for the Plan Year to the total Annual Compensation of all such persons. This amount shall be credited to the person’s Account.

     Discretionary Contributions shall be allocated as of the last day of the Plan Year using Annual Compensation for the Plan Year. In years in which the Plan is a Top-heavy Plan, as defined in the DEFINITIONS SECTION of Article XI, and the minimum contribution under the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI is not being provided by other contributions to this Plan or another plan of the Employer, the allocation shall be made to each person meeting the allocation requirements of this section and each person entitled to a minimum contribution under the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI. In all other years, the allocation shall be made for each person meeting the allocation requirements of this section. The amount allocated shall be equal to the Discretionary Contributions multiplied by the ratio of such person’s Annual Compensation to the total Annual Compensation for all such persons. The allocation for any person who does not meet the allocation requirements of this section shall be limited to the amount necessary to fund the minimum contribution.

     In years in which the Plan is a Top-heavy Plan, the minimum contribution under the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI is not being provided by other contributions to this Plan or another plan of the Employer, and the allocation described above (or any subsequent allocation described below) would provide an allocation for any person less than the minimum contribution required for such person in the MODIFICATION OF CONTRIBUTIONS SECTION of Article XI, such minimum contribution shall first be allocated to all such persons. Then any amount remaining shall be allocated to the remaining persons

RESTATEMENT MARCH 1, 2007 33 ARTICLE III (6-14161)

sharing in the allocation based on Annual Compensation as described above, as if they were the only persons sharing in the allocation for the Plan Year.

     This amount shall be credited to the person’s Account.

     If Leased Employees are Eligible Employees, in determining the amount of Employer Contributions allocated to a person who is a Leased Employee, contributions provided by the leasing organization that are attributable to services such Leased Employee performs for the Employer shall be treated as provided by the Employer. Those contributions shall not be duplicated under this Plan.

SECTION 3.04—CONTRIBUTION LIMITATION.

(a)	Definitions. For the purpose of determining the contribution limitation set forth in this section, the following terms are defined.
	Annual Additions means the sum of the following amounts credited to a Participant’s account for the Limitation Year:

(1)	employer contributions;
(2)	employee contributions; and
(3)	forfeitures.

Annual Additions to a defined contribution plan shall also include the following:

(4)	amounts allocated to an individual medical account, as defined in Code Section 415(1)(2), which are part of a pension or annuity plan maintained by the Employer;
(5)	amounts derived from contributions paid or accrued which are attributable to post-retirement medical benefits, allocated to the separate account of a key employee, as defined in Code Section 419A(d)(3), under a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer; and
(6)	allocations under a simplified employee pension.

For this purpose, any Excess Amount applied under (e) and (k) below in the Limitation Year to reduce Employer Contributions shall be considered Annual Additions for such Limitation Year.

Compensation means wages within the meaning of Code Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3), and 6052. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). The type of compensation that is reported in the “Wages, Tips and Other Compensation” box on Form W-2 satisfies this definition.

RESTATEMENT MARCH 1, 2007 34 ARTICLE III (6-14161)

For any Self-employed Individual, Compensation shall mean Earned Income.

For purposes of applying the limitations of this section, Compensation for a Limitation Year is the Compensation actually paid or made available in gross income during such Limitation Year.

Compensation paid or made available during such Limitation Year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount which is contributed or deferred by the Employer at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125, 132(f)(4), or 457.

For Limitation Years beginning on and after January 1, 2005, payments made within 2 1/2 months after Severance from Employment will be Compensation if they are payments that, absent a Severance from Employment, would have been paid to the Employee while the Employee continued in employment with the Employer and are regular compensation for services during the Employee’s regular working hours, compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar compensation, and payments for accrued bona fide sick, vacation, or other leave, but only if the Employee would have been able to use the leave if employment had continued. Any payments not described above are not considered compensation if paid after Severance from Employment, even if they are paid within 2 1/2 months following Severance from Employment, except for payments to an individual who does not currently perform services for the Employer by reason of qualified military service (within the meaning of Code Section 414(u)(1)) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

Defined Contribution Dollar Limitation means $40,000, as adjusted for cost-of living increases under Code Section 415(d).

Employer means the employer that adopts this Plan, and all members of a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), all commonly controlled trades or businesses (as defined in Code Section 414(c) as modified by Code Section 415(h)) or affiliated service groups (as defined in Code Section 414(m)) of which the adopting employer is a part, and any other entity required to be aggregated with the employer pursuant to regulations under Code Section 414(o).

Excess Amount means the excess of the Participant’s Annual Additions for the Limitation Year over the Maximum Annual Addition.

Limitation Year means the consecutive 12-month period ending on the last day of each Plan Year, including corresponding consecutive 12-month periods before October 1, 1997. If the Limitation Year is other than the calendar year, execution of this Plan (or any amendment to this Plan changing the Limitation Year) constitutes the Employer’s adoption of a written resolution electing the Limitation Year. If the Limitation Year is amended to a different consecutive 12-month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

RESTATEMENT MARCH 1, 2007 35 ARTICLE III (6-14161)

Maximum Annual Addition means, for Limitation Years beginning on or after January 1, 2002, except for catch-up contributions described in Code Section 414(v), the Annual Addition that may be contributed or allocated to a Participant’s Account under the Plan for any Limitation Year. This amount shall not exceed the lesser of:

(1)	The Defined Contribution Dollar Limitation, or
(2)	100 percent of the Participant’s Compensation for the Limitation Year.

The compensation limitation referred to in (2) shall not apply to any contribution for medical benefits (within the meaning of Code Section 401(h) or 419A(f)(2)) after separation from service that is otherwise treated as an Annual Addition.

If a short Limitation Year is created because of an amendment changing the Limitation Year to a different consecutive 12-month period, the Maximum Annual Addition will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction:

Number of months (including any fractional parts of a month)
in the short Limitation Year
12

(b)	If the Participant does not participate in, and has never participated in, another qualified plan maintained by the Employer or a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer, or an individual medical account, as defined in Code Section 415(l)(2), maintained by the Employer, or a simplified employee pension, as defined in Code Section 408(k), maintained by the Employer, which provides an Annual Addition, the amount of Annual Additions which may be credited to the Participant’s Account for any Limitation Year shall not exceed the lesser of the Maximum Annual Addition or any other limitation contained in this Plan. If the Employer Contribution that would otherwise be contributed or allocated to the Participant’s Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Annual Addition, the amount contributed or allocated shall be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Annual Addition.
(c)	Prior to determining the Participant’s actual Compensation for the Limitation Year, the Employer may determine the Maximum Annual Addition for a Participant on the basis of a reasonable estimation of the Participant’s Compensation for the Limitation Year, uniformly determined for all Participants similarly situated.
(d)	As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Addition for the Limitation Year will be determined on the basis of the Participant’s actual Compensation for the Limitation Year.
(e)	If as a result of a reasonable error in estimating a Participant’s Compensation for the Limitation Year, a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any individual under the limits of Code Section 415, or under other facts and circumstances allowed by the Internal Revenue Service, there is an Excess Amount, the excess will be disposed of as follows:

RESTATEMENT MARCH 1, 2007 36 ARTICLE III (6-14161)

(1)	Any Elective Deferral Contributions (plus attributable earnings), to the extent they would reduce the Excess Amount, will be distributed to the Participant. Concurrently with the distribution of such Elective Deferral Contributions, any Matching Contributions that relate to any Elective Deferral Contributions distributed in the preceding sentence, to the extent such application would reduce the Excess Amount, will be applied as provided in (2) or (3) below:
(2)	If after the application of (1) above an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant’s Account will be used to reduce Employer Contributions for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary.
(3)	If after the application of (1) above an Excess Amount still exists, and the Participant is not covered by the Plan at the end of the Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer Contributions for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary.
(4)	If a suspense account is in existence at any time during a Limitation Year pursuant to this (e), it will participate in the allocation of investment gains or losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participant’s Accounts before any Employer Contributions may be made to the Plan for that Limitation Year. Excess Amounts held in a suspense account may not be distributed to Participants or former Participants.

(f) This (f) applies if, in addition to this Plan, the Participant is covered under another qualified defined contribution plan maintained by the Employer, a welfare benefit fund maintained by the Employer, an individual medical account maintained by the Employer, or a simplified employee pension maintained by the Employer which provides an Annual Addition during any Limitation Year. The Annual Additions which may be credited to a Participant’s Account under this Plan for any such Limitation Year will not exceed the Maximum Annual Addition, reduced by the Annual Additions credited to a Participant’s account under the other qualified defined contribution plans, welfare benefit funds, individual medical accounts, and simplified employee pensions for the same Limitation Year. If the Annual Additions with respect to the Participant under other qualified defined contribution plans, welfare benefit funds, individual medical accounts, and simplified employee pensions maintained by the Employer are less than the Maximum Annual Addition, and the Employer Contribution that would otherwise be contributed or allocated to the Participant’s Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Limitation Year will equal the Maximum Annual Addition. If the Annual Additions with respect to the Participant under such other qualified defined contribution plans, welfare benefit funds, individual medical accounts, and simplified employee pensions in the aggregate are equal to or greater than the Maximum Annual Addition, no amount will be contributed or allocated to the Participant’s Account under this Plan for the Limitation Year.

RESTATEMENT MARCH 1, 2007 37 ARTICLE III (6-14161)

(g)	Prior to determining the Participant’s actual Compensation for the Limitation Year, the Employer may determine the Maximum Annual Addition for a Participant in the manner described in (c) above.
(h)	As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Addition for the Limitation Year will be determined on the basis of the Participant’s actual Compensation for the Limitation Year.
(i)	If pursuant to (h) above or as a result of the allocation of forfeitures or as a result of a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any individual under the limits of Code Section 415, a Participant’s Annual Additions under this Plan and such other plans would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a simplified employee pension will be deemed to have been allocated first, followed by Annual Additions to a welfare benefit fund or individual medical account, regardless of the actual allocation date.
(j)	If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of:

(1)	the total Excess Amount allocated as of such date, times
(2)	the ratio of (i) the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan to (ii) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all the other qualified defined contribution plans.

(k) Any Excess Amount attributed to this Plan will be disposed of in the manner described in (e) above.

SECTION 3.05 —EXCESS AMOUNTS.

(a)	Definitions. For purposes of this section, the following terms are defined:
	ACP means, for a specified group of Participants (either Highly Compensated Employees or Nonhighly Compensated Employees) for a Plan Year, the average (expressed as a percentage) of the Contribution Percentages of the Eligible Participants in the group.
	ADP means, for a specified group of Participants (either Highly Compensated Employees or Nonhighly Compensated Employees) for a Plan Year, the average (expressed as a percentage) of the Deferral Percentages of the Eligible Participants in the group.
	Catch-up Contributions means Elective Deferral Contributions made to a plan that are in excess of an otherwise applicable plan limit and that are made by participants who are age 50 or older by the end of the taxable year. An otherwise applicable plan limit is a limit in the plan that applies to Elective Deferral Contributions without regard to Catch-up Contributions, such as the limits on the maximum annual additions under Code Section 415, the dollar limitation on Elective Deferral

RESTATEMENT MARCH 1, 2007 38 ARTICLE III (6-14161)

Contributions under Code Section 402(g) (not counting Catch-up Contributions), and the limit imposed by the nondiscrimination test described in Code Section 401 (k)(3).

Contribution Percentage means the ratio (expressed as a percentage) of the Eligible Participant’s Contribution Percentage Amounts to the Eligible Participant’s Compensation for the Plan Year (whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). For an Eligible Participant for whom such Contribution Percentage Amounts for the Plan Year are zero, the percentage is zero.

Contribution Percentage Amounts means the sum of the Participant Contributions and Matching Contributions (that are not Qualified Matching Contributions taken into account for purposes of the ADP Test) made under the plan on behalf of the Eligible Participant for the plan year. For plan years beginning on or after January 1, 2006, Matching Contributions cannot be taken into account for a plan year for a Nonhighly Compensated Employee to the extent they are disproportionate matching contributions as defined in section 1.401 (m)-2(a)(5)(ii) of the regulations. Such Contribution Percentage Amounts shall not include Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they relate are Excess Elective Deferrals, Excess Contributions, or Excess Aggregate Contributions. Under such rules as the Secretary of the Treasury shall prescribe, in determining the Contribution Percentage the Employer may elect to include Qualified Nonelective Contributions under this Plan that were not used in computing the Deferral Percentage. For plan years beginning on or after January 1, 2006, Qualified Nonelective Contributions cannot be taken into account for a plan year for a Nonhighly Compensated Employee to the extent they are disproportionate contributions as defined in section 1.401(m)-2(a)(6)(v) of the regulations. The Employer may also elect to use Elective Deferral Contributions in computing the Contribution Percentage so long as the ADP Test is met before the Elective Deferral Contributions are used in the ACP Test and continues to be met following the exclusion of those Elective Deferral Contributions that are used to meet the ACP Test.

Deferral Percentage means the ratio (expressed as a percentage) of Elective Deferral Contributions (other than Catch-up Contributions) under this Plan on behalf of the Eligible Participant for the Plan Year to the Eligible Participant’s Compensation for the Plan Year (whether or not the Eligible Participant was an Eligible Participant for the entire Plan Year). The Elective Deferral Contributions used to determine the Deferral Percentage shall include Excess Elective Deferrals (other than Excess Elective Deferrals of Nonhighly Compensated Employees that arise solely from Elective Deferral Contributions made under this Plan or any other plans of the Employer or a Controlled Group member), but shall exclude Elective Deferral Contributions that are used in computing the Contribution Percentage (provided the ADP Test is satisfied both with and without exclusion of these Elective Deferral Contributions). Under such rules as the Secretary of the Treasury shall prescribe, the Employer may elect to include Qualified Nonelective Contributions and Qualified Matching Contributions under this Plan in computing the Deferral Percentage. For Plan Years beginning on or after January 1, 2006, Qualified Matching Contributions cannot be taken into account for a Plan Year for a Nonhighly Compensated Employee to the extent they are disproportionate matching contributions as defined in section 1.401(m)-2(a)(5)(ii) of the regulations. For Plan Years beginning on or after January 1, 2006, Qualified Nonelective Contributions cannot be taken into account for a Plan Year for a Nonhighly Compensated Employee to the extent they are disproportionate contributions as defined in section 1.401(k)-

RESTATEMENT MARCH 1, 2007 39 ARTICLE III (6-14161)

2(a)(6)(iv) of the regulations. For an Eligible Participant for whom such contributions on his behalf for the Plan Year are zero, the percentage is zero.

Elective Deferral Contributions means any employer contributions made to a plan at the election of a participant in lieu of cash compensation. With respect to any taxable year, a participant’s Elective Deferral Contributions are the sum of all employer contributions made on behalf of such participant pursuant to an election to defer under any qualified cash or deferred arrangement described in Code Section 401 (k), any salary reduction simplified employee pension plan described in Code Section 408(k)(6), any SIMPLE IRA plan described in Code Section 408(p), any plan described under Code Section 501(c)(18), and any employer contributions made on behalf of a participant for the purchase of an annuity contract under Code Section 403(b) pursuant to a salary reduction agreement. For taxable years beginning after December 31, 2005, Elective Deferral Contributions include Pre-tax Elective Deferral Contributions and Roth Elective Deferral Contributions. Elective Deferral Contributions shall not include any deferrals properly distributed as excess annual additions.

Eligible Participant means, for purposes of determining the Deferral Percentage, any Employee who is otherwise entitled to make Elective Deferral Contributions under the terms of the plan for the plan year. Eligible Participant means, for purposes of determining the Contribution Percentage, any Employee who is eligible (i) to make a Participant Contribution or an Elective Deferral Contribution (if the Employer takes such contributions into account in the calculation of the Contribution Percentage), or (ii) to receive a Matching Contribution (including forfeitures) or a Qualified Matching Contribution. If a Participant Contribution is required as a condition of participation in the plan, any Employee who would be a participant in the plan if such Employee made such a contribution shall be treated as an Eligible Participant on behalf of whom no Participant Contributions are made.

Excess Aggregate Contributions means, with respect to any Plan Year, the excess of:

(1)	The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over
(2)	The maximum Contribution Percentage Amounts permitted by the ACP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages).

Such determination shall be made after first determining Excess Elective Deferrals and then determining Excess Contributions.

Excess Contributions means, with respect to any Plan Year, the excess of:

(1)	The aggregate amount of employer contributions actually taken into account in computing the Deferral Percentage of Highly Compensated Employees for such Plan Year, over
(2)	The maximum amount of such contributions permitted by the ADP Test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in the order of the Deferral Percentages, beginning with the highest of such percentages).

RESTATEMENT MARCH 1, 2007 40 ARTICLE III (6-14161)

Such determination shall be made after first determining Excess Elective Deferrals.

Excess Elective Deferrals means those Elective Deferral Contributions of a Participant that either (i) are made during the Participant’s taxable year and exceed the dollar limitation under Code Section 402(g) or (ii) are made during a calendar year and exceed the dollar limitation under Code Section 402(g) for the Participant’s taxable year beginning in such calendar year, counting only Elective Deferral Contributions made under this Plan and any other plan, contract, or arrangement maintained by the Employer. The dollar limitation shall be increased by the dollar limit on Catch-up Contributions under Code Section 414(v), if applicable.

Excess Elective Deferrals shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant’s taxable year.

Matching Contributions means employer contributions made to this or any other defined contribution plan, or to a contract described in Code Section 403(b), on behalf of a participant on account of a Participant Contribution made by such participant, or on account of a participant’s Elective Deferral Contributions, under a plan maintained by the Employer or a Controlled Group member.

Participant Contributions means contributions (other than Roth Elective Deferral Contributions) made to the plan by or on behalf of a participant that are included in the participant’s gross income in the year in which made and that are maintained under a separate account to which the earnings and losses are allocated.

Pre-tax Elective Deferral Contributions means a participant’s Elective Deferral Contributions that are not includible in the participant’s gross income at the time deferred.

Qualified Matching Contributions means Matching Contributions that are nonforfeitable when made to the plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions.

Qualified Nonelective Contributions means any employer contributions (other than Matching Contributions) that an Employee may not elect to have paid to him in cash instead of being contributed to the plan and that are nonforfeitable when made to the plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferral Contributions.

Roth Elective Deferral Contributions means a participant’s Elective Deferral Contributions that are includible in the participant’s gross income at the time deferred and have been irrevocably designated as Roth Elective Deferral Contributions by the participant in his elective deferral agreement.

(b) Excess Elective Deferrals A Participant may assign to this Plan any Excess Elective Deferrals made during a taxable year of the Participant by notifying the Plan Administrator in writing on or before the first following March 1 of the amount of the Excess Elective Deferrals to be assigned to the Plan. A Participant is deemed to notify the Plan Administrator of any Excess Elective Deferrals

RESTATEMENT MARCH 1, 2007 41 ARTICLE III (6-14161)

that arise by taking into account only those Elective Deferral Contributions made to this Plan and any other plan, contract, or arrangement of the Employer or a Controlled Group member. The Participant’s claim for Excess Elective Deferrals shall be accompanied by the Participant’s written statement that if such amounts are not distributed, such Excess Elective Deferrals will exceed the limit imposed on the Participant by Code Section 402(g) (including, if applicable, the dollar limitation on Catch-up Contributions under Code Section 414(v)) for the year in which the deferral occurred. The Excess Elective Deferrals assigned to this Plan cannot exceed the Elective Deferral Contributions allocated under this Plan for such taxable year.

Notwithstanding any other provisions of the Plan, Elective Deferral Contributions in an amount equal to the Excess Elective Deferrals assigned to this Plan, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Elective Deferrals for such taxable year or calendar year.

Any Matching Contributions that were based on the Elective Deferral Contributions distributed as Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be forfeited whether or not such amounts are distributed as Excess Elective Deferrals.

(c) ADP Test. As of the end of each Plan Year after Excess Elective Deferrals have been determined, the Plan must satisfy the ADP Test. The ADP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1) Prior Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

(i)	The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 1.25; or
(ii)	The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.	shall not exceed the prior year’s ADP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2, and
B.	the difference between such ADPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Elective Deferral Contributions, for purposes of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ADP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ADP for these Eligible Participants.

RESTATEMENT MARCH 1, 2007 42 ARTICLE III (6-14161)

(2) Current Year Testing Method. The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

(i) The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or

(ii) The ADP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A. shall not exceed the ADP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and

B. the difference between such ADP’s is not more than 2.

If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) if as a result of a merger or acquisition described in Code Section 410(b)(6)(C)(i), the Employer maintains both a plan using the prior year testing method and a plan using the current year testing method and the change is made within the transition period described in Code Section 410(b)(6)(C)(ii).

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

The Deferral Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferral Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if treated as Elective Deferral Contributions for purposes of the ADP Test) allocated to his account under two or more arrangements described in Code Section 401 (k) that are maintained by the Employer or a Controlled Group member shall be determined as if such Elective Deferral Contributions (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single arrangement. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more cash or deferred arrangements of the Employer or of a Controlled Group member that have different plan years, all Elective Deferral Contributions made during the Plan Year shall be aggregated. For Plan Years beginning before January 1, 2006, all such cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. The foregoing notwithstanding, certain plans shall be treated as separate if mandatorily disaggregated under the regulations of Code Section 401 (k).

In the event this Plan satisfies the requirements of Code Section 401(k), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by

RESTATEMENT MARCH 1, 2007 43 ARTICLE III (6-14161)

determining the Deferral Percentage of Employees as if all such plans were a single plan. If more than 10 percent of the Employer’s Nonhighly Compensated Employees are involved in a plan coverage change as defined in section 1.401(k)-2(c)(4) of the regulations, then any adjustments to the Nonhighly Compensated Employee ADP for the prior year shall be made in accordance with such regulations, unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401(k) only if they have the same plan year and use the same testing method for the ADP Test.

For purposes of the ADP Test, Elective Deferral Contributions, Qualified Nonelective Contributions, and Qualified Matching Contributions must be made before the end of the 12-month period immediately following the Plan Year to which the contributions relate.

If the Plan Administrator should determine during the Plan Year that the ADP Test is not being met, the Plan Administrator may limit the amount of future Elective Deferral Contributions of the Highly Compensated Employees.

Notwithstanding any other provisions of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than 12 months after the last day of a Plan Year to Participants to whose Accounts such Excess Contributions were allocated for such Plan Year, except to the extent such Excess Contributions are classified as Catch-up Contributions. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of employer contributions taken into account in calculating the ADP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all of the Excess Contributions have been allocated. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more cash or deferred arrangements of the Employer or of a Controlled Group member, the amount distributed shall not exceed the amount of the employer contributions taken into account in calculating the ADP test and made to this Plan for the year in which the excess arose. If Catch-up Contributions are allowed for the Plan Year being tested, to the extent a Highly Compensated Employee has not reached his Catch-up Contribution limit under the Plan for such year, Excess Contributions allocated to such Highly Compensated Employee are Catch-up Contributions and will not be treated as Excess Contributions. If such excess amounts (other than Catch-up Contributions) are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

Excess Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, even if distributed.

The Excess Contributions shall be adjusted for any income or loss. The income or loss allocable to such Excess Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Elective Deferral Contributions (and, if applicable, Qualified Nonelective Contributions or Qualified Matching Contributions, or both) for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Elective Deferral Contributions (and Qualified Nonelective

RESTATEMENT MARCH 1, 2007 44 ARTICLE III (6-14161)

Contributions or Qualified Matching Contributions, or both, if such contributions are included in the ADP Test).

For purposes of determining income or loss on Excess Contributions beginning with the 2006 Plan Year, any Excess Contributions, in addition to any adjustment for income or loss for the Plan Year in which the excess occurred, shall be adjusted for income or loss for the gap period between the end of such Plan Year and the date of distribution. Such income or loss allocable to the gap period shall be equal to 10% of the income or loss allocable to the Excess Contributions for the Plan Year multiplied by the number of complete months (counting 16 days or more as a complete month) in the gap period.

Excess Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Elective Deferral Contributions. If such Excess Contributions exceed the amount of Excess Contributions in the Participant’s Account resulting from Elective Deferral Contributions, the balance shall be distributed from the Participant’s Account resulting from Qualified Matching Contributions (if applicable) and Qualified Nonelective Contributions, respectively.

Any Matching Contributions that were based on the Elective Deferral Contributions distributed as Excess Contributions, plus any income and minus any loss allocable thereto, shall be forfeited whether or not such amounts are distributed as Excess Contributions.

(d) ACP Test. As of the end of each Plan Year, the Plan must satisfy the ACP Test. The ACP Test shall be satisfied using the prior year testing method, unless the Employer has elected to use the current year testing method.

(1) Prior Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year must satisfy one of the following tests:

(i)	The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 1.25; or
(ii)	The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.	shall not exceed the prior year’s ACP for Eligible Participants who were Nonhighly Compensated Employees for the prior Plan Year multiplied by 2, and
B.	the difference between such ACPs is not more than 2.

If this is not a successor plan, for the first Plan Year the Plan permits any Participant to make Participant Contributions, provides for Matching Contributions, or both, for purposes of the foregoing tests, the prior year’s Nonhighly Compensated Employees’ ACP shall be 3 percent, unless the Employer has elected to use the Plan Year’s ACP tor these Eligible Participants.

RESTATEMENT MARCH 1, 2007 45 ARTICLE III (6-14161)

(2) Current Year Testing Method. The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for each Plan Year and the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year must satisfy one of the following tests:

(i)	The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or
(ii)	The ACP for a Plan Year for Eligible Participants who are Highly Compensated Employees for the Plan Year:

A.	shall not exceed the ACP for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, and
B.	the difference between such ACPs is not more than 2.

If the Employer has elected to use the current year testing method, that election cannot be changed unless (i) the Plan has been using the current year testing method for the preceding five Plan Years, or if less, the number of Plan Years the Plan has been in existence; or (ii) if as a result of a merger or acquisition described in Code Section 410(b)(6)(C)(i), the Employer maintains both a plan using the prior year testing method and a plan using the current year testing method and the change is made within the transition period described in Code Section 410(b)(6)(C)(ii).

A Participant is a Highly Compensated Employee for a particular Plan Year if he meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a Nonhighly Compensated Employee for a particular Plan Year if he does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.

The Contribution Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in Code Section 401 (a) or arrangements described in Code Section 401 (k) that are maintained by the Employer or a Controlled Group member shall be determined as if the total of such Contribution Percentage Amounts was made under each plan and arrangement. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more such plans or arrangements that have different plan years, all Contribution Percentage Amounts made during the Plan Year shall be aggregated. For Plan Years beginning before January 1, 2006, all such plans and arrangements ending with or within the same calendar year shall be treated as a single plan or arrangement. The foregoing not withstanding, certain plans shall be treated as separate if mandatorily disaggregated under the regulations of Code Section 401 (m).

In the event this Plan satisfies the requirements of Code Section 401(m), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single

RESTATEMENT MARCH 1, 2007 46 ARTICLE III (6-14161)

plan. If more than 10 percent of the Employer’s Nonhighly Compensated Employees are involved in a plan coverage change as defined in section 1.401(m)-2(c)(4) of the regulations, then any adjustments to the Nonhighly Compensated Employee ACP for the prior year shall be made in accordance with such regulations, unless the Employer has elected to use the current year testing method. Plans may be aggregated in order to satisfy Code Section 401 (m) only if they have the same plan year and use the same testing method for the ACP Test.

For purposes of the ACP Test, Participant Contributions are considered to have been made in the Plan Year in which contributed to the Plan. Matching Contributions and Qualified Nonelective Contributions will be considered to have been made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year.

Notwithstanding any other provisions of this Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if not vested, or distributed, if vested, no later than 12 months after the last day of a Plan Year to Participants to whose Accounts such Excess Aggregate Contributions were allocated for such Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest Contribution Percentage Amounts taken into account in calculating the ACP Test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all of the Excess Aggregate Contributions have been allocated. For Plan Years beginning on or after January 1, 2006, if a Highly Compensated Employee participates in two or more plans or arrangements of the Employer or of a Controlled Group member that include Contribution Percentage Amounts, the amount distributed shall not exceed the Contribution Percentage Amounts taken into account in calculating the ACP Test and made to this Plan for the year in which the excess arose. If such Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a 10 percent excise tax shall be imposed on the employer maintaining the plan with respect to such amounts.

Excess Aggregate Contributions shall be treated as Annual Additions, as defined in the CONTRIBUTION LIMITATION SECTION of this article, even if distributed.

The Excess Aggregate Contributions shall be adjusted for any income or loss. The income or loss allocable to such Excess Aggregate Contributions allocated to each Participant shall be equal to the income or loss allocable to the Participant’s Contribution Percentage Amounts for the Plan Year in which the excess occurred multiplied by a fraction. The numerator of the fraction is the Excess Aggregate Contributions. The denominator of the fraction is the closing balance without regard to any income or loss occurring during such Plan Year (as of the end of such Plan Year) of the Participant’s Account resulting from Contribution Percentage Amounts.

For purposes of determining income or loss on Excess Aggregate Contributions beginning with the 2006 Plan Year, any Excess Aggregate Contributions, in addition to any adjustment for income or loss for the Plan Year in which the excess occurred, shall be adjusted for income or loss for the gap period between the end of such Plan Year and the date of distribution. Such income or loss allocable to the gap period shall be equal to 10% of the income or loss allocable to the Excess Aggregate Contributions for the Plan Year multiplied by the number of complete months (counting 16 days or more as a complete month) in the gap period.

RESTATEMENT MARCH 1, 2007 47 ARTICLE III (6-14161)

Excess Aggregate Contributions allocated to a Participant shall be distributed from the Participant’s Account resulting from Participant Contributions that are not required as a condition of employment or participation or for obtaining additional benefits from Employer Contributions. If such Excess Aggregate Contributions exceed the balance in the Participant’s Account resulting from such Participant Contributions, the balance shall be forfeited, if not vested, or distributed, if vested, on a pro rata basis from the Participant’s Account resulting from Contribution Percentage Amounts.

(e)

Employer Elections. The Employer has not made an election to use the current year testing method.

RESTATEMENT MARCH 1, 2007 48 ARTICLE III (6-14161)

ARTICLE IV

INVESTMENT OF CONTRIBUTIONS

SECTION 4.01—INVESTMENT AND TIMING OF CONTRIBUTIONS.

     The handling of Contributions and Plan assets is governed by the provisions of the Trust Agreement and any other relevant document, such as an Annuity Contract (for the purposes of this paragraph alone, the Trust Agreement and such other documents will each be referred to as a “document” or collectively as the “documents”), duly entered into by or with regard to the Plan that govern such matters. To the extent permitted by the documents, the parties named below shall direct the Contributions for investment in any of the investment options or investment vehicles available to the Plan under or through the documents, and may request the transfer of amounts resulting from those Contributions between such investment options and investment vehicles. A Participant may not direct the investment of all or any portion of his Account in collectibles. Collectibles mean any work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or other tangible personal property specified by the Secretary of the Treasury. However, for tax years beginning after December 31, 1997, certain coins and bullion as provided in Code Section 408(m)(3) shall not be considered collectibles. To the extent that a Participant who has the ability to provide investment direction fails to give timely investment direction, the amount for which no investment direction is in place shall be invested in such investment options and investment vehicles as provided in the service and expense agreement or such other documents duly entered into by or with regard to the Plan that govern such matters. If the Primary Employer has investment direction, the Contributions shall be invested ratably in the investment options and investment vehicles available to the Plan under or through the documents. The Primary Employer shall have investment direction for amounts that have not been allocated to Participants. To the extent an investment is no longer available, the Primary Employer may require that amounts currently held in such investment be reinvested in other investments.

     At least annually, the Named Fiduciary shall review all pertinent Employee information and Plan data in order to establish the funding policy of the Plan and to determine appropriate methods of carrying out the Plan’s objectives. The Named Fiduciary shall inform the Trustee and any Investment Manager of the Plan’s short-term and long-term financial needs so the investment policy can be coordinated with the Plan’s financial requirements.

(a)	Employer Contributions other than Elective Deferral Contributions: The Primary Employer shall direct the investment of such Employer Contributions and transfer of amounts resulting from those Contributions.
(b)	Elective Deferral Contributions: The Participant shall direct the investment of Elective Deferral Contributions and transfer of amounts resulting from those Contributions.
(c)	Rollover Contributions: The Participant shall direct the investment of Rollover Contributions and transfer of amounts resulting from those Contributions.

     However, the Named Fiduciary may delegate to the Investment Manager investment direction for Contributions and amounts that are not subject to Participant direction.

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     All Contributions are forwarded by the Employer to the Trustee to be deposited in the Trust Fund or to the Insurer to be deposited under the Annuity Contract, as applicable. Contributions that are accumulated through payroll deduction shall be paid to the Trustee or Insurer, as applicable, by the earlier of (i) the date the Contributions can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which the Contributions would otherwise have been paid in cash to the Participant.

SECTION 4.01A—INVESTMENT IN QUALIFYING EMPLOYER SECURITIES.

     All or some portion of the Participant’s Account resulting from the following Contributions may be invested in Qualifying Employer Securities:

     Matching Contributions

     Qualified Nonelective Contributions

     Discretionary Contributions

     For purposes of determining the annual valuation of the Plan, and for reporting to Participants and regulatory authorities, the assets of the Plan shall be valued at least annually on the Valuation Date which corresponds to the last day of the Plan Year. The fair market value of Qualifying Employer Securities shall be determined on such Valuation Date. The prices of Qualifying Employer Securities as of the date of the transaction shall apply for purposes of valuing distributions and other transactions of the Plan to the extent such value is representative of the fair market value of such securities in the opinion of the Plan Administrator. The value of a Participant’s Account held in the Qualifying Employer Securities Fund may be expressed in units.

     If the Qualifying Employer Securities are not publicly traded, or if an extremely thin market exists for such securities so that reasonable valuation may not be obtained from the market place, then such securities must be valued at least annually by an independent appraiser who is not associated with the Employer, the Plan Administrator, the Trustee, or any person related to any fiduciary under the Plan. The independent appraiser may be associated with a person who is merely a contract administrator with respect to the Plan, but who exercises no discretionary authority and is not a plan fiduciary.

     If there is a public market for Qualifying Employer Securities of the type held by the Plan, then the Plan Administrator may use as the value of the securities the price at which such securities trade in such market. If the Qualifying Employer Securities do not trade on the relevant date, or if the market is very thin on such date, then the Plan Administrator may use for the valuation the next preceding trading day on which the trading prices are representative of the fair market value of such securities in the opinion of the Plan Administrator.

     Cash dividends payable on the Qualifying Employer Securities shall be reinvested in additional shares of such securities. In the event of any cash or stock dividend or any stock split, such dividend or split shall be credited to the Accounts based on the number of shares of Qualifying Employer Securities credited to each Account as of the payable date of such dividend or split.

     All purchases of Qualifying Employer Securities shall be made at a price, or prices, which, in the judgment of the Plan Administrator, do not exceed the fair market value of such securities.

     In the event that the Trustee acquires Qualifying Employer Securities by purchase from a “disqualified person” as defined in Code Section 4975(e)(2) or from a “party-in-interest” as defined in ERISA Section 3(14), the terms of such purchase shall contain the provision that in the event there is a final determination by the

RESTATEMENT MARCH 1, 2007 50 ARTICLE IV (6-14161)

Internal Revenue Service, the Department of Labor, or court of competent jurisdiction that the fair market value of such securities as of the date of purchase was less than the purchase price paid by the Trustee, then the seller shall pay or transfer, as the case may be, to the Trustee an amount of cash or shares of Qualifying Employer Securities equal in value to the difference between the purchase price and such fair market value for all such shares. In the event that cash or shares of Qualifying Employer Securities are paid or transferred to the Trustee under this provision, such securities shall be valued at their fair market value as of the date of such purchase, and interest at a reasonable rate from the date of purchase to the date of payment or transfer shall be paid by the seller on the amount of cash paid.

     The Plan Administrator may direct the Trustee to sell, resell, or otherwise dispose of Qualifying Employer Securities to any person, including the Employer, provided that any such sales to any disqualified person or party-in-interest, including the Employer, will be made at not less than the fair market value and no commission will be charged. Any such sale shall be made in conformance with ERISA Section 408(e).

     The Employer is responsible for compliance with any applicable Federal or state securities law with respect to all aspects of the Plan. If the Qualifying Employer Securities or interest in this Plan are required to be registered in order to permit investment in the Qualifying Employer Securities Fund as provided in this section, then such investment will not be effective until the later of the effective date of the Plan or the date such registration or qualification is effective. The Employer, at its own expense, will take or cause to be taken any and all such actions as may be necessary or appropriate to effect such registration or qualification. Further, if the Trustee is directed to dispose of any Qualifying Employer Securities held under the Plan under circumstances which require registration or qualification of the securities under applicable Federal or state securities laws, then the Employer will, at its own expense, take or cause to be taken any and all such action as may be necessary or appropriate to effect such registration or qualification. The Employer is responsible for all compliance requirements under Section 16 of the Securities Act.

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ARTICLE V

BENEFITS

SECTION 5.01—RETIREMENT BENEFITS.

     On a Participant’s Retirement Date, his Vested Account shall be distributed to him according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.02—DEATH BENEFITS.

     If a Participant dies before his Annuity Starting Date, his Vested Account shall be distributed according to the distribution of benefits provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of Article X.

SECTION 5.03—VESTED BENEFITS.

     If an Inactive Participant’s Vested Account is not payable under the SMALL AMOUNTS SECTION of Article X, he may elect, but is not required, to receive a distribution of any part of his Vested Account after he has a Severance from Employment. A distribution under this paragraph shall be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI.

     A Participant may not elect to receive a distribution under the provisions of this section after he again becomes an Employee until he subsequently has a Severance from Employment and meets the requirements of this section.

     If an Inactive Participant does not receive an earlier distribution, upon his Retirement Date or death, his Vested Account shall be distributed according to the provisions of the RETIREMENT BENEFITS SECTION or the DEATH BENEFITS SECTION of this article.

     The Nonvested Account of an Inactive Participant who has had a Severance from Employment shall remain a part of his Account until it becomes a Forfeiture. However, if he again becomes an Employee so that his Vesting Percentage can increase, the Nonvested Account may become a part of his Vested Account.

SECTION 5.04—WHEN BENEFITS START.

(a) Unless otherwise elected, benefits shall begin before the 60th day following the close of the Plan Year in which the latest date below occurs:

(1)	The date the Participant attains age 65 (or Normal Retirement Age, if earlier).
(2)	The 10th anniversary of the Participant’s Entry Date.
(3)	The date the Participant terminates service with the Employer.

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Notwithstanding the foregoing, the failure of a Participant to consent to a distribution while a benefit is immediately distributable, within the meaning of the ELECTION PROCEDURES SECTION of Article VI, shall be deemed to be an election to defer the start of benefits sufficient to satisfy this section.

The Participant may elect to have benefits begin after the latest date for beginning benefits described above, subject to the following provisions of this section. The Participant shall make the election in writing. Such election must be made before his Normal Retirement Date or the date he has a Severance from Employment, if later. The Participant shall not elect a date for beginning benefits or a form of distribution that would result in a benefit payable when he dies which would be more than incidental within the meaning of governmental regulations.

Benefits shall begin on an earlier date if otherwise provided in the Plan. For example, the Participant’s Retirement Date or Required Beginning Date, as defined in the DEFINITIONS SECTION of Article VII.

(b) The Participant’s Vested Account that results from Elective Deferral Contributions and Qualified Nonelective Contributions may not be distributed earlier than Severance from Employment (separation from service, for Plan Years beginning before January 1, 2002), death, or disability. Such amount may also be distributed upon:

(1)	Termination of the Plan, as permitted in Article VIII.
(2)	The attainment of age 59 1/2 as permitted in the WITHDRAWAL BENEFITS SECTION of this article or in the definition of Normal Retirement Date in the DEFINITIONS SECTION of Article I.
(3)	The hardship of the Participant as permitted in the WITHDRAWAL BENEFITS SECTION of this article.
	All distributions that may be made pursuant to one or more of the foregoing distributable events will be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI. In addition, distributions that are triggered by the termination of the Plan must be made in a lump sum. A lump sum shall include a distribution of an annuity contract.

SECTION 5.05—WITHDRAWAL BENEFITS.

     A Participant may withdraw any part of his Vested Account resulting from Rollover Contributions. A Participant may make such a withdrawal at any time.

     A Participant who has attained age 59 1/2 may withdraw any part of his Vested Account that results from the following Contributions:

Elective Deferral Contributions
Matching Contributions
Discretionary Contributions

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A Participant may make such a withdrawal at any time.

     A Participant may withdraw any part of his Vested Account that results from the following Contributions:

     Elective Deferral Contributions

in the event of hardship due to an immediate and heavy financial need. Withdrawals from the Participant’s Account resulting from Elective Deferral Contributions shall be limited to the amount of the Participant’s Elective Deferral Contributions. The minimum amount of any hardship withdrawal shall be $500.

     For Plan Years beginning on or after January 1, 2006, immediate and heavy financial need shall be limited to: (i) expenses incurred or necessary for medical care that would be deductible under Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income); (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the Participant, his spouse, children, or dependents (as defined in Code Section 152 without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)); (iv) payments necessary to prevent the eviction of the Participant from, or foreclosure on the mortgage of, the Participant’s principal residence; (v) payments for funeral or burial expenses for the Participant’s deceased parent, spouse, child, or dependent (as defined in Code Section 152 without regard to Code Section 152(d))1)(B)); (vi) expenses to repair damage to the Participant’s principal residence that would qualify for a casualty loss deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); or (vii) any other distribution which is deemed by the Commissioner of Internal Revenue to be made on account of immediate and heavy financial need as provided in Treasury regulations.

     For Plan Years beginning before January 1, 2006, immediate and heavy financial need shall be limited to: (i) expenses incurred or necessary for medical care, described in Code Section 213(d), of the Participant, the Participant’s spouse, or any dependents of the Participant (as defined in Code Section 152, and for taxable years beginning on or after January 1, 2005, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)); (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the Participant, his spouse, children, or dependents (as defined in Code Section 152, and for taxable years beginning on or after January 1, 2005, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)); (iv) the need to prevent the eviction of the Participant from, or foreclosure on the mortgage of, the Participant’s principal residence; or (v) any other distribution which is deemed by the Commissioner of Internal Revenue to be made on account of immediate and heavy financial need as provided in Treasury regulations.

     No withdrawal shall be allowed which is not necessary to satisfy such immediate and heavy financial need.

     For distributions after December 31, 2001, such withdrawal shall be deemed necessary only if all of the following requirements are met: (i) the distribution is not in excess of the amount of the immediate and heavy financial need (including amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution); (ii) the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer; and (iii) the Plan, and all other plans maintained by the Employer, provide that the Participant’s elective contributions and participant contributions will be suspended for at least six months after receipt of the

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hardship distribution. The Plan will suspend elective contributions and participant contributions for six months as provided in the preceding sentence. A Participant who receives a distribution of elective deferrals in calendar year 2001 shall be prohibited from making elective deferrals and participant contributions under this and all other plans of the Employer for six months after receipt of the distribution or until January 1, 2002, if later.

     For distributions before January 1, 20O2, such withdrawal shall be deemed necessary only if all of the following requirements are met: (i) the distribution is not in excess of the amount of the immediate and heavy financial need (including amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution); (ii) the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer; (iii) the Plan, and all other plans maintained by the Employer, provide that the Participant’s elective contributions and participant contributions will be suspended for at least 12 months after receipt of the hardship distribution; and (iv) the Plan, and all other plans maintained by the Employer, provide that the Participant may not make elective contributions for the Participant’s taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant’s elective contributions for the taxable year of the hardship distribution. The Plan will suspend elective contributions and participant contributions for 12 months and limit elective deferrals as provided in the preceding sentence.

     A Participant shall not cease to be an Eligible Participant, as defined in the EXCESS AMOUNTS SECTION of Article III, merely because his elective contributions or participant contributions are suspended.

     A request for withdrawal shall be made in such manner and in accordance with such rules as the Employer will prescribe for this purpose {including by means of voice response or other electronic means under circumstances the Employer permits). Withdrawals shall be a retirement benefit and shall be distributed to the Participant according to the distribution of benefits provisions of Article VI. A forfeiture shall not occur solely as a result of a withdrawal.

SECTION 5.06—LOANS TO PARTICIPANTS.

     Loans shall be made available to all Participants on a reasonably equivalent basis. For purposes of this section, and unless otherwise specified. Participant means any Participant or Beneficiary who is a party-in-interest as defined in ERISA. Loans shall not be made to Highly Compensated Employees in an amount greater than the amount made available to other Participants.

     For loans made before January 1, 2002, no loans will be made to any shareholder-employee or Owner-employee. For purposes of this requirement, a shareholder-employee means an employee or officer of an electing small business (Subchapter S) corporation who owns (or is considered as owning within the meaning of Code Section 318(a)(1)), on any day during the taxable year of such corporation, more than 5 percent of the outstanding stock of the corporation.

     A loan to a Participant shall be a Participant-directed investment of his Account. The portion of the Participant’s Account held in the Qualifying Employer Securities Fund may be redeemed for purposes of a loan only after the amount held in other investment options has been depleted. The loan is a Trust Fund investment but no Account other than the borrowing Participant’s Account shall share in the interest paid on the loan or bear any expense or loss incurred because of the loan.

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     The number of outstanding loans shall be limited to one. No more than one loan shall be approved for any Participant in any 12-month period. The minimum amount of any loan shall be $1,000.

     Loans must be adequately secured and bear a reasonable rate of interest.

     The amount of the loan shall not exceed the maximum amount that may be treated as a loan under Code Section 72(p) (rather than a distribution) to the Participant and shall be equal to the lesser of (a) or (b) below:

(a)	$50,000, reduced by the highest outstanding loan balance of loans during the one-year period ending on the day before the new loan is made.
(b)	The greater of (1) or (2), reduced by (3) below:

(1)	One-half of the Participant’s Vested Account.
(2)	$10,000.
(3)	Any outstanding loan balance on the date the new loan is made.

For purposes of this maximum, a Participant’s Vested Account does not include any accumulated deductible employee contributions, as defined in Code Section 72(o)(5)(B), and all qualified employer plans, as defined in Code Section 72(p)(4), of the Employer and any Controlled Group member shall be treated as one plan.

     The foregoing notwithstanding, the amount of such loan shall not exceed 50 percent of the amount of the Participant’s Vested Account, For purposes of this maximum, a Participant’s Vested Account does not include any accumulated deductible employee contributions, as defined in Code Section 72(o)(5)(B). No collateral other than a portion of the Participant’s Vested Account (as limited above) shall be accepted.

     The Participant’s outstanding loan balance shall include any deemed distribution, along with accrued interest, that has not been repaid (offset).

     Each loan shall bear a reasonable fixed rate of interest to be determined by the Loan Administrator. In determining the interest rate, the Loan Administrator shall take into consideration fixed interest rates currently being charged by commercial lenders for loans of comparable risk on similar terms and for similar durations, so that the interest will provide for a return commensurate with rates currently charged by commercial lenders for loans made under similar circumstances. The Loan Administrator shall not discriminate among Participants in the matter of interest rates; but loans granted at different times may bear different interest rates in accordance with the current appropriate standards.

     The loan shall by its terms require that repayment (principal and interest) be amortized in level payments, not less frequently than quarterly, over a period not extending beyond five years from the date of the loan.

     The Participant shall make an application for a loan in such manner and in accordance with such rules as the Employer shall prescribe for this purpose (including by means of voice response or other electronic means under circumstances the Employer permits). The application must specify the amount and duration requested.

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     Information contained in the application for the loan concerning the income, liabilities, and assets of the Participant will be evaluated to determine whether there is a reasonable expectation that the Participant will be able to satisfy payments on the loan as due. Additionally, the Loan Administrator will pursue any appropriate further investigations concerning the creditworthiness and credit history of the Participant to determine whether a loan should be approved.

     Each loan shall be fully documented in the form of a promissory note signed by the Participant for the face amount of the loan, together with interest determined as specified above.

     There will be an assignment of collateral to the Plan executed at the time the loan is made.

     In those cases where repayment through payroll deduction is available, installments are so payable, and a payroll deduction agreement shall be executed by the Participant at the time the loan is made. If the Participant has previously been treated as having received a deemed distribution and the subsequent loan is being made before the deemed distribution, along with accrued interest, has been repaid (or offset), a payroll deduction agreement shall be required for loans made on or after January 1, 2004. If a payroll deduction agreement is required because of a previous deemed distribution and the Participant later revokes such agreement, the outstanding loan balance at the time of the revocation shall be treated as a deemed distribution. Loan repayments that are accumulated through payroll deduction shall be paid to the Trustee by the earlier of (i) the date the loan repayments can reasonably be segregated from the Employer’s assets, or (ii) the 15th business day of the month following the month in which such amounts would otherwise have been paid in cash to the Participant.

     Where payroll deduction is not available, payments in cash are to be timely made. Any payment that is not by payroll deduction shall be made payable to the Employer or the Trustee, as specified in the promissory note, and delivered to the Loan Administrator, including prepayments, service fees and penalties, if any, and other amounts due under the note. The Loan Administrator shall deposit such amounts into the Plan as soon as administratively practicable after they are received, but in no event later than the 15th business day of the month after they are received.

     The promissory note may provide for reasonable late payment penalties and service fees. Any penalties or service fees shall be applied to all Participants in a nondiscriminatory manner. If the promissory note so provides, such amounts may be assessed and collected from the Account of the Participant as part of the loan balance.

     Each loan may be paid prior to maturity, in part or in full, without penalty or service fee, except as may be set out in the promissory note.

     The Plan shall suspend loan payments for a period not exceeding one year during which an approved unpaid leave of absence occurs other than a military leave of absence. The Loan Administrator shall provide the Participant a written explanation of the effect of the suspension of payments upon his loan.

     If a Participant separates from service (or takes a leave of absence) from the Employer because of service in the military and does not receive a distribution of his Vested Account, the Plan shall suspend loan payments until the Participant’s completion of military service or until the Participant’s fifth anniversary of commencement of military service, if earlier, as permitted under Code Section 414(u). The Loan Administrator shall provide the Participant a written explanation of the effect of his military service upon his loan.

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57

     If any payment of principal and interest, or any portion thereof, remains unpaid for more than 90 days after due, the loan shall be in default. For purposes of Code Section 72(p), the Participant shall then be treated as having received a deemed distribution regardless of whether or not a distributable event has occurred.

     Upon default, the Plan has the right to pursue any remedy available by law to satisfy the amount due, along with accrued interest, including the right to enforce its claim against the security pledged and execute upon the collateral as allowed by law. The entire principal balance whether or not otherwise then due, along with accrued interest, shall become immediately due and payable without demand or notice, and subject to collection or satisfaction by any lawful means, including specifically, but not limited to, the right to enforce the claim against the security pledged and to execute upon the collateral as allowed by law.

     In the event of default, foreclosure on the note and attachment of security or use of amounts pledged to satisfy the amount then due shall not occur until a distributable event occurs in accordance with the Plan, and shall not occur to an extent greater than the amount then available upon any distributable event which has occurred under the Plan.

     All reasonable costs and expenses, including but not limited to attorney’s fees, incurred by the plan in connection with any default or in any proceeding to enforce any provision of a promissory note or instrument by which a promissory note for a Participant loan is secured, shall be assessed and collected from the Account of the Participant as part of the loan balance.

     If payroll deduction is being utilized, in the event that a Participant’s available payroll deduction amounts in any given month are insufficient to satisfy the total amount due, there will be an increase in the amount taken subsequently, sufficient to make up the amount that is then due. If any amount remains past due more than 90 days, the entire principal amount, whether or not otherwise then due, along with interest then accrued, shall become due and payable, as above.

     If no distributable event has occurred under the Plan at the time that the Participant’s Vested Account would otherwise be used under this provision to pay any amount due under the outstanding loan, this will not occur until the time, or in excess of the extent to which, a distributable event occurs under the Plan. An outstanding loan will become due and payable in full 60 days after a Participant has a Severance from Employment and ceases to be a party-in-interest as defined in ERISA or after complete termination of the Plan.

SECTION 5.07—DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS.

     The Plan specifically permits distributions to an Alternate Payee under a qualified domestic relations order as defined in Code Section 414(p), at any time, irrespective of whether the Participant has attained his earliest retirement age, as defined in Code Section 414(p), under the Plan. A distribution to an Alternate Payee before the Participant has attained his earliest retirement age is available only if the order specifies that distribution shall be made prior to the earliest retirement age or allows the Alternate Payee to elect a distribution prior to the earliest retirement age.

     Nothing in this section shall permit a Participant to receive a distribution at a time otherwise not permitted under the Plan nor shall it permit the Alternate Payee to receive a form of payment not permitted under the Plan.

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     The benefit payable to an Alternate Payee shall be subject to the provisions of the SMALL AMOUNTS SECTION of Article X if the value of the benefit (disregarding the portion, if any, of the benefit resulting from the Participant’s Rollover Contributions) does not exceed $5,000.

     The Plan Administrator shall establish reasonable procedures to determine the qualified status of a domestic relations order. Upon receiving a domestic relations order, the Plan Administrator shall promptly notify the Participant and each Alternate Payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and each Alternate Payee, in writing, of its determination. The Plan Administrator shall provide notice under this paragraph by mailing to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations. The Plan Administrator may treat as qualified any domestic relations order entered before January 1, 1985, irrespective of whether it satisfies all the requirements described in Code Section 414(p).

     If any portion of the Participant’s Vested Account is payable during the period the Plan Administrator is making its determination of the qualified status of the domestic relations order, a separate accounting shall be made of the amount payable. If the Plan Administrator determines the order is a qualified domestic relations order within 18 months of the date amounts are first payable following receipt of the order, the payable amounts shall be distributed in accordance with the order. If the Plan Administrator does not make its determination of the qualified status of the order within the 18-month determination period, the payable amounts shall be distributed in the manner the Plan would distribute if the order did not exist and the order shall apply prospectively if the Plan Administrator later determines the order is a qualified domestic relations order.

     The Plan shall make payments or distributions required under this section by separate benefit checks or other separate distribution to the Alternate Payee(s).

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ARTICLE VI

DISTRIBUTION OF BENEFITS

SECTION 6.01—FORM OF DISTRIBUTION.

(a)	Retirement Benefits. The only form of retirement benefit is a single sum payment.
(b)	Death Benefits. The only form of death benefit is a single sum payment.

SECTION 6.02—ELECTION PROCEDURES.

     The Participant shall make any election under this section in writing. The Plan Administrator may require such individual to complete and sign any necessary documents as to the provisions to be made. Any election permitted under (a) and (b) below shall be subject to the qualified election provisions of (c) below.

(a)	Retirement Benefits. A Participant may elect to have retirement benefits distributed.
(b)	Death Benefits A Participant may elect his Beneficiary.
(c)	Qualified Election. The Participant may make an election at any time during the election period. The Participant may revoke the election made (or make a new election) at any time and any number of times during the election period. An election is effective only if it meets the consent requirements below.

(1)	Election Period for Retirement Benefits. The Participant may make an election as to
	retirement benefits at any time before the Annuity Starting Date.
(2)	Election Period for Death Benefits. A Participant may make an election as to death benefits
	at any time before he dies.
(3)	Consent to Election. If the Participant’s Vested Account (disregarding the portion, if any, of his Account resulting from Rollover Contributions) exceeds $5,000, any benefit that is immediately distributable requires the consent of the Participant.
	The consent of the Participant to a benefit that is immediately distributable must not be made before the date the Participant is provided with the notice of the ability to defer the distribution. Such consent shall be in writing.
	The consent shall not be made more than 90 days before the Annuity Starting Date. The consent of the Participant shall not be required to the extent that a distribution is required to satisfy Code Section 401(a)(9) or 415.
	In addition, upon termination of this Ran, if the Plan does not offer an annuity option (purchased from a commercial provider), and if the Employer (or any entity within the same Controlled Group) does not maintain another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)), the Participant’s

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Account balance will, without the Participant’s consent, be distributed to the Participant. However, if any entity within the same Controlled Group maintains another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) then the Participant’s Account will be transferred, without the Participant’s consent, to the other plan if the Participant does not consent to an immediate distribution.

A benefit is immediately distributable if any part of the benefit could be distributed to the Participant before the Participant attains the older of Normal Retirement Age or age 62.

Spousal consent is needed to name a Beneficiary other than the Participant’s spouse. If the Participant names a Beneficiary other than his spouse, the spouse has the right to limit consent only to a specific Beneficiary. The spouse can relinquish such right. Such consent shall be in writing. The spouse’s consent shall be witnessed by a plan representative or notary public. The spouse’s consent must acknowledge the effect of the election, including that the spouse had the right to limit consent only to a specific Beneficiary and that the relinquishment of such right was voluntary. Unless the consent of the spouse expressly permits designations by the Participant without a requirement of further consent by the spouse, the spouse’s consent must be limited to the Beneficiary, class of Beneficiaries, or contingent Beneficiary named in the election.

Spousal consent is not required, however, if the Participant establishes to the satisfaction of the plan representative that the consent of the spouse cannot be obtained because there is no spouse or the spouse cannot be located. A spouse’s consent under this paragraph shall not be valid with respect to any other spouse. A Participant may revoke a prior election without the consent of the spouse. Any new election will require a new spousal consent, unless the consent of the spouse expressly permits such election by the Participant without further consent by the spouse. A spouse’s consent may be revoked at any time within the Participant’s election period.

SECTION 6.03—NOTICE REQUIREMENTS.

     Right to Defer. The Plan Administrator shall furnish to the Participant a written explanation of the right of the Participant to defer distribution until the benefit is no longer immediately distributable.

     The Plan Administrator shall furnish the written explanation by a method reasonably calculated to reach the attention of the Participant no less than 30 days, and no more than 90 days, before the Annuity Starting Date.

     However, distribution may begin less than 30 days after the notice described in this subparagraph is given, provided the Plan Administrator clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution, and the Participant, after receiving the notice, affirmatively elects a distribution.

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ARTICLE VII

REQUIRED MINIMUM DISTRIBUTIONS

SECTION 7.01—APPLICATION.

     The optional forms of distribution are only those provided in Article VI. An optional form of distribution shall not be permitted unless it meets the requirements of this article. The timing of any distribution must meet the requirements of this article. Unless otherwise specified, the provisions of this article apply to calendar years beginning after December 31, 2002.

SECTION 7.02—DEFINITIONS.

For purposes of this article, the following terms are defined:

Designated Beneficiary means the individual who is designated by the Participant (or the Participant’s surviving spouse) as the Beneficiary of the Participant’s interest under the Plan and who is the designated beneficiary under Code Section 401(a)(9) and section 1.401(a)(9)-4 of the regulations.

Distribution Calendar Year means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under (b)(2) of the REQUIRED MINIMUM DISTRIBUTIONS SECTION of this article. The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

5-percent Owner means a Participant who is treated as a 5-percent Owner for purposes of this article. A Participant is treated as a 5-percent Owner for purposes of this article if such Participant is a 5-percent owner as defined in Code Section 416 at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 1/2.

Once distributions have begun to a 5-percent Owner under this article, they must continue to be distributed, even if the Participant ceases to be a 5-percent Owner in a subsequent year.

Life Expectancy means life expectancy as computed by use of the Single Life Table in Q&A-1 in section 1.401(a)(9)-9 of the regulations.

Participant’s Account Balance means the Account balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The Account balance for the valuation calendar year includes

RESTATEMENT MARCH 1, 2007 62 ARTICLE VII (6-14161)

any amounts rolled over or transferred to the Ran either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

Required Beginning Date means, for a Participant who is a 5-percent Owner, April 1 of the calendar year following the calendar year in which he attains age 70 1/2.

Required Beginning Date means, for any Participant who is not a 5-percent Owner, April 1 of the calendar year following the later of the calendar year in which he attains age 70 1/2 or the calendar year in which he retires.

The preretirement age 70 1/2 distribution option is only eliminated with respect to Participants who reach age 70 1/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated such option. The preretirement age 70 1/2 distribution option is an optional form of benefit under which benefits payable in a particular distribution form (including any modifications that may be elected after benefits begin) begin at a time during the period that begins on or after January 1 of the calendar year in which the Participant attains age 70 1/2 and ends April 1 of the immediately following calendar year.

The options available for Participants who are not 5-percent Owners and attained age 70 1/2 in calendar years before the calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment which eliminated the preretirement age 70 1/2 distribution option shall be the following. Any such Participant attaining age 70 1/2 in years after 1995 may elect by April 1 of the calendar year following the calendar year in which he attained age 70 1/2 (or by December 31, 1997 in the case of a Participant attaining age 70 1/2 in 1996) to defer distributions until April 1 of the calendar year following the calendar year in which he retires. Any such Participant attaining age 70 1/2 in years prior to 1997 may elect to stop distributions that are not purchased annuities and recommence by April 1 of the calendar year following the calendar year in which he retires. There shall be a new Annuity Starting Date upon recommencement.

SECTION 7.03—REQUIRED MINIMUM DISTRIBUTIONS.

(a) General Rules.

(1)	The requirements of this article shall apply to any distribution of a Participant’s interest and will take precedence over any inconsistent provisions of this Plan.
(2)	All distributions required under this article shall be determined and made in accordance with the regulations under Code Section 401(a)(9) and the minimum distribution incidental benefit requirement of Code Section 401(a)(9)(G).

(b) Time and Manner of Distribution.

(1)	Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.
(2)	Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

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(i)	If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calender year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(ii)	If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(iii)	If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(iv)	If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse are required to begin, this (b)(2), other than (b)(2)(i), will apply as if the surviving spouse were the Participant.

For purposes of this (b)(2) and (d) below, unless (b)(2)(iv) above applies, distributions are considered to begin on the Participant’s Required Beginning Date. If (b)(2)(iv) above applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under (b)(2)(i) above. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under (b)(2)(i) above), the date distributions are considered to begin is the date distributions actually commence.

(3) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with (c) and (d) below. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the regulations thereunder.

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(c) Required Minimum Distributions During Participant’s Lifetime.

(1) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:

(i)

the quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Q&A-2 in section 1.401(a)(9)-9 of the regulations, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

(ii)

if the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Q&A-3 in section 1.401(a)(9)-9 of the regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Distribution Calendar Year.

(2) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this (c) beginning with the first Distribution Calendar Year and continuing up to, and including, the Distribution Calendar Year that includes the Participant’s date of death.

(d) Required Minimum Distributions After Participant’s Death.

(1) Death On or After Date Distributions Begin.

(i) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as follows:

A.

The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

B.

If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Distribution Calendar Years after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

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C. If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(ii) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) Death Before Date Distributions Begin.

(i)	Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as provided in (d)(1) above, except to the extent that an election is made to receive distributions in accordance with the 5-year rule. Under the 5-year rule, the Participant’s entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(ii)	No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(iii)	Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under (b)(2)(i) above, this (d)(2) will apply as if the surviving spouse were the Participant.

     SECTION 7.04— TRANSITION RULES.

     To the extent the Plan was effective before 2003, required minimum distributions were made pursuant to (a) and (b) below:

(a) 2000 and Before. Required minimum distributions for calendar years after 1984 and before 2001 were made in accordance with Code Section 401(a)(9) and the proposed regulations thereunder published in the Federal Register on July 27, 1987 (the 1987 Proposed Regulations).

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(b) 2001 and 2002. Required minimum distributions for calendar years 2001 and 2002 were made pursuant to the proposed regulations under Code Section 401 (a)(9) published in the Federal Register on January 17, 2001 (the 2001 Proposed Regulations). Distributions were made in 2001 under the 1987 Proposed Regulations prior to June 14, 2001, and the special transition rule in Announcement 2001-82, 2001-2 C.8. 123, applied.

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ARTICLE VIII

TERMINATION OF THE PLAN

     The Employer expects to continue the Plan indefinitely but reserves the right to terminate the Plan in whole or in part at any time upon giving written notice to all parties concerned. Complete discontinuance of Contributions constitutes complete termination of the Plan.

     The Account of each Participant shall be 100% vested and nonforfeitable as of the effective date of complete termination of the Plan. The Account of each Participant who is included in the group of Participants deemed to be affected by the partial termination of the Plan shall be 100% vested and nonforfeitable as of the effective date of the partial termination of the Plan, The Participant’s Vested Account shall continue to participate in the earnings credited, expenses charged, and any appreciation or depreciation of the Investment Fund until his Vested Account is distributed.

     A Participant’s Vested Account that does not result from the Contributions listed below may be distributed to the Participant after the effective date of the complete termination of the Plan:

Elective Deferral Contributions
Qualified Nonelective Contributions

A Participant’s Vested Account resulting from such Contributions may be distributed upon complete termination of the Plan, but only if neither the Employer nor any Controlled Group member maintain another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7) or 409(a), a simplified employee pension plan as defined in Code Section 408(k), a SIMPLE IRA plan as defined in Code Section 408(p), a plan or contract that satisfies the requirements of Code Section 403(b), or a plan described in Code Section 457(b) or (f)) at any time during the period beginning on the date of complete termination of the Plan and ending 12 months after all assets have been distributed from the Plan. Such distribution is made in a lump sum. A distribution under this article shall be a retirement benefit and shall be distributed to the Participant according to the provisions of Article VI.

     The Participant’s entire Vested Account shall be paid in a single sum to the Participant as of the effective date of complete termination of the Plan if (i) the requirements for distribution of Elective Deferral Contributions in the above paragraph are met and (ii) consent of the Participant is not required in the ELECTION PROCEDURES SECTION of Article VI to distribute a benefit that is immediately distributable. This is a small amounts payment. The small amounts payment is in full settlement of all benefits otherwise payable.

     Upon complete termination of the Plan, no more Employees shall become Participants and no more Contributions shall be made.

     The assets of this Plan shall not be paid to the Employer at any time, except that, after the satisfaction of all liabilities under the Plan, any assets remaining may be paid to the Employer, The payment may not be made if it would contravene any provision of law.

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ARTICLE IX

ADMINISTRATION OF THE PLAN

SECTION 9.01—ADMINISTRATION.

     Subject to the provisions of this article, the Plan Administrator has complete control of the administration of the Plan. The Plan Administrator has all the powers necessary for it to properly carry out its administrative duties. Not in limitation, but in amplification of the foregoing, the Plan Administrator has complete discretion to construe or interpret the provisions of the Plan, including ambiguous provisions, if any, and to determine all questions that may arise under the Plan, including all questions relating to the eligibility of Employees to participate in the Plan and the amount of benefit to which any Participant or Beneficiary may become entitled. The Plan Administrator’s decisions upon all matters within the scope of its authority shall be final.

     Unless otherwise set out in the Plan or Annuity Contract, the Plan Administrator may delegate recordkeeping and other duties which are necessary to assist it with the administration of the Plan to any person or firm which agrees to accept such duties. The Plan Administrator shall be entitled to rely upon all tables, valuations, certificates and reports furnished by the consultant or actuary appointed by the Plan Administrator and upon all opinions given by any counsel selected or approved by the Plan Administrator.

     The Plan Administrator shall receive ell claims for benefits by Participants, former Participants and Beneficiaries. The Plan Administrator shall determine all facts necessary to establish the right of any Claimant to benefits and the amount of those benefits under the provisions of the Plan. The Plan Administrator may establish rules and procedures to be followed by Claimants in filing claims for benefits, in furnishing and verifying proofs necessary to determine age, and in any other matters required to administer the Plan.

SECTION 9.02—EXPENSES.

     Expenses of the Plan, to the extent that the Employer does not pay such expenses, may be paid out of the assets of the Plan provided that such payment is consistent with ERISA. Such expenses include, but are not limited to, expenses for bonding required by ERISA; expenses for recordkeeping and other administrative services; fees and expenses of the Trustee or Annuity Contract; expenses for investment education service; and direct costs that the Employer incurs with respect to the Plan. Expenses that relate solely to a specific Participant or Alternate Payee may be assessed against such Participant or Alternate Payee as provided in the service and expense agreement or such other documents duly entered into by or with regard to the Plan that govern such matters.

SECTION 9.03—RECORDS.

     All acts and determinations of the Plan Administrator shall be duly recorded. All these records, together with other documents necessary for the administration of the Plan, shall be preserved in the Plan Administrator’s custody.

     Writing (handwriting, typing, printing), photostating, photographing, microfilming, magnetic impulse, mechanical or electrical recording, or other forms of data compilation shall be acceptable means of keeping records.

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SECTION 9.04—INFORMATION AVAILABLE.

     Any Participant in the Plan or any Beneficiary may examine copies of the Plan description, latest annual report, any bargaining agreement, this Plan, the Annuity Contract, or any other instrument under which the Plan was established or is operated. The Plan Administrator shall maintain all of the items listed in this section in its office, or in such other place or places as it may designate in order to comply with governmental regulations. These items may be examined during reasonable business hours. Upon the written request of a Participant or Beneficiary receiving benefits under the Plan, the Plan Administrator shall furnish him with a copy of any of these items. The Plan Administrator may make a reasonable charge to the requesting person for the copy.

SECTION 9.05—CLAIM PROCEDURES.

     A Claimant must submit any necessary forms and needed information when making a claim for benefits under the Plan.

     If a claim for benefits under the Plan is wholly or partially denied, the Plan Administrator shall provide adequate written notice to the Claimant whose claim for benefits under the Plan has been denied. The notice must be furnished within 90 days of the date that the claim is received by the Plan without regard to whether all of the information necessary to make a benefit determination is received. The Claimant shall be notified in writing within this initial 90-day period if special circumstances require an extension of the time needed to process the claim. The notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator’s decision is expected to be rendered. In no event shall such extension exceed a period of 90 days from the end of the initial 90-day period.

     The Plan Administrator’s notice to the Claimant shall: (i) specify the reason or reasons for the denial; (ii) reference the specific Plan provisions on which the denial is based; (iii) describe any additional material and information needed for the Claimant to perfect his claim for benefits; (iv) explain why the material and information is needed; and (v) inform the Claimant of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on appeal.

     Any appeal made by a Claimant must be made in writing to the Plan Administrator within 60 days after receipt of the Plan Administrator’s notice of denial of benefits. If the Claimant appeals to the Plan Administrator, the Claimant may submit written comments, documents, records, and other information relating to the claim for benefits. The Claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. The Plan Administrator shall review the claim taking into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

     The Plan Administrator shall provide adequate written notice to the Claimant of the Plan’s benefit determination on review. The notice must be furnished within 60 days of the date that the request for review is received by the Plan without regard to whether all of the information necessary to make a benefit determination on review is received. The Claimant shall be notified in writing within this initial 60-day period if special circumstances require an extension of the time needed to process the claim. The notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects

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to render the determination on review. In no event shall such extension exceed a period of 60 days from the end of the initial 60-day period.

     In the event the benefit determination is being made by a committee or board of trustees that hold regularly scheduled meetings at least quarterly, the above paragraph shall not apply. The benefit determination must be made by the date of the meeting of the committee or board that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, the benefit determination must be made by the date of the second meeting following the Plan’s receipt of the request for review. The date of the receipt of the request for review shall be determined without regard to whether all of the information necessary to make a benefit determination on review is received. The Claimant shall be notified in writing within this initial period if special circumstances require an extension of the time needed to process the claim. The notice shall indicate the special circumstances requiring an extension of time and the date by which the committee or board expects to render the determination on review. In no event shall such benefit determination be made later than the third meeting of the committee or board following the Plan’s receipt of the request for review. The Plan Administrator shall provide adequate written notice to the Claimant of the Plan’s benefit determination on review as soon as possible, but not later than five days after the benefit determination is made.

     If the claim for benefits is wholly or partially denied on review, the Plan Administrator’s notice to the Claimant shall: (i) specify the reason or reasons for the denial; (ii) reference the specific Plan provisions on which the denial is based; (iii) include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits; and (iv) include a statement of the Claimant’s right to bring a civil action under ERISA section 502(a).

     A Claimant may authorize a representative to act on the Claimant’s behalf with respect to a benefit claim or appeal of an adverse benefit determination. Such authorization shall be made by completion of a form furnished for that purpose. In the absence of any contrary direction from the Claimant, all information and notifications to which the Claimant is entitled shall be directed to the authorized representative.

     The Plan Administrator shall perform periodic examinations, reviews, or audits of benefit claims to determine whether claims determinations are made in accordance with the governing Plan documents and, where appropriate, Plan provisions have been consistently applied with respect to similarly situated Claimants.

SECTION 9.06—DELEGATION OF AUTHORITY.

     All or any part of the administrative duties and responsibilities under this article may be delegated by the Plan Administrator to a retirement committee. The duties and responsibilities of the retirement committee shall be set out in a separate written agreement.

SECTION 9.07—EXERCISE OF DISCRETIONARY AUTHORITY.

     The Employer, Plan Administrator, and any other person or entity who has authority with respect to the management, administration, or investment of the Plan may exercise that authority in its/his full discretion, subject only to the duties imposed under ERISA. This discretionary authority includes, but is not limited to, the authority to make any and all factual determinations and interpret all terms and provisions of the Plan documents relevant to the issue under consideration. The exercise of authority will be binding upon all

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persons; will be given deference in all courts of law to the greatest extent allowed under law; and will not be overturned or set aside by any court of law unless found to be arbitrary and capricious or made in bad faith.

SECTION 9.08—TRANSACTION PROCESSING.

     Transactions (including, but not limited to, investment directions, trades, loans, and distributions) shall be processed as soon as administratively practicable after proper directions are received from the Participant or other parties. No guarantee is made by the Plan, Plan Administrator, Trustee, Insurer, or Employer that such transactions will be processed on a daily or other basis, and no guarantee is made in any respect regarding the processing time of such transactions.

     Notwithstanding any other provision of the Plan, the Employer, the Plan Administrator, or the Trustee reserve the right to not value an investment option on any given Valuation Date for any reason deemed appropriate by the Employer, the Plan Administrator, or the Trustee.

     Administrative practicality will be determined by legitimate business factors (including, but not limited to, failure of systems or computer programs, failure of the means of the transmission of data, force majeure, the failure of a service provider to timely receive values or prices, and correction for errors or omissions or the errors or omissions of any service provider) and in no event will be deemed to be less than 14 days. The processing date of a transaction shall be binding for all purposes of the Plan and considered the applicable Valuation Date for any transaction.

SECTION 9.09—VOTING AND TENDER OF QUALIFYING EMPLOYER SECURITIES.

     Voting rights with respect to Qualifying Employer Securities will be passed through to Participants. Participants will be allowed to direct the voting rights of Qualifying Employer Securities for any matter put to the vote of shareholders. Before each meeting of shareholders, the Employer shall cause to be sent to each person with power to control such voting rights a copy of any notice and any other information provided to shareholders and, if applicable, a form for instructing the Trustee how to vote at such meeting (or any adjournment thereof) the number of full and fractional shares subject to such person’s voting control. The Trustee may establish a deadline in advance of the meeting by which such forms must be received in order to be effective.

     Each Participant shall be entitled to one vote for each share credited to his Account.

     If some or all of the Participants have not directed or have not timely directed the Trustee on how to vote, then the Trustee shall vote such Qualifying Employer Securities in the same proportion as those shares of Qualifying Employer Securities for which the Trustee has received proper direction for such matter.

     Tender rights or exchange offers tor Qualifying Employer Securities will be passed through to Participants. As soon as practicable after the commencement of a tender or exchange offer for Qualifying Employer Securities, the Employer shall cause each person with power to control the response to such tender or exchange offer to be advised in writing the terms of the offer and, if applicable, to be provided with a form for instructing the Trustee, or for revoking such instruction, to tender or exchange shares of Qualifying Employer Securities, to the extent permitted under the terms of such offer. In advising such persons of the terms of the offer, the Employer may include statements from the board of directors setting forth its position with respect to the offer.

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     If some or all of the Participants have not directed or have not timely directed the Trustee on how to tender, then the Trustee shall tender such Qualifying Employer Securities in the same proportion as those shares of Qualifying Employer Securities for which the Trustee has received proper direction for such matter.

     If the tender or exchange offer is limited so that all of the shares that the Trustee has been directed to tender or exchange cannot be sold or exchanged, the shares that each Participant directed to be tendered or exchanged shall be deemed to have been sold or exchanged in the same ratio that the number of shares actually sold or exchanged bears to the total number of shares that the Trustee was directed to tender or exchange.

     The Trustee shall hold the Participant’s individual directions with respect to voting rights or tender decisions in confidence and, except as required by law, shall not divulge or release such individual directions to anyone associated with the Employer. The Employer may require verification of the Trustee’s compliance with the directions received from Participants by any independent auditor selected by the Employer, provided that such auditor agrees to maintain the confidentiality of such individual directions.

     The Employer may develop procedures to facilitate the exercise of votes or tender rights, such as the use of facsimile transmissions for the Participants located in physically remote areas.

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ARTICLE X

GENERAL PROVISIONS

SECTION 10.01—AMENDMENTS.

     The Employer may amend this Plan at any time, including any remedial retroactive changes (within the time specified by Internal Revenue Service regulations), to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

     An amendment may not diminish or adversely affect any accrued interest or benefit of Participants or their Beneficiaries nor allow reversion or diversion of Plan assets to the Employer at any time, except as may be required to comply with any law or regulation issued by any governmental agency to which the Plan is subject.

     No amendment to this Plan shall be effective to the extent that it has the effect of decreasing a Participant’s accrued benefit. However, a Participant’s Account may be reduced to the extent permitted under Code Section 412(c)(8). For purposes of this paragraph, a Plan amendment that has the effect of decreasing a Participant’s Account with respect to benefits attributable to service before the amendment shall be treated as reducing an accrued benefit. Furthermore, if the vesting schedule of the Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee’s right to his employer-derived accrued benefit shall not be less than his percentage computed under the Plan without regard to such amendment.

     No amendment to the Plan shall be effective to eliminate or restrict an optional form of benefit with respect to benefits attributable to service before the amendment except as provided in the MERGERS AND DIRECT TRANSFERS SECTION of this article and below:

(a)

The Plan is amended to eliminate or restrict the ability of a Participant to receive payment of his Account balance under a particular optional form of benefit and the amendment provides a single sum distribution form that is otherwise identical to the optional form of benefit eliminated or restricted. A single sum distribution form is otherwise identical only if it is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the Participant) except with respect to the timing of payments after commencement.

(b)

The Plan is amended to eliminate or restrict in-kind distributions and the conditions in Q&A-2(b)(2)(iii) in section 1.411(d)-4 of the regulations are met.

     If, as a result of an amendment, an Employer Contribution is removed that is not 100% immediately vested when made, the applicable vesting schedule shall remain in effect after the date of such amendment. The Participant shall not become immediately 100% vested in such Contributions as a result of the elimination of such Contribution except as otherwise specifically provided in the Plan.

     An amendment shall not decrease a Participant’s vested interest in the Plan. If an amendment to the Plan, or a deemed amendment in the case of a change in top-heavy status of the Plan as provided in the MODIFICATION OF VESTING REQUIREMENTS SECTION of Article XI, changes the computation of the

RESTATEMENT MARCH 1, 2007 74 ARTICLE X (6-14161)

percentage used to determine that portion of a Participant’s Account attributable to Employer Contributions which is nonforfeitable (whether directly or indirectly), each Participant or former Participant

(c)	who has completed at least three Years of Service on the date the election period described below ends (five Years of Service if the Participant does not have at least one Hour of Service in a Plan Year beginning after December 31, 1988) and
(d)	whose nonforfeitable percentage will be determined on any date after the date of the change

may elect, during the election period, to have the nonforfeitable percentage of his Account that results from Employer Contributions determined without regard to the amendment. This election may not be revoked. If after the Plan is changed, the Participant’s nonforfeitable percentage will at all times be as great as it would have been if the change had not been made, no election needs to be provided. The election period shall begin no later than the date the Plan amendment is adopted, or deemed adopted in the case of a change in the top-heavy status of the Plan, and end no earlier than the 60th day after the latest of the date the amendment is adopted (deemed adopted) or becomes effective, or the date the Participant is issued written notice of the amendment (deemed amendment) by the Employer or the Plan Administrator.

SECTION 10.02—DIRECT ROLLOVERS.

     Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

     In the event of a mandatory distribution of an Eligible Rollover Distribution greater than $1,000 in accordance with the SMALL AMOUNTS SECTION of this article (or which is a small amounts payment under Article VIII at complete termination of the Plan), if the Participant does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Participant in a Direct Rollover or to receive the distribution directly, the Plan Administrator will pay the distribution in a Direct Rollover to an individual retirement plan designated by the Plan Administrator.

     In the event of any other Eligible Rollover Distribution to a Distributee in accordance with the SMALL AMOUNTS SECTION of this article (or which is a small amounts payment under Article VIII at complete termination of the Plan), if the Distributee does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover or to receive the distribution directly, the Plan Administrator will pay the distribution to the Distributee.

     A mandatory distribution is a distribution to a Participant that is made without the Participant’s consent and is made to the Participant before he attains the older of age 62 or his Normal Retirement Age.

SECTION 10.03—MERGERS AND DIRECT TRANSFERS.

     The Plan may not be merged or consolidated with, nor have its assets or liabilities transferred to, any other retirement plan, unless each Participant in this Plan would (if that plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer (if this Plan had then terminated). The Employer may enter into merger agreements or direct transfer of assets

RESTATEMENT MARCH 1, 2007 75 ARTICLE X (6-14161)

agreements with the employers under other retirement plans which are qualifiable under Code Section 401(a), including an elective transfer, and may accept the direct transfer of plan assets, or may transfer plan assets, as a party to any such agreement. The Employer shall not consent to, or be a party to a merger, consolidation, or transfer of assets with a plan which is subject to the survivor annuity requirements of Code Section 401(a)(11) if such action would result in a survivor annuity feature being maintained under this Plan. The Employer will not transfer any amounts attributable to elective deferral contributions, qualified matching contributions, and qualified nonelective contributions unless the transferee plan provides that the limitations of section 1.401(k)-1(d) of the regulations shall apply to such amounts (including post-transfer earnings thereon), unless the amounts could have been distributed at the time of the transfer (other than for hardship), and the transfer is an elective transfer described in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations.

     Notwithstanding any provision of the Plan to the contrary, to the extent any optional form of benefit under the Plan permits a distribution prior to the Employee’s retirement, death, disability, or Severance from Employment, and prior to plan termination, the optional form of benefit is not available with respect to benefits attributable to assets (including the post-transfer earnings thereon) and liabilities that are transferred, within the meaning of Code Section 414(I), to this Plan from a money purchase pension plan qualified under Code Section 401(a) (other than any portion of those assets and liabilities attributable to voluntary employee contributions). The limitations of section 1.401 (k)- 1(d) of the regulations applicable to elective deferral contributions, qualified matching contributions, and qualified nonelective contributions shall continue to apply to any amounts attributable to such contributions (including post-transfer earnings thereon) transferred to this Plan, unless the amounts could have been distributed at the time of the transfer (other than for hardship), and the transfer is an elective transfer described in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations.

     The Plan may accept a direct transfer of plan assets on behalf of an Eligible Employee. If the Eligible Employee is not an Active Participant when the transfer is made, the Eligible Employee shall be deemed to be an Active Participant only for the purpose of investment and distribution of the transferred assets. Employer Contributions shall not be made for or allocated to the Eligible Employee, until the time he meets all of the requirements to become an Active Participant.

     The Plan shall hold, administer, and distribute the transferred assets as a part of the Plan. The Plan shall maintain a separate account for the benefit of the Employee on whose behalf the Plan accepted the transfer in order to reflect the value of the transferred assets.

     Unless a transfer of assets to the Plan is an elective transfer as described below, the Plan shall apply the optional forms of benefit protections described in the AMENDMENTS SECTION of this article to all transferred assets.

     A Participant’s protected benefits may be eliminated upon transfer between qualified defined contribution plans if the conditions in Q&A-3(b)(1) in section 1.411(d)-4 of the regulations are met. The transfer must meet all of the other applicable qualification requirements.

     A Participant’s protected benefits may be eliminated upon transfer between qualified plans (both defined benefit and defined contribution) if the conditions in Q&A-3(c)(1) in section 1.411 (d)-4 of the regulations are met. Beginning January 1, 2002, if the Participant is eligible to receive an immediate distribution of his entire nonforfeitable accrued benefit in a single sum distribution that would consist entirely of an eligible rollover distribution under Code Section 401(a)(31), such transfer will be accomplished as a direct rollover under Code Section 401(a)(31). The rules applicable to distributions under the plan would apply to the transfer, but the

RESTATEMENT MARCH 1, 2007 76 ARTICLE X (6-14161)

transfer would not be treated as a distribution for purposes of the minimum distribution requirements of Code Section 401(a)(9).

SECTION 10.04—PROVISIONS RELATING TO THE INSURER AND OTHER PARTIES.

     The obligations of an Insurer shall be governed solely by the provisions of the Annuity Contract. The Insurer shall not be required to perform any act not provided in or contrary to the provisions of the Annuity Contract, Each Annuity Contract when purchased shall comply with the Plan. See the CONSTRUCTION SECTION of this article.

     Any issuer or distributor of investment contracts or securities is governed solely by the terms of its policies, written investment contract, prospectuses, security instruments, and any other written agreements entered into with the Trustee with regard to such investment contracts or securities.

     Such Insurer, issuer or distributor is not a party to the Plan, nor bound in any way by the Plan provisions. Such parties shall not be required to look to the terms of this Plan, nor to determine whether the Employer, the Plan Administrator, the Trustee, or the Named Fiduciary have the authority to act in any particular manner or to make any contract or agreement.

     Until notice of any amendment or termination of this Plan or a change in Trustee has been received by the Insurer at its home office or an issuer or distributor at their principal address, they are and shall be fully protected in assuming that the Plan has not been amended or terminated and in dealing with any party acting as Trustee according to the latest information which they have received at their home office or principal address.

SECTION 10.05—EMPLOYMENT STATUS.

     Nothing contained in this Plan gives an Employee the right to be retained in the Employer’s employ or to interfere with the Employer’s right to discharge any Employee.

SECTION 10.06—RIGHTS TO PLAN ASSETS.

     An Employee shall not have any right to or interest in any assets of the Plan upon termination of employment or otherwise except as specifically provided under this Plan, and then only to the extent of the benefits payable to such Employee according to the Plan provisions.

     Any final payment or distribution to a Participant or his legal representative or to any Beneficiaries of such Participant under the Plan provisions shall be in full satisfaction of all claims against the Plan, the Named Fiduciary, the Plan Administrator, the Insurer, the Trustee, and the Employer arising under or by virtue of the Plan.

SECTION 10.07—BENEFICIARY.

     Each Participant may name a Beneficiary to receive any death benefit that may arise out of his participation in the Plan. The Participant may change his Beneficiary from time to time. Unless a qualified election has been made, for purposes of distributing any death benefits before the Participant’s Retirement Date, the Beneficiary of a Participant who has a spouse shall be the Participant’s spouse. The Participant’s

RESTATEMENT MARCH 1, 2007 77 ARTICLE X (6-14161)

Beneficiary designation and any change of Beneficiary shall be subject to the provisions of the ELECTION PROCEDURES SECTION of Article VI.

     It is the responsibility of the Participant to give written notice to the Plan Administrator of the name of the Beneficiary on a form furnished for that purpose. The Plan Administrator shall maintain records of Beneficiary designations for Participants before their Retirement Dates. However, the Plan Administrator may delegate to another party the responsibility of maintaining records of Beneficiary designations. In that event, the written designations made by Participants shall be filed with such other party. If a party other than the Insurer maintains the records of Beneficiary designations and a Participant dies before his Retirement Date, such other party shall certify to the Insurer the Beneficiary designation on its records for the Participant.

     If there is no Beneficiary named or surviving when a Participant dies, the Participant’s Beneficiary shall be the Participant’s surviving spouse, or where there is no surviving spouse, the executor or administrator of the Participant’s estate.

SECTION 10.08—NONALIENATION OF BENEFITS.

     Benefits payable under the Plan are not subject to the claims of any creditor of Bny Participant, Beneficiary or spouse. A Participant, Beneficiary or spouse does not have any rights to alienate, anticipate, commute, pledge, encumber, or assign such benefits, except in the case of a loan as provided in the LOANS TO PARTICIPANTS SECTION of Article V. The preceding sentences shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant according to a domestic relations order, unless such order is determined by the Plan Administrator to be a qualified domestic relations order, as defined in Code Section 414(p), or any domestic relations order entered before January 1, 1985. The preceding sentences shall not apply to any offset of a Participant’s benefits provided under the Plan against an amount the Participant is required to pay the Plan with respect to a judgment, order, or decree issued, or a settlement entered into, on or after August 5, 1997, which meets the requirements of Code Sections 401(a)(13)(C) or (D).

SECTION 10.09—CONSTRUCTION.

     The validity of the Plan or any of its provisions is determined under and construed according to Federal law and, to the extent permissible, according to the laws of the state in which the Employer has its principal office. In case any provision of this Plan is held illegal or invalid for any reason, such determination shall not affect the remaining provisions of this Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included.

     In the event of any conflict between the provisions of the Plan and the terms of any Annuity Contract issued hereunder, the provisions of the Plan control.

SECTION 10.10—LEGAL ACTIONS.

     No person employed by the Employer; no Participant, former Participant, or their Beneficiaries; nor any other person having or claiming to have an interest in the Plan is entitled to any notice of process. A final judgment entered in any such action or proceeding shall be binding and conclusive on all persons having or claiming to have an interest in the Plan.

RESTATEMENT MARCH 1, 2007 78 ARTICLE X (6-14161)

SECTION 10.11—SMALL AMOUNTS.

     If consent of the Participant is not required for a benefit that is immediately distributable in the ELECTION PROCEDURES SECTION of Article VI, a Participant’s entire Vested Account shall be paid in a single sum as of the earliest of his Retirement Date, the date he dies, or the date he has a Severance from Employment for any other reason (the date the Employer provides notice to the record keeper of the Plan of such event, if later). For purposes of this section, if the Participant’s Vested Account is zero, the Participant shall be deemed to have received a distribution of such Vested Account. If a Participant would have received a distribution under the first sentence of this paragraph but for the fact that the Participant’s consent was needed to distribute a benefit which is immediately distributable, and if at a later time consent would not be needed to distribute a benefit that is immediately distributable and such Participant has not again become an Employee, such Vested Account shall be paid in a single sum. This is a small amounts payment.

     If a small amounts payment is made as of the date the Participant dies, the small amounts payment shall be made to the Participant’s Beneficiary. If a small amounts payment is made while the Participant is living, the small amounts payment shall be made to the Participant. The small amounts payment is in full settlement of all benefits otherwise payable.

     No other small amounts payments shall be made.

SECTION 10.12—WORD USAGE.

     The masculine gender, where used in this Plan, shall include the feminine gender and the singular words, where used in this Plan, shall include the plural, unless the context indicates otherwise.

     The words “in writing” and “written,” where used in this Plan, shall include any other forms, such as voice response or other electronic system, as permitted by any governmental agency to which the Plan is subject.

SECTION 10.13—CHANGE IN SERVICE METHOD.

(a) Change of Service Method Under This Plan If this Plan is amended to change the method of crediting service from the elapsed time method to the hours method for any purpose under this Ran, the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)

The number of whole years of service credited to the Employee under the Plan as of the date the change is effective.

(2)

One year of service for the computation period in which the change is effective if he is credited with the required number of Hours of Service. For that portion of the computation period ending on the date of the change (for the first day of the computation period if the change is made on the first day of the computation period), the Employee will be credited with the greater of (i) his actual Hours of Service or (ii) the number of Hours of Service that is equivalent to the fractional part of a year of elapsed time service credited as of the date of the change, if any. In determining the equivalent Hours of Service, the Employee shall be credited with 190 Hours of Service for each month and any fractional part of a month in

RESTATEMENT MARCH 1, 2007 79 ARTICLE X (6-14161)

such fractional part of a year. The number of months and any fractional part of a month shall be determined by multiplying the fractional part of a year, expressed as a decimal, by 12. For the remaining portion of the computation period (the period beginning on the second day of the computation period and ending on the last day of the computation period if the change is made on the first day of the computation period), the Employee will be credited with his actual Hours of Service.

(3)

The Employee’s service determined under this Plan using the hours method after the end of the computation period in which the change in service method was effective.

If this Plan is amended to change the method of crediting service from the hours method to the elapsed time method for any purpose under this Plan, the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

(4)	The number of whole years of service credited to the Employee under the Plan as of the beginning of the computation period in which the change in service method is effective.
(5)	The greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the Plan as of the date the change is effective.
(6)	The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period in which the change in service method was effective.

(b) Transfers Between Plans with Different Service Methods. If an Employee has been a participant in another plan of the Employer that credited service under the elapsed time method for any purpose that under this Plan is determined using the hours method, then the Employee’s service shall be equal to the sum of (1), (2), and (3) below:

(1)

The number of whole years of service credited to the Employee under the other plan as of the date he became an Eligible Employee under this Plan.

(2)

One year of service for the applicable computation period in which he became an Eligible Employee if he is credited with the required number of Hours of Service. For that portion of such computation period ending on the date he became an Eligible Employee (for the first day of such computation period if he became an Eligible Employee on the first day of such computation period), the Employee will be credited with the greater of (i) his actual Hours of Service or (ii) the number of Hours of Service that is equivalent to the fractional part of a year of elapsed time service credited as of the date he became an Eligible Employee, if any. In determining the equivalent Hours of Service, the Employee shall be credited with 190 Hours of Service for each month and any fractional part of a month in such fractional part of a year. The number of months and any fractional part of a month shall be determined by multiplying the fractional part of a year, expressed as a decimal, by 12. For the remaining portion of such computation period (the period beginning on the second day of such computation period and ending on the last day of such computation period if he became an Eligible Employee on the first day of such computation period), the Employee will be credited with his actual Hours of Service.

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(3) The Employee’s service determined under this Plan using the hours method after the end of the computation period in which he became an Eligible Employee.

     If an Employee has been a participant in another plan of the Employer that credited service under the hours method for any purpose that under this Plan is determined using the elapsed time method, then the Employee’s service shall be equal to the sum of (4), (5), and (6) below:

(4)	The number of whole years of service credited to the Employee under the other plan as of the beginning of the computation period under that plan in which he became an Eligible Employee under this Plan.
(5)	The greater of (i) the service that would be credited to the Employee for that entire computation period using the elapsed time method or (ii) the service credited to him under the other plan as of the date he became an Eligible Employee under this Plan.
(6)	The Employee’s service determined under this Plan using the elapsed time method after the end of the applicable computation period under the other plan in which he became an Eligible Employee.

     If an Employee has been a participant in a Controlled Group member’s plan that credited service under a different method than is used in this Plan, in order to determine entry and vesting, the provisions in (b) above shall apply as though the Controlled Group member’s plan was a plan of the Employer.

     Any modification of service contained in this Plan shall be applicable to the service determined pursuant to this section.

SECTION 10.14—MILITARY SERVICE.

     Notwithstanding any provision of this Plan to the contrary, the Plan shall provide contributions, benefits, and service credit with respect to qualified military service in accordance with Code Section 414(u). Loan repayments shall be suspended under this Plan as permitted under Code Section 414(u).

RESTATEMENT MARCH 1, 2007 81 ARTICLE X (6-14161)

ARTICLE XI

TOP-HEAVY PLAN REQUIREMENTS

SECTION 11.01 —APPLICATION.

     The provisions of this article shall supersede all other provisions in the Plan to the contrary. The provisions of this article shall apply for purposes of determining whether the Plan is a Top-heavy Plan for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefit requirements of Code Section 416(c) for such years.

     For the purpose of applying the Top-heavy Plan requirements of this article, all members of the Controlled Group shall be treated as one Employer. The term Employer, as used in this article, shall be deemed to include all members of the Controlled Group, unless the term as used clearly indicates only the Employer is meant.

     The accrued benefit or account of a participant that results from deductible employee contributions shall not be included for any purpose under this article.

     The minimum vesting and contribution provisions of the MODIFICATION OF VESTING REQUIREMENTS and MODIFICATION OF CONTRIBUTIONS SECTIONS of this article shall not apply to any Employee who is included in a group of Employees covered by a collective bargaining agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, including the Employer, if there is evidence that retirement benefits were the subject of good faith bargaining between such representatives. For this purpose, the term “employee representatives” does not include any organization more than half of whose members are employees who are owners, officers, or executives.

SECTION 11.02—DEFINITIONS.

     For purposes of this article the following terms are defined:

     Aggregation Group means:

(a)	each of the Employer’s qualified plans in which a Key Employee is a participant during the Plan Year containing the Determination Date (regardless of whether the plans have terminated) or one of the four preceding Plan Years,
(b)	each of the Employer’s other qualified plans which allows the plan(s) described in (a) above to meet the nondiscrimination requirement of Code Section 401(a)(4) or the minimum coverage requirement of Code Section 410, and
(c)	any of the Employer’s other qualified plans not included in (a) or (b) above which the Employer desires to include as part of the Aggregation Group. Such a qualified plan shall be included only if the Aggregation Group would continue to satisfy the requirements of Code Sections 401(a)(4) and 410.

RESTATEMENT MARCH 1, 2007 82 ARTICLE XI (6-14161)

The plans in (a) and (b) above constitute the “required” Aggregation Group. The plans in (a), (b), and (c) above constitute the “permissive” Aggregation Group.

Compensation means compensation as defined in the CONTRIBUTION LIMITATION SECTION of Article III.

Determination Date means as to any plan, for any plan year subsequent to the first plan year, the last day of the preceding plan year. For the first plan year of the plan, the Determination Date is the last day of that year.

Key Employee means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date is:

(a)	an officer of the Employer having an annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002),
(b)	a 5-percent owner of the Employer, or
(c)	a 1-percent owner of the Employer having an annual Compensation of more than $150,000.

The determination of who is a Key Employee shall be made according to Code Section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

Nonkey Employee means any Employee who is not a Key Employee.

Top-heavy Plan means a plan that is top-heavy for any plan year. This Plan shall be top-heavy if any of the following conditions exist:

(a)	The Top-heavy Ratio for this Plan exceeds 60 percent and this Plan is not part of any required Aggregation Group or permissive Aggregation Group.
(b)	This Plan is a part of a required Aggregation Group, but not part of a permissive Aggregation Group, and the Top-heavy Ratio for the required Aggregation Group exceeds 60 percent.
(c)	This Plan is a part of a required Aggregation Group and part of a permissive Aggregation Group and the Top-heavy Ratio for the permissive Aggregation Group exceeds 60 percent.

Top-heavy Ratio means:

(a) If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for this Plan alone or for the required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the one-year period ending on the Determination Date(s) and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group), and the denominator of which is the sum of all account balances (including

RESTATEMENT MARCH 1, 2007 83 ARTICLE XI (6-14161)

	any part of any account balance distributed in the one-year period ending on the Determination Date(s) and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group), both computed in accordance with Code Section 416 and the regulations thereunder. In the case of a distribution made for a reason other than Severance from Employment, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period.” Both the numerator and denominator of the Top-heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Code Section 416 and the regulations thereunder.
(b)	If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-heavy Ratio for any required or permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances under the aggregated defined contribution plan or plans of all Key Employees determined in accordance with (a) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with (a) above, and the present value of accrued benefits under the defined benefit plan or plans for all participants as of the Determination Date(s), all determined in accordance with Code Section 416 and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-heavy Ratio are increased for any distribution of an accrued benefit made in the one-year period ending on the Determination Date (and distributions under a terminated plan which if it had not been terminated would have been required to be included in the Aggregation Group). In the case of a distribution made for a reason other than Severance from Employment, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period.”
(c)	For purposes of (a) and (b) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (i) who is not a Key Employee but who was a Key Employee in a prior year or (ii) who has not been credited with at least one hour of service with any employer maintaining the plan at any time during the one-year period ending on the Determination Date will be disregarded. The calculation of the Top-heavy Ratio and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.
	The accrued benefit of a participant other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code Section 411(b)(1)(C).

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SECTION 11.03—MODIFICATION OF VESTING REQUIREMENTS.

     If a Participant’s Vesting Percentage determined under Article I is not at least as great as his Vesting Percentage would be if it were determined under a schedule permitted in Code Section 416, the following shall apply. During any Plan Year in which the Plan is a Top-heavy Plan, the Participant’s Vesting Percentage shall be the greater of the Vesting Percentage determined under Article I or the schedule below.

VESTING SERVICE	NONFORFEITABLE
(whole years)	PERCENTAGE
Less than 2	0
2	20
3	40
4	60
5	80
6 or more	100

     The schedule above shall not apply to Participants who are not credited with an Hour of Service after the Plan first becomes a Top-heavy Plan. The Vesting Percentage determined above applies to the portion of the Participant’s Account that is multiplied by a Vesting Percentage to determine his Vested Account, including benefits accrued before the effective date of Code Section 416 and benefits accrued before this Plan became a Top-heavy Plan.

     If, in a later Plan Year, this Plan is not a Top-heavy Plan, a Participant’s Vesting Percentage shall be determined under Article I. A Participant’s Vesting Percentage determined under either Article I or the schedule above shall never be reduced and the election procedures of the AMENDMENTS SECTION of Article X shall apply when changing to or from the schedule as though the automatic change were the result of an amendment.

     The part of the Participant’s Vested Account resulting from the minimum contributions required pursuant to the MODIFICATION OF CONTRIBUTIONS SECTION of this article (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or (D).

SECTION 11.04—MODIFICATION OF CONTRIBUTIONS.

     During any Plan Year in which this Plan is a Top-heavy Plan, the Employer shall make a minimum contribution as of the last day of the Plan Year for each Nonkey Employee who is an Employee on the last day of the Plan Year and who was an Active Participant at any time during the Plan Year. A Nonkey Employee is not required to have a minimum number of Hours of Service or minimum amount of Compensation in order to be entitled to this minimum. A Nonkey Employee who fails to be an Active Participant merely because his Compensation is less than a stated amount or merely because of a failure to make mandatory participant contributions or, in the case of a cash or deferred arrangement, elective contributions shall be treated as if he were an Active Participant. The minimum is the lesser of (a) or (b) below:

(a) 3 percent of such person’s Compensation for such Plan Year.

RESTATEMENT MARCH 1, 2007 85 ARTICLE XI (6-14161)

(b)   The “highest percentage” of Compensation for such Plan Year at which the Employer’s Contributions are made for or allocated to any Key Employee. The highest percentage shall be determined by dividing the Employer Contributions made for or allocated to each Key Employee during the Plan Year by the amount of his Compensation for such Plan Year, and selecting the greatest quotient (expressed as a percentage). To determine the highest percentage, all of the Employer’s defined contribution plans within the Aggregation Group shall be treated as one plan. The minimum shall be the amount in (a) above if this Plan and a defined benefit plan of the Employer are required to be included in the Aggregation Group and this Plan enables the defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410.

     For purposes of (a) and lb) above, Compensation shall be limited by Code Section 401(a)(17).

     If the Employer’s contributions and allocations otherwise required under the defined contribution plan(s) are at least equal to the minimum above, no additional contribution shall be required. If the Employer’s total contributions and allocations are less than the minimum above, the Employer shall contribute the difference for the Plan Year.

     The minimum contribution applies to all of the Employer’s defined contribution plans in the aggregate which are Top-heavy Plans. A minimum contribution under a profit sharing plan shall be made without regard to whether or not the Employer has profits.

     If a person who is otherwise entitled to a minimum contribution above is also covered under another defined contribution plan of the Employer’s which is a Top-heavy Plan during that same Plan Year, any additional contribution required to meet the minimum above shall be provided in this Plan.

     If a person who is otherwise entitled to a minimum contribution above is also covered under a defined benefit plan of the Employer’s that is a Top-heavy Plan during that same Plan Year, the minimum benefits for him shall not be duplicated. The defined benefit plan shall provide an annual benefit for him on, or adjusted to, a straight life basis equal to the lesser of:

(c)	2 percent of his average compensation multiplied by his years of service, or
(d)	20 percent of his average compensation.

Average compensation and years of service shall have the meaning set forth in such defined benefit plan for this purpose.

     For purposes of this section, any employer contribution made according to a salary reduction or similar arrangement shall not apply in determining if the minimum contribution requirement has been met, but shall apply in determining the minimum contribution required. Matching contributions, as defined in Code Section 401(m), shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. Matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Code Section 401(m).

     The requirements of this section shall be met without regard to any Social Security contribution.

RESTATEMENT MARCH 1, 2007 86 ARTICLE XI (6-14161)

     By executing this Plan, the Primary Employer acknowledges having counseled to the extent necessary with selected legal and tax advisors regarding the Plan’s legal and tax implications.

     Executed this 1^st day of March, 2007.

SANDRIDGE ENERGY, INC.

By:

SR. VP — Human Resources

Title

Defined Contribution Plan CL2005

     The Adopting Employer must agree to participate in or adopt the Plan in writing. If this has not already been done, it may be done by signing below.

ALSATE MANAGEMENT & INVESTMENT
COMPANY

By:

SR. VP, Legal

Title

3-1-07

Date

RESTATEMENT MARCH 1, 2007	87	PLAN EXECUTION (6-14161)
		Subtype 110217

LARIAT SERVICES, lNC.

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07

Date

RIAGRA LAND & CATTLE COMPANY

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07

Date

TRANSPECOS LOGGING, LLC

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07

Date

RESTATEMENT MARCH 1, 2007 88 PLAN EXECUTION (6-14161)
Subtype 110217

INTEGRA ENERGY, LLC

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07
Date

RIATA ENERGY OPERATING, LLC

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07

Date

CHAPARRAL SUPPLY, LLC

By:

Matthew Mclann SR. VP, Legal

Title

3-1-07

Date

RESTATEMENT MARCH 1, 2007	89	PLAN EXECUTION (6-14161)
		Subtype 110217

TLW INVESTMENTS, INC.

By:

Chairman and CEO

Title

3-1-07

Date

PETROSOURCE INC.

By:

Metthew Mclann SR. VP, Legal

Title

3-1-07

Date

RESTATEMENT MARCH 1, 2007	90	PLAN EXECUTION (6-14161)
		Subtype 110217

EX-10.5

Exhibit 10.5

FORM OF INDEMNIFICATION AGREEMENT

     THIS AGREEMENT is effective October [ ], 2007, between SandRidge Energy, Inc., a Delaware corporation (the “Corporation”), and the undersigned director or officer of the Corporation (“Indemnitee”).

     WHEREAS, the Corporation has adopted Bylaws (as the same may be amended from time to time, the “Bylaws”) providing for indemnification of the Corporation’s directors and officers; and

     WHEREAS, the Bylaws and the Delaware General Corporation Law (the “DGCL”) contemplate that contracts and insurance policies may be entered into with respect to indemnification of directors and officers; and

     WHEREAS, there are questions concerning the adequacy and reliability of the protection which might be afforded to directors and officers from acquisition of policies of Directors and Officers Liability Insurance (“D&O Insurance”), covering certain liabilities which might be incurred by directors and officers in the performance of their services to the Corporation; and

     WHEREAS, it is reasonable, prudent and necessary for the Corporation to obligate itself contractually to indemnify Indemnitee so that he will serve or continue to serve the Corporation free from undue concern that he will not be adequately protected.

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Corporation and Indemnitee do hereby covenant and agree as follows:

     Definitions. As used in this Agreement:

     (a) The term “Proceeding” shall include any threatened, pending or completed action, suit, claim, inquiry or proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative, arbitrative or investigative nature, in which Indemnitee is or is reasonably expected to be involved as a party, as a witness or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Corporation, by reason of any action taken by him or of any inaction on his part while acting as a director or officer of the Corporation or by reason of the fact that he is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement; provided that any such action, suit, claim, inquiry or proceeding which is brought by Indemnitee against the Corporation or directors or officers of the Corporation, other than an action brought by Indemnitee to enforce his rights under this Agreement, shall not be deemed a Proceeding without prior approval by a majority of the Board of Directors of the Corporation.

     (b) The term “Expenses” shall include, without limitation, any judgments, fines and penalties against Indemnitee in connection with a Proceeding; amounts paid by Indemnitee in settlement of a Proceeding pursuant to this Agreement; and all attorneys’ fees and disbursements, accountants’ fees, private investigation fees and disbursements, retainers, court costs, transcript

costs, fees of experts, fees and expenses of witnesses, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements, or expenses, reasonably incurred by or for Indemnitee in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in a Proceeding or establishing Indemnitee’s right of entitlement to indemnification for any of the foregoing.

     (c) References to Indemnitee’s being or acting as “a director or officer of the Corporation” or “serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise” shall include in each case service to or actions taken while a director, officer, trustee, employee or agent of any subsidiary of the Corporation or while serving as a member of a committee of the Board of Directors of the Corporation.

     (d) References to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, trustee, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” as referred to in this Agreement.

     (e) The term “substantiating documentation” shall mean copies of bills or invoices for costs incurred by or for Indemnitee, or copies of court or agency orders or decrees or settlement agreements, as the case may be, accompanied by a sworn statement from Indemnitee that such bills, invoices, court or agency orders or decrees or settlement agreements, represent costs or liabilities meeting the definition of “Expenses” herein.

     (f) The terms “he” and “his” have been used for convenience and mean “she” and “her” if Indemnitee is a female.

     Indemnity of Director or Officer. The Corporation hereby agrees to hold harmless and indemnify Indemnitee against Expenses to the fullest extent authorized or permitted by law (including the applicable provisions of the DGCL). The phrase “to the fullest extent permitted by law” shall include, but not be limited to (a) to the fullest extent permitted by any provision of the DGCL that authorizes or permits additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL and (b) to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors. Any amendment, alteration or repeal of the DGCL that adversely affects any right of Indemnitee shall be prospective only and shall not limit or eliminate any such right with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

2

     Additional Indemnity. The Corporation hereby further agrees to hold harmless and indemnify Indemnitee against Expenses incurred by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise, but only if Indemnitee acted in good faith and, in the case of conduct in his official capacity, in a manner he reasonably believed to be in the best interests of the Corporation and, in all other cases, not opposed to the best interests of the Corporation. Additionally, in the case of a criminal proceeding, Indemnitee must have had no reasonable cause to believe that his conduct was unlawful. The termination of any Proceeding by judgment, order of the court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, and with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

     Contribution. If the indemnification provided under Section 2 or Section 3 is unavailable by reason of a court decision finding that Indemnitee is not eligible to receive indemnification for Expenses incurred by Indemnitee under this Agreement, based on grounds other than any of those set forth in Section 15, then, in respect of any Proceeding in which the Corporation is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Corporation shall contribute to the amount of Expenses actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Corporation on one hand and Indemnitee on the other from the transaction from which such Proceeding arose and (ii) the relative fault of the Corporation on the one hand and of Indemnitee on the other in connection with the events that resulted in such Expenses as well as any other relevant equitable considerations. The relative fault of the Corporation on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses. The Corporation agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation that does not take into account of the foregoing equitable considerations.

     Choice of Counsel. Each Indemnitee that is an Outside Director or Other Indemnitee, together with the other Indemnitees who are designated in the same group, shall be entitled to employ, and be reimbursed for the fees and disbursements of, separate counsel to represent the Outside Directors or the Other Indemnitees, as the case may be, in connection with any Proceeding. For purposes of this Agreement, an Indemnitee shall be designated as (i) an “Outside Director” if such Indemnitee is a director and not an officer of the Corporation or (ii) an “Other Indemnitee” if such Indemnitee is not an Outside Director. The principal counsel for Outside Directors (“Outside Director Counsel”) shall be determined by majority vote of the Outside Directors and the Principal Counsel for the Other Indemnitees (“Other Indemnitee Counsel”) shall be determined by majority vote of the Other Indemnitees, in each case subject to the consent of the Corporation (not to be unreasonably withheld or delayed). The obligation of the Corporation to reimburse Indemnitee for the fees and disbursements of counsel hereunder shall not extend to the fees and disbursements of any counsel employed by Indemnitee other than

3 

Outside Director Counsel or Other Indemnitee Counsel, as the case may be, unless Indemnitee has interests that are different from those of the other Indemnitees or defenses available to him that are in addition to or different from those of the other Indemnitees such that Outside Director Counsel or Other Indemnitee Counsel, as the case may be, would have an actual, apparent or potential conflict of interest in representing Indemnitee.

     Advances of Expenses. Expenses (other than judgments, penalties, fines and settlements) incurred by Indemnitee shall be paid by the Corporation, in advance of the final disposition of the Proceeding, within 20 calendar days after receipt of Indemnitee’s written request accompanied by substantiating documentation and Indemnitee’s written affirmation that he has met the standard of conduct for indemnification and a written undertaking to repay such amount to the extent it is ultimately determined that indemnitee is not entitled to indemnification. No objections based on or involving the question whether such charges meet the definition of “Expenses,” including any question regarding the reasonableness of such Expenses, shall be grounds for failure to advance such amount to Indemnitee, or to reimburse such Indemnitee for, the amount claimed within such 20-day period, and the undertaking of Indemnitee set forth in Section 8 hereof to repay any such amount to the extent it is ultimately determined that Indemnitee is not entitled to indemnification shall be deemed to include an undertaking to repay any such amounts determined not to have met such definition.

     Right of Indemnitee to Indemnification Upon Application; Procedure Upon Application. Any indemnification under this Agreement, other than advances pursuant to Section 6 hereof, shall be made no later than 60 days after receipt by the Corporation of the written request of Indemnitee, accompanied by substantiating documentation, unless a determination is made within said 60-day period by (a) the Board of Directors by a majority vote of a quorum consisting of directors who are not or were not parties to such Proceeding, (b) a committee of the Board of Directors designated by majority vote of the Board of Directors, even though less than a quorum, (c) if there are no such directors, or if such directors so direct, independent legal counsel in a written opinion or (d) the stockholders, that Indemnitee has not met the relevant standards for indemnification set forth in Section 3 hereof.

     The right to indemnification or advances as provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction. The burden of proving that indemnification is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, any committee thereof, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standards of conduct, nor an actual determination by the Corporation (including its Board of Directors, any committee thereof, independent legal counsel or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

     Undertaking by Indemnitee. Indemnitee hereby undertakes to repay to the Corporation (a) any advances of Expenses pursuant to Section 6 hereof and (b) any judgments, penalties, fines and settlements paid to or on behalf of Indemnitee hereunder, in each case to the extent that it is ultimately determined that Indemnitee is not entitled to indemnification. As a condition to the advancement of such Expenses or the payment of such judgments, penalties,

4 

fines and settlements, Indemnitee shall, at the request of the Corporation, execute an acknowledgment that such Expenses or such judgments, penalties, fines and settlements, as the case may be, are delivered pursuant and are subject to the provisions of this Agreement.

     Indemnification Hereunder Not Exclusive. The indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the Certificate of Incorporation of the Corporation, the Bylaws, the DGCL, any D&O Insurance, any agreement, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office of the Corporation; provided, however, that this Agreement supersedes all prior written indemnification agreements between the Corporation (or any predecessor thereof) and Indemnitee with respect to the subject matter hereof. However, Indemnitee shall reimburse the Corporation for amounts paid to him pursuant to such other rights to the extent such payments duplicate any payments received pursuant to this Agreement.

     Continuation of Indemnity. All agreements and obligations of the Corporation contained herein shall continue during the period Indemnitee is a director or officer of the Corporation (or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (notwithstanding the fact that Indemnitee has ceased to serve the Corporation).

     Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for a portion of Expenses, but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

     Settlement of Claims. The Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Corporation’s prior written consent. The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s prior written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay their consent to any proposed settlement. The Corporation shall not be liable to indemnify Indemnitee under this Agreement with regard to any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.

     Acknowledgements.

     (a) Corporation Acknowledgement. The Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Corporation hereby in order to induce Indemnitee to serve or to continue to serve as a director or officer of the Corporation, and acknowledges that Indemnitee is relying upon this Agreement in agreeing to serve or in continuing to serve as a director or officer of the Corporation.

5 

     (b) Mutual Acknowledgment. Both the Corporation and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Corporation from indemnifying its directors and officers under this Agreement or otherwise. For example, the Corporation and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Corporation has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Corporation’s right under public policy to indemnify Indemnitee.

     Enforcement. In the event Indemnitee is required to bring any action or other proceeding to enforce rights or to collect moneys due under this Agreement and is successful in such action, the Corporation shall reimburse Indemnitee for all of Indemnitee’s Expenses in bringing and pursuing such action.

     Exceptions. Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of this Agreement:

     (a) No Entitlement to Indemnification. To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that Indemnitee was not entitled to indemnification hereunder;

     (b) Insured Claims. To indemnify Indemnitee for Expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such Expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a D&O Insurance policy maintained by the Corporation;

     (c) Remuneration in Violation of Law. To indemnify Indemnitee in respect of remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;

     (d) Indemnification Unlawful. To indemnify Indemnitee if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful;

     (e) Misconduct, Etc. To indemnify Indemnitee on account of Indemnitee’s conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest or to constitute intentional misconduct, a knowing violation of law, a violation of Section 174 of the DGCL or a transaction from which Indemnitee derived an improper personal benefit;

     (f) Breach of Duty. To indemnify Indemnitee on account of Indemnitee’s conduct which is the subject of any Proceeding brought by the Corporation and approved by a majority of the Board of Directors which alleges willful misappropriation of corporate assets by Indemnitee, disclosure of confidential information in violation of Indemnitee’s fiduciary or contractual obligations to the Corporation, or any other willful and deliberate breach in bad faith of Indemnitee’s duty to the Corporation or its stockholders; or

6 

     (g) Claims Under Section 16(b). To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

     Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable (a) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be in any way affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Each section of this Agreement is a separate and independent portion of this Agreement. If the indemnification to which Indemnitee is entitled with respect to any aspect of any claim varies between two or more sections of this Agreement, that section providing the most comprehensive indemnification shall apply.

     17. Miscellaneous.

     (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of law.

     (b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

     (c) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

     (d) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) when delivered personally to the recipient, (ii) when sent to the recipient by telecopy (receipt electronically confirmed by sender’s telecopy machine) if during normal business hours of the recipient, otherwise on the next business day, (iii) one business day after the date when sent to the recipient by reputable overnight courier service (charges prepaid), or (iv) five business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the parties at the addresses indicated on the signature page hereto, or to such other address as any party hereto may, from time to time, designate in writing delivered pursuant to the terms of this Section 17(d).

7 

     (e) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

     (f) Successors and Assigns. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns.

     (g) Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation to effectively bring suit to enforce such rights.

8 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

SANDRIDGE ENERGY, INC.
By:
Name:
Title:
Address:	1601 N.W. Expressway,
	Suite 1600
	Oklahoma City, Oklahoma 73118
	Facsimile: (405) 753-5500
INDEMNITEE:
[Name]
Address:
	Facsimile: (___) ___-___

EX-10.6

Exhibit 10.6

[Published CUSIP Number:                     ]

CREDIT AGREEMENT

Dated as of November 21, 2006

among

RIATA ENERGY, INC.
(d/b/a SandRidge Energy, Inc.)
as the Borrower,

BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender
and
L/C Issuer,

and

The Other Lenders Party Hereto

BANC OF AMERICA SECURITIES LLC,
Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

Section	Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS		1
1.01 Defined Terms		1
1.02 Other Interpretive Provisions		27
1.03 Accounting Terms		28
1.04 Petroleum Terms		28
1.05 Rounding		28
1.06 Times of Day		28
1.07 Letter of Credit Amounts		28
ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS		29
2.01 Committed Loans		29
2.02 Borrowings, Conversions and Continuations of Committed Loans		29
2.03 Letters of Credit		30
2.04 Swing Line Loans		39
2.05 Borrowing Base		42
2.06 Prepayments		44
2.07 Termination or Reduction of Commitments		46
2.08 Repayment of Loans		46
2.09 Interest		46
2.10 Fees		47
2.11 Computation of Interest and Fees		48
2.12 Evidence of Debt		48
2.13 Payments Generally; Administrative Agent’s Clawback		49
2.14 Sharing of Payments by Lenders		50
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY		51
3.01 Taxes		51
3.02 Illegality		53
3.03 Inability to Determine Rates		53
3.04 Increased Costs; Reserves on Eurodollar Rate Loans		54
3.05 Compensation for Losses		55
3.06 Mitigation Obligations; Replacement of Lenders		56
3.07 Survival		56
ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS		56
4.01 Conditions of Initial Credit Extension		56
4.02 Conditions to all Credit Extensions		61
ARTICLE V. REPRESENTATIONS AND WARRANTIES		62
5.01 Existence, Qualification and Power		62
5.02 Authorization; No Contravention		62
5.03 Governmental Authorization; Other Consents		62
5.04 Binding Effect		63
5.05 Financial Statements; No Material Adverse Effect		63
5.06 Litigation		64
5.07 No Default		64
5.08 Ownership of Property; Liens		64
5.09 Environmental Compliance		64

i

Section	Page
5.10 Insurance		65
5.11 Taxes		65
5.12 ERISA Compliance		65
5.13 Subsidiaries; Equity Interests; Loan Parties		66
5.14 Margin Regulations; Investment Company Act		66
5.15 Disclosure		66
5.16 Compliance with Laws		67
5.17 Solvency		67
5.18 Casualty, Etc.		67
5.19 Labor Matters		67
5.20 Collateral Documents		67
5.21 Engineered Oil and Gas Properties		67
5.22 Sale of Production		68
ARTICLE VI. AFFIRMATIVE COVENANTS		70
6.01 Financial Statements		70
6.02 Certificates; Other Information		71
6.03 Notices		73
6.04 Payment of Obligations		74
6.05 Preservation of Existence, Etc.		74
6.06 Maintenance of Properties		75
6.07 Maintenance of Insurance		75
6.08 Compliance with Laws		75
6.09 Books and Records		75
6.10 Inspection Rights		75
6.11 Use of Proceeds		76
6.12 Covenant to Guarantee Obligations and Give Security		76
6.13 Compliance with Environmental Laws		77
6.14 Further Assurances		78
6.15 Production Proceeds		78
ARTICLE VII. NEGATIVE COVENANTS		78
7.01 Liens		78
7.02 Investments		80
7.03 Indebtedness		81
7.04 Fundamental Changes		82
7.05 Dispositions		83
7.06 Restricted Payments		84
7.07 Change in Nature of Business		84
7.08 Transactions with Affiliates		84
7.09 Burdensome Agreements		85
7.10 Use of Proceeds		85
7.11 Financial Covenants		85
7.12 Hedge Transactions		85
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES		86
8.01 Events of Default		86
8.02 Remedies Upon Event of Default		88
8.03 Application of Funds		88
ARTICLE IX. ADMINISTRATIVE AGENT		89
9.01 Appointment and Authority		89

ii 

Section	Page
9.02 Rights as a Lender		90
9.03 Exculpatory Provisions		90
9.04 Reliance by Administrative Agent		91
9.05 Delegation of Duties		91
9.06 Resignation of Administrative Agent		91
9.07 Non-Reliance on Administrative Agent and Other Lenders		92
9.08 No Other Duties, Etc.		92
9.09 Administrative Agent May File Proofs of Claim		93
9.10 Collateral and Guaranty Matters		93
ARTICLE X. MISCELLANEOUS		94
10.01 Amendments, Etc.		94
10.02 Notices; Effectiveness; Electronic Communication		95
10.03 No Waiver; Cumulative Remedies		97
10.04 Expenses; Indemnity; Damage Waiver		97
10.05 Payments Set Aside		99
10.06 Successors and Assigns		100
10.07 Treatment of Certain Information; Confidentiality		104
10.08 Right of Setoff		105
10.09 Interest Rate Limitation		105
10.10 Counterparts; Integration; Effectiveness		106
10.11 Survival of Representations and Warranties		106
10.12 Severability		106
10.13 Replacement of Lenders		106
10.14 Governing Law; Jurisdiction; Etc.		107
10.15 Waiver of Jury Trial		108
10.16 No Advisory or Fiduciary Responsibility		108
10.17 USA PATRIOT Act Notice		109

iii 

SCHEDULES
2.01	Commitments and Applicable Percentages
5.03	Governmental Authorizations
5.05	Supplement to Interim Financial Statements
5.06	Litigation
5.09	Environmental Matters
5.13	Subsidiaries; Other Equity Investments and Loan Parties
5.22	Sale of Production
7.01	Existing Liens
7.03	Existing Indebtedness
10.02	Administrative Agent’s Office; Certain Addresses for Notices
10.06	Processing and Recordation Fees
EXHIBITS
	Form of
A	Committed Loan Notice
B	Swing Line Notice
C	Note
D	Compliance Certificate
E	Assignment and Assumption
F	Guaranty
G	Opinion of Counsel to the Loan Parties
H	Pledge and Security Agreement
I	Mortgages

iv 

CREDIT AGREEMENT

     This CREDIT AGREEMENT (“Agreement”) is entered into as of November 21, 2006 among RIATA ENERGY, INC., a Texas corporation (d/b/a SandRidge Energy, Inc.) (the “Borrower”), each LENDER from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

PRELIMINARY STATEMENTS:

     Capitalized terms used but not defined in these Preliminary Statements shall have respective meanings set forth for such terms in Section 1.01 hereof.

     Pursuant to the Purchase and Sale Agreement dated November 21, 2006 (the “Acquisition Agreement”) by and among SandRidge Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Borrower (“Buyer”), American Real Estate Partners, L.P., a Delaware limited partnership, American Real Estate Holdings Limited Partnership, a Delaware limited partnership, AREP Oil & Gas Holdings LLC, a Delaware limited liability company, AREP O & G Holdings LLC, a Delaware limited liability company (collectively, the “Seller”) and NEG Oil & Gas LLC, a Delaware limited liability company (the “Target”) , Buyer has agreed to acquire (the “Acquisition”) all of the membership interests of Target for not more than $1,269.0 million in cash, plus additional consideration in the form of common equity of the Borrower.

     The Borrower intends to finance the Acquisition, the costs and expenses related to the Transaction, the repayment of certain existing indebtedness of the Borrower and the Target and the Borrower’s and its Subsidiaries’ ongoing working capital and other general corporate purposes after consummation of the Acquisition from the following sources: (a) at least $500.0 million in cash proceeds to be received from the issuance and sale of convertible preferred equity (the “Preferred Stock”), (b) at least $244.0 million of common equity of the Target currently held by the Seller to be rolled over (directly or indirectly) into common equity of the Borrower, (c) the revolving senior secured credit facility provided under this Agreement, of which not more than $150.0 million may be drawn on the Closing Date of the Transaction, and (d) up to $850.0 million of senior unsecured loans under a bridge facility (the “Bridge Facility”) made available to the Borrower as interim financing.

     The Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

     In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

     “Acquisition” has the meaning specified in the Preliminary Statements.

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     “Acquisition Agreement” has the meaning specified in the Preliminary Statements.

     “Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

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

     “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

     “Aggregate Commitments” means the Commitments of all the Lenders.

     “Agreement” means this Credit Agreement.

     “Applicable Percentage” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s Commitment at such time. If the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

     “Applicable Rate” means, at any date, the applicable percentage per annum, set forth below, based upon the Borrowing Base Utilization Ratio at such date:

				Applicable Rate
							Eurodollar
							Rate +
	Borrowing Base			Base Rate			Letters of			Commitment
Level	Utilization Ratio			+			Credit			Fee
1		³ 90	%		1.000	%		2.000	%		0.375	%
2	³ 75% and < 90%				0.750	%		1.750	%		0.375	%
3	³ 50% and < 75%				0.500	%		1.500	%		0.250	%
4		< 50	%		0.250	%		1.250	%		0.250	%

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     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

     “Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager in respect of this Agreement.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.06(b), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.

     “Attributed Value” means, with respect to any Engineered Oil and Gas Property, the portion of the Borrowing Base attributed by the Administrative Agent to such Engineered Oil and Gas Property for purposes of the most recent determination of the Borrowing Base, based upon the discounted present value of the estimated net cash flow to be realized from the production of Hydrocarbons from such Engineered Oil and Gas Property.

     “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

     “Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2005, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

     “Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.07, and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

     “Available Borrowing Base” means, at any time of determination, the remainder of (a) the lesser of the Borrowing Base or the Aggregate Commitments, minus (b) the Total Outstandings.

     “Bank of America” means Bank of America, N.A. and its successors.

     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a rate

3

set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

     “Base Rate Committed Loan” means a Committed Loan that is a Base Rate Loan.

     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.

     “Borrower” has the meaning specified in the introductory paragraph hereto.

     “Borrower Existing Credit Agreement” means that certain First Amended and Restated Master Credit Agreement dated as of January 12, 2006, among the Borrower (under its former name of Riata Energy, Inc.), Bank of America, N.A. and certain subsidiaries of Borrower from time to time party thereto as guarantors,

     “Borrower Materials” has the meaning specified in Section 6.02.

     “Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may require.

     “Borrowing Base” means, on any date, either the amount provided for in Section 2.05(a) or the amount determined in accordance with the provisions of Section 2.05(b); provided, however, that in no event shall the Borrowing Base ever exceed the Aggregate Commitments.

     “Borrowing Base Deficiency” means, as of any date, the amount, if any, by which the Total Outstandings on such date exceeds the Borrowing Base in effect on such date.

     “Borrowing Base Utilization Ratio” means at any time the ratio (expressed as a percentage) determined by taking the Total Outstandings and dividing by the Borrowing Base.

     “Bridge Facility” has the meaning specified in the Preliminary Statements.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

     “Cash Collateralize” has the meaning specified in Section 2.03(g).

     “Cash Equivalents” means any of the following types of Investments, to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens (other than Liens created under the Collateral Documents):

     (a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having

4

maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;

     (b) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 90 days from the date of acquisition thereof;

     (c) commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof; and

     (d) Investments, classified in accordance with GAAP as current assets of the Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition.

     “Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Oil and Gas Property of the Borrower or any of its Subsidiaries having a fair market value in excess of $500,000.

     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

     “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

     “CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

     “Change of Control” means an event or series of events by which:

5

     (a) at any time prior to the creation of a Public Market, the Ward/Mitchell Group shall cease to own and control legally and beneficially (free and clear of all Liens), either directly or indirectly, equity securities in the Borrower representing more than 30% of the combined voting power of all of equity securities entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that the Ward/Mitchell Group has the right to acquire pursuant to any option right (as defined in clause (b) below)); or

     (b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than the Ward/Mitchell Group becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than a Control Percentage of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such “person” or “group” has the right to acquire pursuant to any option right); for this purpose, “Control Percentage” means (i) prior to the creation of the Public Market, the percentage of which the Ward/Mitchell Group is the beneficial owner (determined as provided above) and (ii) at any time after the creation of a Public Market, the greater of 30% and the percentage in (i); or

     (c) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors).

     “Citi L/Cs” means letters of credit outstanding under the Target Existing Credit Agreements.

     “Citi Payoff Documents” means documents executed and delivered in connection with the termination of the Target Existing Credit Agreements which shall be satisfactory in form and substance to the Administrative Agent.

6

     “Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

     “Code” means the Internal Revenue Code of 1986.

     “Collateral” means all of the “Collateral” and “Mortgaged Property” referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

     “Collateral Documents” means, collectively, the Security Agreement, the Mortgages, each of the mortgages, collateral assignments, Security Agreement Supplements, security agreements, pledge agreements or other similar agreements delivered to the Administrative Agent pursuant to the Security Agreement or Section 6.12, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties.

     “Commitment” means, as to each Lender, its obligation to (a) make Committed Loans to the Borrower pursuant to Section 2.01, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

     “Commitment Letter” means the letter agreement so denominated dated November 20, 2006 among the Borrower, the Administrative Agent, the Arranger and the other parties thereto.

     “Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

     “Committed Loan” has the meaning specified in Section 2.01.

     “Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

     “Compliance Certificate” means a certificate substantially in the form of Exhibit D.

     “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.

7

     “Consolidated Current Assets” means, for any period, the aggregate amount of all assets of Borrower and its Consolidated Subsidiaries which would be properly classified as current assets in accordance with GAAP plus any Available Borrowing Base, but excluding any unrealized assets resulting from compliance with the Financial Accounting Standards Board’s Statement 133 concerning mark-to-market requirements on hedging transactions.

     “Consolidated Current Liabilities” means, for any period, the aggregate amount of all liabilities of Borrower and its Consolidated Subsidiaries which would be properly classified as current liabilities in accordance with GAAP, but excluding current maturities under this Agreement, all amounts outstanding pursuant to the Bridge Facility and any unrealized liabilities resulting from compliance with the Financial Accounting Standards Board’s Statement 133 concerning mark-to-market requirements on hedging transactions.

     “Consolidated Current Ratio” means, as of any date of determination, the ratio of (a) Consolidated Current Assets as of such date to (b) Consolidated Current Liabilities as of such date.

     “Consolidated EBITDAX” means for any period, the Consolidated Net Income of Borrower for such period; plus each of the following (without duplication) determined for Borrower and its Consolidated Subsidiaries on a Consolidated basis for such period: (a) any provision for (or less any benefit from) income or franchise taxes included in determining Consolidated Net Income; (b) any interest expense deducted in determining Consolidated Net Income; (c) any depreciation, depletion, amortization or exploration expense deducted in determining Consolidated Net Income; (d) any non-cash loss on change in fair value of derivative instruments deducted in determining Consolidated Net Income; and (e) any other non-cash charge, expense or loss deducted in determining Consolidated Net Income; and minus each of the following (without duplication) determined for Borrower and its Consolidated Subsidiaries on a Consolidated basis for such period, to the extent included in determining such Consolidated Net Income for such period: (a) any non-cash gain on change in fair value of derivative instruments; (b) any interest income included in determining Consolidated Net Income and (c) any other non-cash income or gains; provided however, that in determining Consolidated Net Income for the purposes of this definition for any period in which Borrower or any of its Consolidated Subsidiaries has acquired or acquires additional Consolidated Subsidiaries (whether by purchase, merger or otherwise) or has acquired or disposed of or acquires or disposes of producing Oil and Gas Properties, (1) the Consolidated Net Income of such acquired Consolidated Subsidiaries shall be included in such calculation on a pro forma basis as if they had been owned by Borrower and its Consolidated Subsidiaries throughout such period, (2) the revenues attributable to the oil and gas production from such acquired Oil and Gas Properties during such period, less the direct operating expenses and severance and ad valorem taxes incurred with respect to such properties during such period, shall be included in such calculation on a pro forma basis as if they had been owned by Borrower and its Consolidated Subsidiaries throughout such period, and (3) the revenues attributable to the oil and gas production from producing Oil and Gas Properties disposed of during such period, less the direct operating expenses and severance and ad valorem taxes incurred with respect to such properties during such period, shall be deducted in such calculation on a pro forma basis as if they had not been owned by Borrower and its Consolidated Subsidiaries throughout such period. Pro forma adjustments made in connection with Subsidiaries or Oil and Gas Properties acquired or disposed

8

of shall be consistent with Article 11 of Regulation S-X and certified by the Borrower’s chief financial officer.

     “Consolidated Fixed Charges” means, for any period, the sum of (a) Consolidated Interest Charges for such period, (b) the aggregate amount of scheduled principal payments made during such period in respect of Long-Term Indebtedness of the Borrower and its Consolidated Subsidiaries (except payments made by the Borrower or any Consolidated Subsidiary to the Borrower or any Consolidated Subsidiary), and (c) the aggregate amount of principal payments (except scheduled principal payments) made during such period in respect of Long-Term Indebtedness of the Borrower and its Consolidated Subsidiaries (other than the Loans), but in the case of any principal payment other than scheduled principal payments, only to the extent that such payment reduced any scheduled principal payments that would have become due within one year after the date of such payment.

     “Consolidated Fixed Charge Coverage Ratio” means, as of the last day of any fiscal quarter, the ratio of (a) Consolidated EBITDAX for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Fixed Charges for such period.

     “Consolidated Funded Indebtedness” means, as of any date of determination, for the Borrower and its Consolidated Subsidiaries on a Consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (d) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (e) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (d) above of Persons other than the Borrower or any Consolidated Subsidiary, and (f) all Indebtedness of the types referred to in clauses (a) through (e) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Consolidated Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Consolidated Subsidiary.

     “Consolidated Interest Charges” means, for any period, for the Borrower and its Consolidated Subsidiaries on a Consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP (but excluding amortization of debt discount and expense in connection with the Transaction), (b) to the extent not reflected in (a), plus the net amount payable under Swap Contracts in respect of interest rates (or minus the net amount receivable under Swap Contracts in respect of interest rates) plus (c) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP.

9

     “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDAX for the period of the four fiscal quarters most recently ended.

     “Consolidated Net Income” means, for any period, the net income (or loss) of Borrower and its Consolidated Subsidiaries for such period determined in accordance with GAAP, provided that the following shall be excluded in calculating Consolidated Net Income and Consolidated EBITDAX: (i) any extraordinary items of gain or loss, (ii) any gain or loss from the sale of assets other than in the ordinary course of business, (iii) any non-cash income, gains, losses or charges resulting from the requirements of SFAS 133 or 143 and (iv) any professional fees related to the Transaction.

     “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

     “Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder unless such failure has been cured, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute or

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unless such failure has been cured, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

     “Determination Date” has the meaning specified in Section 2.05(b).

     “Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. The issuance of Equity Interests by any Subsidiary to any Person other than the Borrower or a wholly-owned Subsidiary shall be deemed a Disposition by the Borrower of its direct or indirect Equity Interest in such Subsidiary to the extent of the resulting dilution.

     “Dollar” and “$” mean lawful money of the United States.

     “Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States.

     “Election Notice” has the meaning specified in Section 2.05(c).

     “Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

     “Engineered Oil and Gas Property” means any Oil and Gas Property listed in the Initial Engineering Report or any subsequent Engineering Report.

     “Engineering Report” means the Initial Engineering Report and each engineering report delivered pursuant to Section 6.01. To the extent that two or more engineering firms prepare reports as of the same date for portions of the properties required to be reported on, such reports will collectively constitute a single “Engineering Report” for the purposes hereof.

     “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

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     “Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

     “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

     “Equity Issuance” means the issuance of the Preferred Stock.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

     “Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such

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Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

     “Eurodollar Rate Loan” means a Committed Loan that bears interest at a rate based on the Eurodollar Rate.

     “Event of Default” has the meaning specified in Section 8.01.

     “Excluded Personal Property” has the meaning specified in the Security Agreement.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), 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 such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a).

     “Existing Credit Agreements” mean collectively the Borrower Existing Credit Agreement and the Target Existing Credit Agreements.

     “Existing Letters of Credit” means the letter of credit number 3085220 in the amount of $2,990,000.00 issued on November 7, 2006 for the benefit of Indemnity Insurance Company of North America and expiring on October 31, 2007.

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

     “Fee Letter” means the letter agreement so denominated dated November 20, 2006 among the Borrower, the Administrative Agent, the Arranger and the other parties thereto.

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     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “FRB” means the Board of Governors of the Federal Reserve System of the United States.

     “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank).

     “Granting Lender” has the meaning specified in Section 10.06(h).

     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as

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determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

     “Guarantors” means, collectively, (i) NEG Oil & Gas LLC, ROC Gas Company, National Onshore LP, National Offshore LP, NEG Operating LLC, Lariat Compression Company, Alsate Management and Investment Company, Integra Energy, L.L.C., Petrosource Energy Company, L.P., Petrosource Production Company, L.P. and SandRidge Holdings, Inc. and (ii) each Person which becomes a Guarantor after the Closing Date pursuant to Section 6.12.

     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit F.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     “Hedge Transaction” means any commodity, interest rate, currency or other swap, option, collar, futures contract or other contract pursuant to which a Person hedges risks related to commodity prices, interest rates, currency exchange rates, securities prices or financial market conditions. Hedge Transactions expressly include Oil and Gas Hedge Transactions.

     “Hydrocarbons” means oil, gas, casinghead gas, drip gasolines, natural gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith, and all products, by-products and all other substances derived therefrom or the processing thereof, and all other minerals and substances, including, but not limited to, sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium, and any and all other minerals, ores, or substances of value, and the products and proceeds therefrom, including, without limitation, all gas resulting from the insitu combustion of coal or lignite.

     “Immaterial Title Deficiencies” means, with respect to specified Proved Reserves, defects or clouds on title, discrepancies in reported net revenue and working interest ownership percentages, inaccuracies of representations and warranties in Sections 5.21 and 5.22 that are qualified by reference to this term, and other Liens, defects, discrepancies and similar matters, including without limitation rights of participants in the Well Participation Program or any similar predecessor or successor program, which do not, in the aggregate, reduce the Attributed Value of all Proved Reserves of the Borrower by more than four percent (4%) of Attributed Value of all such Proved Reserves.

     “Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

     (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

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     (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

     (c) net obligations of such Person under any Swap Contract;

     (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 90 days after the date on which such trade account payable was created);

     (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

     (f) capital leases and Synthetic Lease Obligations;

     (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (other than the Preferred Stock), valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

     (h) all Guarantees of such Person in respect of any of the foregoing.

     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitees” has the meaning specified in Section 10.04(b).

     “Information” has the meaning specified in Section 10.07.

     “Initial Engineering Report” means the engineering report concerning Oil and Gas Properties of Loan Parties dated as of June 30, 2006 prepared by Netherland, Sewell & Associates and DeGolyer & MacNaughton.

     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest

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Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.

     “Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Loan Notice; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

     (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

     “Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

     “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

     “IRS” means the United States Internal Revenue Service.

     “ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

     “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to such Letter of Credit.

     “Lariat” means Lariat Services, Inc., a Texas corporation and a wholly-owned Subsidiary of the Borrower.

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     “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.

     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Committed Borrowing.

     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.

     “L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

     “Lead Arranger” means Banc of America Securities LLC.

     “Lender” has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender.

     “Lender Counterparty” means any counterparty under a Swap Contract that was a Lender (or an Affiliate of a Lender) at the time such Swap Contract was entered into.

     “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

     “Letter of Credit” means any letter of credit issued hereunder and shall include the Existing Letters of Credit.

     “Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer. In the event of any inconsistency between the provisions of any Letter of Credit Application and the provisions of this Agreement, the provisions of this Agreement shall prevail.

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     “Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

     “Letter of Credit Fee” has the meaning specified in Section 2.03(i).

     “Letter of Credit Sublimit” means an amount equal to $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

     “Loan” means an extension of credit by a Lender to the Borrower under Article II in the form of a Committed Loan or a Swing Line Loan.

     “Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, the Guaranty and the Collateral Documents.

     “Loan Parties” means, collectively, the Borrower and each Guarantor.

     “Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

     “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), results of operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of (i) the rights and remedies of the Administrative Agent or any Lender under any Loan Document or (ii) the ability of the Loan Parties to perform their obligations under the Loan Documents; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

     “Maturity Date” means November 21, 2011; provided, however, that if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

     “Mortgage” has the meaning specified in Section 4.01(a)(iv).

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Net Cash Proceeds” means:

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(a) with respect to any Disposition by the Borrower or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset and that is required to be repaid in connection with such transaction (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses incurred by the Borrower or such Subsidiary in connection with such transaction and (C) income taxes reasonably estimated to be actually payable within two years of the date of the relevant transaction as a result of any gain recognized in connection therewith and (D) the Swap Termination Value, if any, associated with such transaction; provided that, if the amount of any estimated taxes pursuant to subclause (C) exceeds the amount of taxes actually required to be paid in cash in respect of such Disposition, the aggregate amount of such excess shall constitute Net Cash Proceeds; and

(b) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any of its Subsidiaries, the excess of (i) the sum of the cash and Cash Equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by the Borrower or such Subsidiary in connection therewith.

     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit C.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit or any Swap Contract with a Lender Counterparty, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

     “Oil and Gas Business” means the business of acquiring, exploring, or developing and operating Oil and Gas Properties and the production, marketing, processing and transporting of Hydrocarbons therefrom.

     “Oil and Gas Hedge Transaction” means a Hedge Transaction pursuant to which any Person hedges the price to be received by it for future production of Hydrocarbons.

     “Oil and Gas Properties” means all 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, storage, processing and handling assets.

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     “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

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

     “Outstanding Amount” means (i) with respect to Committed Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans and Swing Line Loans, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.

     “Participant” has the meaning specified in Section 10.06(d).

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “PCAOB” means the Public Company Accounting Oversight Board.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permitted Encumbrances” has the meaning specified in the Mortgages.

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

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Platform” has the meaning specified in Section 6.02.

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     “Pledged Equity” has the meaning specified in the Security Agreement.

     “Preferred Stock” has the meaning set forth in the Preliminary Statements.

     “Proved Reserves” means, collectively, proved developed nonproducing reserves, proved developed producing reserves and proved undeveloped reserves.

     “Public Market” shall exist if (a) a Public Offering has been consummated and (b) any Equity Interests of the Borrower have been distributed by means of an effective registration statement under the Securities Act of 1933.

     “Public Offering” means a public offering of the Equity Interests of the Borrower pursuant to an effective registration statement under the Securities Act of 1933.

     “PV10 Pricing” means means the net present value, discounted at 10% per annum, of the future net revenues expected to accrue to the Borrower’s and its Subsidiaries’ collective interests in Proved Reserves expected to be produced from Oil and Gas Properties during the remaining expected economic lives of such reserves made in accordance with the then existing standards of the Society of Petroleum Engineers (with appropriate adjustments made for hedging operations) as follows:

     (a) for anticipated sales of oil and gas that are fixed in a firm fixed price sales contract with an investment grade counterparty or a counterparty guaranteed, or for whom a letter of credit has been issued, by an investment grade party (or another counterparty approved by Administrative Agent), the fixed price or prices provided for in such sales contract during the term thereof; and

     (b) for anticipated sales of oil and gas, if such sales are not under a sales contract that is described in paragraph (a) above, for the date of calculation (or, if such date is not a Business Day, for the first Business Day thereafter), adjusted in each case for historical location and quality differentials during the twelve months preceding such date of determination:

     (i) for the remainder of the current calendar year (whether a whole or partial 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, and

     (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.

     “Register” has the meaning specified in Section 10.06(c).

     “Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

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     “Related Documents” means the Acquisition Agreement and the documentation for the Equity Issuance.

     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

     “Required Lenders” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

     “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

     “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof).

     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

     “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

     “Scheduled Determination” has the meaning specified in Section 2.05(b)(i).

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     “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Secured Parties” means, collectively, the Administrative Agent, the Lenders, the L/C Issuer, the Lender Counterparties, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents.

     “Securities Laws” means the Securities Act of 1933 and regulations thereunder, the Securities Exchange Act of 1934 and regulations thereunder, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

     “Security Agreement” has the meaning specified in Section 4.01(a)(iii).

     “Security Agreement Supplement” has the meaning specified in the Security Agreement.

     “Seller” has the meaning specified in the Preliminary Statements.

     “Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

     “SPC” has the meaning specified in Section 10.06(h).

     “Special Determination” has the meaning specified in Section 2.05(b)(ii).

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

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     “Super-Majority Lenders” means, as of any date of determination, Lenders having 75% or more of the Aggregate Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate 75% or more of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Super-Majority Lenders.

     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

     “Swing Line” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.

     “Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

     “Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

     “Swing Line Loan” has the meaning specified in Section 2.04(a).

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     “Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

     “Swing Line Sublimit” means an amount equal to the lesser of (a) $25,000,000 and (b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

     “Target” has the meaning specified in the Preliminary Statements.

     “Target Existing Credit Agreements” means (i) that certain Credit Agreement dated as of December 20, 2005, among the Target (under its former name of AREP OIL & GAS LLC), Citicorp USA, Inc., as Administrative Agent, Bear Stearns Corporate Lending Inc., as the Syndication Agent and certain financial institutions from time to time party thereto as lenders and (ii) that certain Amended and Restated Credit Agreement, dated as of December 20, 2005, by and among NEG Operating LLC, a Delaware limited liability company, as borrower, NEG Oil & Gas Sub LLC (as assignee of Target), a Delaware limited liability company, as lender and administrative agent, and Citicorp USA, Inc., as Collateral Agent.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

     “Threshold Amount” means $2,500,000.

     Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

     “Transaction” means, collectively, the Acquisition, the Equity Issuance, the entering into and funding of the senior credit facility under this Agreement, the entering into and funding of the Bridge Facility, the refinancing of certain outstanding Indebtedness of the Borrower and the Target under the Existing Credit Agreements, and all related transactions and the payment of the fees and expenses incurred in connection with the consummation of the foregoing.

     “Type” means, with respect to a Committed Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

     “UCC” means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

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     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “United States” and “U.S.” mean the United States of America.

     “Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

     “Well Participation Program” means that the Well Participation Program effective as of June 8, 2006 by and among the Borrower and certain executive officers of the Borrower, as in effect on the Closing Date.

     “Ward/Mitchell Group” means (i) each of Tom L. Ward (“Ward”) and N. Malone Mitchell III (“Mitchell”); (ii) the wife of either of them; (iii) a lineal descendant of either of them; (iv) the estate of either of them; (v) any trust of which at least one of the trustees is Ward or Mitchell, or the principal beneficiaries of which are any one or more of the Persons in (i)-(iv); (vi) any Person which is Controlled by any one or more of the persons in (i)-(v); and (vii) any group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of which each of Ward and Mitchell is a member.

     1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning

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and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

     (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

     1.03 Accounting Terms. (a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

     1.04 Petroleum Terms.

     As used herein, the terms “proved reserves,” “proved developed reserves,” “proved developed producing reserves,” “proved developed nonproducing reserves,” and “proved undeveloped reserves” have the meaning given such terms from time to time and at the time in question by the Society of Petroleum Engineers of the American Institute of Mining Engineers.

     1.05 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

     1.07 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in

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effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

ARTICLE II.
THE COMMITMENTS AND CREDIT EXTENSIONS

     2.01 Committed Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “Committed Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Commitment; provided, however, that after giving effect to any Committed Borrowing, (i) the Total Outstandings shall not exceed the lesser of the Aggregate Commitments and the Borrowing Base, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment. Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.06, and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

     2.02 Borrowings, Conversions and Continuations of Committed Loans.

     (a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Committed Loans, and (ii) on the requested date of any Borrowing of Base Rate Committed Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Sections 2.03(c), each Borrowing of or conversion to Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a

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conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

     (b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrower as provided above.

     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to Committed Loans.

     2.03 Letters of Credit.

     (a) The Letter of Credit Commitment.

     (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03, (1)

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from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the lesser of the Aggregate Commitments and the Borrowing Base, (y) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

     (ii) The L/C Issuer shall not issue any Letter of Credit, if:

     (A) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

     (B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.

     (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

     (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or

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expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

     (B) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

     (C) except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $100,000, in the case of a commercial Letter of Credit, or $50,000, in the case of a standby Letter of Credit; or

     (D) such Letter of Credit is to be denominated in a currency other than Dollars;

     (iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.

     (v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

     (vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

     (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension and Auto-Reinstatement Letters of Credit.

     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the

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full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.

     (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Letter of Credit.

     (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent

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that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

     (iv) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that permits the automatic reinstatement of all or a portion of the stated amount thereof after any drawing thereunder (each, an “Auto-Reinstatement Letter of Credit”). Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer to permit such reinstatement. Once an Auto-Reinstatement Letter of Credit has been issued, except as provided in the following sentence, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to reinstate all or a portion of the stated amount thereof in accordance with the provisions of such Letter of Credit. Notwithstanding the foregoing, if such Auto-Reinstatement Letter of Credit permits the L/C Issuer to decline to reinstate all or any portion of the stated amount thereof after a drawing thereunder by giving notice of such non-reinstatement within a specified number of days after such drawing (the “Non-Reinstatement Deadline”), the L/C Issuer shall not permit such reinstatement if it has received a notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Reinstatement Deadline (A) from the Administrative Agent that the Required Lenders have elected not to permit such reinstatement or (B) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied (treating such reinstatement as an L/C Credit Extension for purposes of this clause) and, in each case, directing the L/C Issuer not to permit such reinstatement.

     (v) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

     (c) Drawings and Reimbursements; Funding of Participations.

     (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable Percentage thereof. In such event, the Borrower shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments

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and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

     (ii) Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent’s Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Committed Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer.

     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

     (iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.

     (v) Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

     (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the

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foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

     (d) Repayment of Participations.

     (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof in the same funds as those received by the Administrative Agent.

     (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

     (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

     (ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection

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with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

     (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

     (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

     (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any Subsidiary.

     The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

     (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to

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consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

     (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.06 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America.

     (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit.

     (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate times the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) computed on a quarterly basis in arrears. If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the

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Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit, at the rate of 0.125% per annum, (i) with respect to each commercial Letter of Credit, computed on the amount of such Letter of Credit and payable upon the issuance thereof, (ii) with respect to any amendment of a commercial Letter of Credit increasing the amount of such Letter of Credit, computed on the amount of such increase, and payable upon the effectiveness of such amendment, and (iii) with respect to each standby Letter of Credit, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears, and due and payable on the first Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

     (k) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

     2.04 Swing Line Loans.

     (a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the lesser of the Aggregate Commitments and the Borrowing Base, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.06, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk

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participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan.

     (b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds.

     (c) Refinancing of Swing Line Loans.

     (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Committed Loan in an amount equal to such Lender’s Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Committed Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.

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     (ii) If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Committed Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

     (iii) If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

     (iv) Each Lender’s obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

     (d) Repayment of Participations.

     (i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage thereof in the same funds as those received by the Swing Line Lender.

     (ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any

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settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

     (e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Lender funds its Base Rate Committed Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.

     (f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

     2.05 Borrowing Base

     (a) Initial Borrowing Base. During the period from the Closing Date until the next Determination Date the Borrowing Base shall be $300,000,000.

     (b) Subsequent Determinations of the Borrowing Base. Upon each designation of a new Borrowing Base on a Scheduled Determination or a Special Determination, the Administrative Agent shall notify the Borrower of the new Borrowing Base which designation shall take effect immediately on the date such notice is sent (each such date, a “Determination Date”) and shall remain in effect until, but not including, the next Determination Date. The Borrowing Base shall be determined in accordance with the following methodology:

          (i) By April 1 and October 1 of each year beginning April 1, 2007, the Borrower shall furnish to the Administrative Agent (with sufficient copies for each Lender of any information provided on paper, computer disks, or other tangible media) the Engineering Report then required under Section 6.01(d) or (e) together with all information, reports and data that the Administrative Agent requests concerning the businesses and properties of the Borrower and its Subsidiaries (including their Oil and Gas Properties and the reserves and production relating thereto). As promptly as reasonably practicable after receiving such Engineering Report, information, reports and data, the Administrative Agent shall propose a Borrowing Base following the procedures set forth in Section 2.05(b)(iii) below. Each such determination of the Borrowing Base is herein called a “Scheduled Determination”. If the Borrower does not furnish all such information, reports and data by the date specified in the first sentence of this Section, the Administrative Agent may nonetheless designate the Borrowing Base at any amount that Required Lenders determine (or, in the case of an increase, that all the Lenders determine) and the Borrowing Base may similarly be designated from time to time thereafter until each Lender receives all such information, reports and data, whereupon the Lenders shall designate a new Borrowing Base as described above.

          (ii) In addition to Scheduled Determinations, the Borrower may request the Lenders to make additional determinations of the Borrowing Base (x) twice during the twelve

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months following the Closing Date and (y) thereafter once during each twelve month interval between Scheduled Determinations, and the Administrative Agent also may (and at the request of Required Lenders must) request the Lenders to make an additional determination of the Borrowing Base (x) once during the twelve months following the Closing Date and (y) thereafter once during each twelve month interval between Scheduled Determinations. The Administrative Agent shall give notice to the Borrower of any such request made by the Administrative Agent to the Lenders. The Borrower shall submit any such request made by Borrower to Administrative Agent and each Lender and, at the time of such request, the Borrower shall (A) deliver to the Administrative Agent and each Lender an updated Engineering Report prepared either by the Borrower or by independent petroleum engineers, and (B) notify the Administrative Agent and each Lender of the Borrowing Base requested by the Borrower. Any determination of the Borrowing Base made pursuant to a request under this clause (ii) is herein called a “Special Determination”. Any Special Determination shall be made by Lenders in accordance with the procedures set forth in Section 2.05(b)(iii), provided, however, that the Borrower shall not be required to deliver an updated Engineering Report to the Administrative Agent and Lenders in connection with any Special Determination requested by the Administrative Agent.

          (iii) The Administrative Agent shall (within 30 days after receiving the information, if any, required for a Scheduled Determination or a Special Determination) propose to the Lenders a specific Borrowing Base amount for the Lenders to approve or disapprove. Within 15 days thereafter each Lender shall respond to the Administrative Agent in writing, either approving such proposed amount or setting out a reasonable alternative amount (based on the criteria described in clause (v) below), and any Lender’s failure to respond to such proposal within such time will be deemed a disapproval of the proposed amount. After receiving such responses or deemed responses from all Lenders, the Administrative Agent will designate the new Borrowing Base at the highest amount approved (i) by all Lenders, in the case of an increase to the then current Borrowing Base, or (ii) at the highest amount approved by Required Lenders, in the case of a reduction to or continuation of the then current Borrowing Base.

          (iv) In addition to the foregoing, the Administrative Agent and Lenders shall also have the right to adjust the Borrowing Base (which shall not count as a Special Determination but which shall otherwise be done in accordance with the procedures set forth in Section 2.05(b)(iii)) if the Borrower or any Subsidiaries sell or otherwise transfer (excluding transfers to the Borrower or a Subsidiary of the Borrower that is a Guarantor) Oil and Gas Properties that, on a cumulative basis since the then most recent Determination Date, represent more than ten percent of the net present value of all of their proved reserves, as determined in the most recently delivered Engineering Report.

          (v) Each redetermination of the Borrowing Base pursuant to this Section 2.05 shall be made in good faith by all of the Lenders and the Administrative Agent, in the exercise of their reasonable discretion and in accordance with their respective customary and prudent standards for oil and gas lending and credit transactions as they exist at such time. Without limiting such discretion, Borrower acknowledges and agrees that the Administrative Agent and the Lenders (i) may make such assumptions regarding appropriate existing and projected pricing for Hydrocarbons as they deem appropriate in their discretion, (ii) may make such assumptions regarding projected rates and quantities of future production of Hydrocarbons from the Oil and Gas Properties owned by Borrower and its Subsidiaries as they deem appropriate in their discretion, (iii) may consider the projected cash requirements of Borrower and its Subsidiaries,

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(iv) are not required to consider any asset other than Proved Reserves owned by Borrower and its Subsidiaries, and (v) may make such other assumptions, considerations and exclusions as they deems appropriate in the exercise of their discretion. It is further acknowledged and agreed that the Administrative Agent and the Lenders may consider such other credit factors as they deem appropriate in the exercise of their discretion.

     (c) Borrowing Base Deficiency. If a Borrowing Base Deficiency exists at any time, the Borrower shall, within ten (10) days after being notified of such Borrowing Base Deficiency, provide written notice (the “Election Notice”) to Lender stating the action which Borrower proposes to take to remedy such Borrowing Base Deficiency, and the Borrower shall thereafter, at its option, do one or a combination of the following in an aggregate amount sufficient to eliminate such Borrowing Base Deficiency:

          (i) within ten (10) days following the delivery of such Election Notice, make a prepayment of the Loans,

          (ii) pay monthly installments of the Outstanding Amount of the Loans over a term and in an amount satisfactory to the Administrative Agent, but in any event not to exceed six months, by immediately dedicating a sufficient amount of monthly cash flow from the Oil and Gas Properties of the Borrower and its Subsidiaries,

          (iii) within thirty (30) days following the delivery of the Election Notice, submit additional Oil and Gas Properties to the Administrative Agent for evaluation as Borrowing Base Properties which the Administrative Agent, in its sole discretion, determines have a value sufficient to increase the Borrowing Base by at least the amount of the Borrowing Base Deficiency (after giving effect to other actions taken pursuant to this Section 2.05(c) that have the effect of reducing such Borrowing Base Deficiency), and/or

          (iv) within thirty (30) days following the delivery of such Election Notice, apply the Net Cash Proceeds from a Disposition permitted by Section 7.05(g) to reduce the Borrowing Base Deficiency after giving effect to any reduction of the Borrowing Base as determined by the Required Lenders as a result of such sale.

     2.06 Prepayments.

     (a) Optional.

          (i) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Committed Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given

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by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.

          (ii) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

     (b) Mandatory.

          (i) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.06(b) unless after the prepayment in full of the Loans the Total Outstandings exceed the Aggregate Commitments then in effect.

          (ii) If the Borrower or any of its Subsidiaries Disposes of any property under Section 7.05(g) which results in the realization by such Person of Net Cash Proceeds, the Borrower shall use the Net Cash Proceeds to eliminate any Borrowing Base Deficiency resulting from such sale; provided that, the proceeds of any Disposition permitted by Section 7.05(g) shall not constitute Net Cash Proceeds to the extent that (A) such proceeds are reinvested in replacement properties or assets, or other productive properties or assets, acquired by the Borrower or a Subsidiary of a kind then used or usable in the business of the applicable Person (with equal or greater aggregate Attributed Value) within 180 days from the date of receipt thereof or (B) if the applicable Borrower or Subsidiary intends to acquire replacement properties or assets, or other productive properties or assets, with such proceeds as part of a like-kind exchange under Section 1031 of the Code, the potential replacement properties or assets are identified by such Borrower or Subsidiary within 180 days from the date the ownership to the sold assets is transferred to the buyer of such property and the proceeds from such property are reinvested to acquire such replacement properties or assets (with equal or greater aggregate Attributed Value) within 180 days from the date the ownership to the sold assets is transferred to the buyer of such property; provided further that, the proceeds of any Casualty Event shall not constitute Net Cash Proceeds to the extent that such proceeds are reinvested in replacement properties or assets, or other productive properties or assets, acquired by the Borrower or a Guarantor of a kind then used or usable in the business of the applicable Person (with equal or greater aggregate Attributed Value) within 180 days from the date of receipt thereof.

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          (iii) Upon the incurrence or issuance by the Borrower or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.03, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary (such prepayments to be applied as set forth in clause (iv) below).

          (iv) Prepayments of the Total Outstandings made pursuant to this Section 2.06(b), first, shall be applied ratably to the L/C Borrowings, second, shall be applied ratably to the outstanding Loans, and, third, shall be used to Cash Collateralize the remaining L/C Obligations. Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the L/C Issuer or the Lenders, as applicable.

     2.07 Termination or Reduction of Commitments. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce the Aggregate Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such Sublimit shall be automatically reduced by the amount of such excess. The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Commitments. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.

     2.08 Repayment of Loans.

     (a) The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Committed Loans outstanding on such date.

     (b) The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) demand by the Swing Line Lender and (ii) the Maturity Date.

     2.09 Interest.

     (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal

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amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

     (b) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iii) Upon the request of the Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

     2.10 Fees. In addition to certain fees described in subsections (i) and (j) of Section 2.03:

     (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a commitment fee equal to the Applicable Rate times the daily amount of the Available Borrowing Base. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. For the purposes of computation of the Commitment Fee, Swing Line Loans shall not be counted as usage of the Aggregate Commitments.

     (b) Other Fees. (i) The Borrower shall pay to the Arranger and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee

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Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

     (ii) The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

     2.11 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

     2.12 Evidence of Debt.

     (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

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     2.13 Payments Generally; Administrative Agent’s Clawback.

     (a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

     (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Committed Borrowing of Eurodollar Rate Loans (or, in the case of any Committed Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Committed Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Committed Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Committed Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

     (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer

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hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c).

     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

     2.14 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and in Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with

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the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts owing them, provided that:

     (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

     (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

     The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 Taxes.

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

     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties,

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interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.

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

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

     Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

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     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

     (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

     3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Committed Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

     3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate

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Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

     3.04 Increased Costs; Reserves on Eurodollar Rate Loans.

     (a) Increased Costs Generally. If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer;

     (ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); or

     (iii) impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

     (b) Capital Requirements. If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding

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company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

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

     (d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

     (e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

     3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

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     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

     (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13; including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

     3.06 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13.

     3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     4.01 Conditions of Initial Credit Extension. The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

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     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

     (i) executed counterparts of this Agreement, the Guaranty and the Security Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

     (ii) a Note executed by the Borrower in favor of each Lender requesting a Note;

     (iii) a pledge and security agreement, in substantially the form of Exhibit H (together with each other pledge and security agreement and pledge and security agreement supplement delivered pursuant to Section 6.12, in each case as amended, the “Security Agreement”), duly executed by each Loan Party, together with:

     (A) any and all certificates representing the Pledged Equity referred to therein accompanied by undated stock powers executed in blank,

     (B) proper financing statements in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Security Agreement, covering the Collateral described in the Security Agreement,

     (C) completed requests for information, dated on or before the date of the initial Credit Extension, listing all effective financing statements filed in the jurisdictions referred to in clause (B) above that name any Loan Party as debtor, together with copies of such other financing statements,

     (D) evidence of the completion of all other actions, recordings and filings of or with respect to the Security Agreement that the Administrative Agent may deem necessary in order to perfect the Liens created thereby, and

     (E) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Security Agreement has been taken (including receipt of duly executed payoff letters, UCC-3 termination statements);

     (iv) deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages and leasehold deeds of trust, in substantially the form of Exhibit I (with such changes as may be satisfactory to the Administrative Agent and its counsel to account for local law matters) and covering properties sufficient to comply with Section 6.12(b) (together with each other mortgage delivered pursuant to Section 6.12, in each case as amended, the “Mortgages”), duly executed by the appropriate Loan Party, together with:

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     (A) evidence that counterparts of the Mortgages have been duly executed, acknowledged and delivered and are in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may deem necessary in order to create a valid first and subsisting Lien (subject to Permitted Liens) on the property described therein in favor of the Administrative Agent for the benefit of the Secured Parties and that all filing, documentary, stamp, intangible and recording taxes and fees have been paid,

     (B) evidence that all other action that the Administrative Agent may reasonably deem necessary or desirable in order to create valid first and subsisting Liens (subject to Permitted Liens) on the property described in the Mortgages has been taken; and

     (C) title opinions and other documentation satisfactory to the Administrative Agent with respect to Oil and Gas Properties of the Borrower, the Target and their Subsidiaries covering at least 75% in total Attributed Value of the Engineered Oil and Gas Properties subject to the Mortgages;

     (v) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;

     (vi) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

     (vii) a favorable opinion of Vinson and Elkins LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit G and such other matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request;

     (ix) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies, or an exhibit, of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

     (x) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(b) and (c) have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial

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Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;

     (xi) certificates attesting to the Solvency of each Loan Party before and after giving effect to the Transaction and the incurrence of indebtedness related thereto, from its chief financial officer;

     (xiv) evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect, together with the certificates of insurance, naming the Administrative Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitutes Collateral;

     (xv) certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lenders, together with all agreements, instruments and other documents delivered in connection therewith as the Administrative Agent shall reasonably request;

     (xvi) the Initial Engineering Report.

     (xvii) evidence that the Existing Credit Agreements have been or concurrently with the Closing Date are being terminated and all Liens securing obligations under the Existing Credit Agreements have been or concurrently with the Closing Date are being released;

     (xviii) the following financial information: (A) audited consolidated financial statements of each of the Borrower and the Target for the three fiscal years ended most recently prior to the Acquisition, unaudited consolidated financial statements of each of the Borrower and the Target for any interim quarterly periods that have ended since the most recent of such audited financial statements, and pro forma financial statements of the Borrower giving effect to the Transaction for the most recently completed fiscal year and the period commencing with the end of the most recently completed fiscal year and ending with the most recently completed quarter, which in each case, (1) shall be satisfactory in form and substance to the Lead Arranger and the Lenders, (2) shall not be materially inconsistent with the Information heretofore provided to the Lenders, and (3) shall meet the requirements of Regulation S-X under the Securities Act of 1933, as amended, and all other accounting rules and regulations of the SEC promulgated thereunder applicable to a registration statement under such Act on Form S-1; (B) forecasts prepared by management of the Borrower, each in form satisfactory to the Administrative Agent and the Lenders, of balance sheets, income statements and cash flow statements for the first year following the Closing Date and for each year commencing with the first fiscal year following the Closing Date for the term of this Agreement; and (C) evidence satisfactory to the Administrative Agent that (1) Consolidated EBITDAX for the twelve-month period ended June 30, 2006 calculated on a pro forma basis giving effect to the Transaction was not less than $290,000,000, (2) the ratio of Consolidated Funded Indebtedness at the Closing Date to Consolidated EBITDAX for the twelve months ended June 30, 2006 (which ratio shall be calculated

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reflecting the Transaction on a pro forma basis) was not greater than 3.3:1.0 and (3) the pro forma financial statements delivered pursuant to clause (A) above and the forecasts delivered pursuant to clause (B) above were prepared in good faith on the basis of the assumptions stated therein, which assumptions are fair in light of the then existing conditions, and, in the case of each of (1), (2) and (3) above, and the chief financial officer of the Borrower shall have provided the Administrative Agent and the Lenders a written certification to that effect.

     (xix) evidence of the receipt by the Borrower of not less than $500,000,000 cash proceeds from the Preferred Stock and not less than $850,000,000 gross cash proceeds from the advance under the Bridge Facility (less any amount by which the Bridge Facility should have been reduced pursuant to the provisions of the Fee Letter);

     (xx) such reports and audits prepared by the Borrower or any of its Affiliates or any advisor engaged by the Borrower or any of its Affiliates with respect to the Target and its Subsidiaries as the Administrative Agent may reasonably request; and

     (xxi) such other certificates, documents, or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.

     (b) Any fees required to be paid on or before the Closing Date shall have been paid.

     (c) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

     (d) The Closing Date shall have occurred on or before November 22, 2006.

     (e) All applicable waiting periods (including, without limitation, the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1975) shall have expired or terminated without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on any of the Borrower, the Target, their respective Subsidiaries or the Transaction or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable that in the judgment of the Lead Arranger could have such effect.

     (f) The Acquisition shall have been consummated substantially in accordance with the terms of the Acquisition Agreement, without any waiver or amendment not consented to by the Lenders of any material term, provision or condition set forth therein, other than waivers or amendments that could not reasonably be expected to have a Material Adverse Effect, and in compliance with all applicable requirements of Law.

     (g) There shall have been no change, occurrence or development since June 30, 2006 that could reasonably be expected to have a Material Adverse Effect.

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     (h) The aggregate principal amount of Loans made on the Closing Date shall not exceed $150,000,000.

     Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

     4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:

     (a) After giving effect to such Credit Extension, (x) the Total Outstandings shall not exceed the lesser of the Aggregate Commitments and the Borrowing Base, (y) the aggregate Outstanding Amount of the Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations shall not exceed such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.

     (b) The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

     (c) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

     (d) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

     Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a), (b) and (c) have been satisfied on and as of the date of the applicable Credit Extension.

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ARTICLE V.

REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Administrative Agent and the Lenders that:

     5.01 Existence, Qualification and Power. Each Loan Party and each of its Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents and (as of the Closing Date only) Related Documents to which it is a party and consummate the Transaction, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document and (as of the Closing Date only) Related Document to which such Person is or is to be a party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation that is material to the Loan Parties to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.

     5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or Related Document, or for the consummation of the Transaction, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) the authorizations, approvals, actions, notices and filings listed on Schedule 5.03, all of which have been duly obtained, taken, given or made and are in full force and effect, (ii) authorizations, approvals, actions, notices and filings in connection with enforcement of pledge and the sale of the Pledged Equity in connection therewith, (iii) authorizations, approvals, actions, notices and filings required in connection with the additional mortgage and security interests required to be granted under this Agreement; (iv) routine authorizations, approvals, actions, notices and filings in the ordinary course of business (e.g. tax filings, annual reports, environmental filings, etc. ); and (v) authorizations, approvals and consents necessary in connection with the Borrower’s mineral class leases with the general land office of State of Texas. All applicable waiting periods in connection with the Transaction have expired without any action having been taken by any Governmental Authority restraining,

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preventing or imposing materially adverse conditions upon the Transaction or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

     5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms.

     5.05 Financial Statements; No Material Adverse Effect. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries dated September 30, 2006, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness.

     (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

     (d) The consolidated pro forma balance sheet of the Borrower and its Subsidiaries as at June 30, 2006, and the related consolidated pro forma statements of income and cash flows of the Borrower and its Subsidiaries for the twelve months then ended, certified by the chief financial officer or treasurer of the Borrower, copies of which have been furnished to each Lender, fairly present the consolidated pro forma financial condition of the Borrower and its Subsidiaries as at such date and the consolidated pro forma results of operations of the Borrower and its Subsidiaries for the period ended on such date, in each case giving effect to the Transaction, all in accordance with GAAP (except for the absence of footnotes and subject to year-end audit adjustments).

     (e) The consolidated forecasted balance sheets, statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 4.01 or Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and

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represented, at the time of delivery, the Borrower’s reasonable estimate of its future financial condition and performance.

     5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement, any other Loan Document, any Related Document or the consummation of the Transaction, or (b) except as specifically disclosed in Schedule 5.06 (the “Disclosed Litigation”), either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and there has been no change in the status, or financial effect on any Loan Party or any Subsidiary thereof, of the matters described in Schedule 5.06 that could reasonably be expected to have a Material Adverse Effect.

     5.07 No Default. Neither any Loan Party nor any Subsidiary thereof is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

     5.08 Ownership of Property; Liens. (a) Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (b) The property of each Loan Party and each of its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

     5.09 Environmental Compliance. (a) The Loan Parties and their respective Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.09, such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (b) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under 42 USC § 9605(a)(8)(B) or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries in quantities or in a manner as to create Environmental Liability.

          (c) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate,

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reasonably be expected to have a Material Adverse Effect, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law that is reasonably expected to result in material Environmental Liability to any Loan Party or any of its Subsidiaries; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material Environmental Liability to any Loan Party or any of its Subsidiaries.

     5.10 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.

     5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.

     5.12 ERISA Compliance. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws except for such events of noncompliance which could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (c) Except to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

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     5.13 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are (in the case of corporate securities) fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except those created under the Collateral Documents or permitted by Section 7.01. As of the Closing Date, no Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. Set forth on Part (c) of Schedule 5.13 is a complete and accurate list of all Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its incorporation, the address of its principal place of business and its U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification number, its unique identification number issued to it by the jurisdiction of its incorporation. As of the Closing Date, the copy of the charter of each Loan Party and each amendment thereto provided pursuant to Section 4.01(a)(vii) is a true and correct copy of each such document, each of which is valid and in full force and effect.

     5.14 Margin Regulations; Investment Company Act. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

     5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished in writing by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished) contains as of the date so furnished any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. 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 projections concerning volumes attributable to the Oil and Gas Properties and production and cost estimates contained in each Engineering Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and the Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

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     5.16 Compliance with Laws. Each Loan Party and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     5.17 Solvency. Each Loan Party is, individually and together with its Subsidiaries on a Consolidated basis, Solvent.

     5.18 Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are 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) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.19 Labor Matters.

          There are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Subsidiaries as of the Closing Date and neither the Borrower nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.20 Collateral Documents. The provisions of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 7.01) on all right, title and interest of the respective Loan Parties in the Collateral described therein. Except as expressly contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens.

     5.21 Engineered Oil and Gas Properties.

     (a) The Borrower or another Loan Party has good and defensible title to all Engineered Oil and Gas Properties, free and clear of all Liens except as permitted pursuant to Section 7.01 and Immaterial Title Deficiencies. With the exception of Immaterial Title Deficiencies, all such Oil and Gas Properties are valid, subsisting, and in full force and effect, and all material rentals, royalties, and other amounts due and payable in respect thereof have been duly paid. Without regard to any consent or non-consent provisions of any joint operating agreement covering any of the Loan Parties’ Proved Reserves, and with the exception of Immaterial Title Deficiencies, the Loan Parties’ share of (a) the costs for each Engineered Oil and Gas Property is not greater than the decimal fraction set forth in the most recent Engineering Report, before and after payout, as the case may be, and described therein by the respective designations “working interests,” “WI,” “gross working interest,” “GWI,” or similar terms, and (b) production from, allocated to, or attributed to each Engineered Oil and Gas Property is not less than the decimal fraction set forth in the most recent Engineering Report, before and after payout, as the case may be, and described therein by the designations “net revenue interest,” “NRI,” or similar terms.

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Except to the extent constituting an Immaterial Title Deficiency, each well drilled in respect of each Engineered Oil and Gas Property described in the Engineering Report (y) is capable of, and is presently, producing Hydrocarbons in commercial quantities, and the applicable Loan Party is currently receiving payments for its share of production, with no material funds in respect of any thereof being presently held in suspense, other than any such funds being held in suspense pending delivery of appropriate division orders and other usual and customary suspense accounts, and (z) has been drilled, bottomed, completed, and operated in compliance in all material respects with all applicable Laws and no such well which is currently producing hydrocarbons is subject to any penalty in production by reason of such well having produced in excess of its allowable production. To Borrower’s knowledge, there are no unrecorded assignments or conveyances affecting the Engineered Oil and Gas Properties or any Loan Party’s interest therein that would result in the Borrower or its Subsidiaries having a WI or NRI that is less than the WI/NRI set forth in the Engineering Report, except the interests of Sierra Madera CO2 Pipeline LP and Symbol Energy Inc., which constitute Immaterial Title Deficiencies.

     (b) The Engineered Oil and Gas Properties (and all properties unitized therewith) are, in all material respects, being (and, to the extent the same could materially and adversely affect the ownership or operation of the Engineered Oil and Gas Properties after the date hereof, to the applicable Loan Party’s knowledge, have in the past been) maintained, operated and developed in a good and workmanlike manner, in accordance with prudent industry standards and in conformity with all applicable Laws and in conformity with all oil, gas or other mineral leases and other contracts and agreements forming a part of the Engineered Oil and Gas Property and in conformity with the Permitted Encumbrances. No Engineered Oil and Gas Property is subject to having allowable production after the date hereof reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the date hereof and (ii) none of the wells located on the Engineered Oil and Gas Properties (or properties unitized therewith) are or will be deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are bottomed under and producing from, with the well bores wholly within, the Engineered Oil and Gas Properties (or, in the case of wells located on properties unitized therewith, such unitized properties). There are no dry holes, or otherwise inactive wells, located on the Engineered Oil and Gas Properties or on lands pooled or unitized therewith, except for wells that have been properly plugged and abandoned or for which appropriate plugging and abandonment has been scheduled. Each Loan Party has all material governmental licenses and permits reasonably necessary or appropriate to own and operate its Engineered Oil and Gas Properties, and no Loan Party has received notice in writing of any material violations in respect of any such licenses or permits.

     5.22 Sale of Production. Except (x) as of the Closing Date, as set forth in Schedule 5.22, or (y) thereafter, as disclosed in writing to the Administrative Agent and the Lenders and reflected in the most recent determination of the Borrowing Base, or (z) for matters that constitute Immaterial Title Deficiencies:

     (a) No Engineered Oil and Gas Property is subject to any material contractual or other arrangement (i) whereby payment for production is or can be deferred for a substantial period after the month in which such production is delivered (in the case of oil, not in excess of 60 days, and in the case of gas, not in excess of 90 days) or (ii) whereby payments are made to a Loan

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Party other than by checks, drafts, wire transfer advises or other similar writings, instruments or communications for the immediate payment of money;

     (b) (i) No Engineered Oil and Gas Property is subject to any material contractual or other arrangement for the sale, processing or transportation of production (or otherwise related to the marketing of production) which cannot be canceled on 120 days’ (or less) notice and (ii) all material contractual or other arrangements for the sale, processing or transportation of production (or otherwise related to the marketing of production) are bona fide arm’s length transactions made with third parties not affiliated with Loan Parties;

     (c) Each Loan Party is presently receiving a price for all production (other than gas used for operations at a field location) from (or attributable to) each Engineered Oil and Gas Property covered by a production sales contract or marketing contract that is computed in accordance with the terms of such contract, and no Loan Party is having deliveries of production from such Engineered Oil and Gas Property curtailed substantially below such property’s delivery capacity, except for curtailments caused (i) by an act or event of force majeure, or (ii) by routine maintenance requirements in the ordinary course of business;

     (d) No Loan Party, nor, to such Loan Party’s knowledge, any Loan Party’s predecessors in title, has received prepayments (including payments for gas not taken pursuant to “take or pay” or other similar arrangements) for any oil, gas or other hydrocarbons produced or to be produced from any Engineered Oil and Gas Properties after the date hereof;

     (e) No Engineered Oil and Gas Property is subject to any “take or pay” or other similar arrangement (i) which can be satisfied in whole or in part by the production or transportation of gas from other properties or (ii) as a result of which production from any Engineered Oil and Gas Property may be required to be delivered to one or more third parties without payment (or without full payment) therefor as a result of payments made, or other actions taken, with respect to other properties;

     (f) There is no Engineered Oil and Gas Property with respect to which any Loan Party, or, to such Loan Party’s knowledge, any Loan Party’s predecessors in title, has, prior to the date hereof, taken more (“overproduced”), or less (“underproduced”), in any material respect, gas from the lands covered thereby (or pooled or unitized therewith) than its ownership interest in such Engineered Oil and Gas Property would entitle it to take; and as of the Closing Date Schedule 5.22 accurately reflects, in all material respects, for each well or unit with respect to which such an imbalance is shown thereon to exist, (i) whether such Loan Party is overproduced or underproduced and (ii) the volumes (in cubic feet or British thermal units) of such overproduction or underproduction and the effective date of such information;

     (g) No Engineered Oil and Gas Property is subject to a gas balancing arrangement under which one or more third parties may take a portion of the production attributable to such Engineered Oil and Gas Property without payment (or without full payment) therefor as a result of production having been taken from, or as a result of other actions or inactions with respect to, other properties; and

     (h) No Engineered Oil and Gas Property is subject at the present time to any regulatory refund obligation and, to such Loan Party’s knowledge, no facts exist which might cause the same to be imposed.

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ARTICLE VI.

AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

     6.01 Financial Statements. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of Section 6.02:

     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of a Registered Public Accounting Firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit or with respect to the absence of any material misstatement and (ii) commencing at such time as the Borrower is required to prepare the same for SEC reporting purposes, an opinion of such Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of the SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which the Required Lenders do not object, and such consolidating statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries;

     (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

     (c) as soon as available, but in any event within 90 days after the end of each fiscal year (commencing April 1, 2007) of the Borrower, an annual business plan and budget of the

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Borrower and its Subsidiaries on a Consolidated basis, including forecasts prepared by management of the Borrower, in form satisfactory to the Administrative Agent and the Required Lenders, of consolidated balance sheets and statements of income or operations of the Borrower and its Subsidiaries on a monthly basis for the immediately following fiscal year;

     (d) By April 1 of each year commencing April 1, 2007, an Engineering Report prepared as of the preceding January 1 by one or more of Netherland, Sewell & Associates, DeGolyer & MacNaughton, or other independent petroleum engineers chosen by Borrower and reasonably acceptable to Administrative Agent, concerning all Oil and Gas Properties owned by any Loan Party which are located in or offshore of the United States and which have attributable to them proved oil or gas reserves. This report shall be reasonably satisfactory to Administrative Agent, shall be prepared using PV10 Pricing, shall take into account any “over-produced” status under gas balancing arrangements, and shall contain information and analysis consistent in form and scope in all material respects to that contained in the Initial Engineering Report. This report shall distinguish (or shall be delivered together with a certificate from an appropriate officer of Borrower which distinguishes) (i) the Oil and Gas Properties owned by each Loan Party and (ii) those properties treated in the report which are Collateral from those properties treated in the report which are not Collateral; and

     (e) By October 1 of each year, commencing October 1, 2007, an Engineering Report prepared as of the preceding July 1 (or the last day of the preceding calendar month in the case of a Special Determination) by petroleum engineers who are employees of Borrower (or, at the option of Borrower, by the independent engineers named above or selected in accordance with (d) above), together with an accompanying report on property sales, property purchases and changes in categories that have occurred since the date of the prior Engineering Report, both in the same form and scope as the reports in (d) above.

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under clause (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in clauses (a) and (b) above at the times specified therein.

     6.02 Certificates; Other Information. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of this Section 6.02:

     (a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal quarter ended December 31, 2006), (i) a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower and (ii) a calculation of the Borrowing Base Utilization Ratio as of the end of the most recent fiscal quarter;

     (c) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them;

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     (d) promptly after the same are available, copies of all annual, regular, periodic and special reports, registration statements and proxy statements which the Borrower may file or be required to file with the SEC under Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (e) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

     (f) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof;

     (g) not later than five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of all notices, requests and other documents (including amendments, waivers and other modifications) so received under or pursuant to any Related Document or instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and, from time to time upon request by the Administrative Agent, such information and reports regarding the Related Documents and such instruments, indentures and loan and credit and similar agreements as the Administrative Agent may reasonably request;

     (h) promptly after the assertion or occurrence thereof, notice of any action or proceeding against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any materially adverse restrictions on ownership, occupancy, use or transferability under any Environmental Law;

     (i) as soon as available, but in any event within 30 days after the Closing Date, a duly completed Compliance Certificate (on a pro forma basis) as of the last day of the fiscal quarter of the Borrower ended on September 30, 2006, signed by a Responsible Officer of the Borrower; and

     (j) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

     Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the

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date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

     The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that so long as the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

     Each Public Lender shall designate individuals or advisors authorized to act on behalf of the Public Lender to receive Borrower Materials not designated as “PUBLIC” pursuant to the immediately preceding paragraph, including any notices pursuant to Section 6.03.

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     6.03 Notices. Promptly notify the Administrative Agent and each Lender:

     (a) of the occurrence of any Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws;

     (c) of the occurrence of any ERISA Event;

     (d) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary;

     (e) of the determination by the Registered Public Accounting Firm providing the opinion required (but only if required) under Section 6.01(a)(ii) (in connection with its preparation of such opinion) or the Borrower’s determination at any time of the occurrence or existence of any Internal Control Event; and

     (f) of the (i) occurrence of any Disposition of property or assets for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.06(b)(ii), and (ii) incurrence or issuance of any Indebtedness for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.06(b)(iii).

     Each notice pursuant to this Section 6.03 (other than Section 6.03(f)) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

     6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, except, in the case of (a) or (b), for such amounts that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

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     6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     6.07 Maintenance of Insurance. (a) Maintain (at its own expense) insurance for its property in accordance with the Insurance Schedule with financially sound and reputable insurance companies, as well as insurance in such amounts, with such limitations or deductibles, against such risks, and in such form as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. All insurance policies covering Collateral shall be endorsed (i) to provide for payment of losses to the Administrative Agent as its interests may appear, (ii) to provide that such policies may not be canceled or reduced or affected in any material manner for any reason without ten (10) days prior notice to the Administrative Agent, and (iii) to provide for any other matters specified in any applicable Collateral Document. Each Loan Party shall at all times maintain insurance against its liability for injury to persons or property in accordance with the Insurance Schedule, which insurance shall be by financially sound and reputable insurers.

     (b) Reimbursement under any liability insurance maintained by Loan Parties pursuant to this Section 6.07 may be paid directly to the Person who has incurred the liability covered by such insurance. With respect to any loss involving damage to Collateral, each Loan Party will make or cause to be made the necessary repairs to or replacements of such Collateral, and any proceeds of insurance maintained by each Loan Party pursuant to this Section 6.07 shall be paid to such Loan Party by the Administrative Agent as reimbursement for the costs of such repairs or replacements as such repairs or replacements are made or acquired; provided that Administrative Agent shall be entitled (but not obligated) to retain and apply such proceeds as Collateral during the continuance of any Event of Default.

     6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

     6.09 Books and Records. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

     6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to

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discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

     6.11 Use of Proceeds. The Borrower shall apply the proceeds of the Credit Extensions to (i) partially finance the Acquisition, (ii) refinance the Borrower’s existing senior secured revolving credit facility under the Borrower Existing Credit Agreement, (iii) refinance the Target’s existing credit facilities under the Target Existing Credit Agreements, (iv) pay certain fees and expenses incurred in connection with the Acquisition and entering into this Agreement, (v) provide working capital for the Borrower and its Subsidiaries including the issuance of letters of credit, capital expenditures, and other lawful corporate purposes, and (vi) finance permitted acquisitions by the Borrower and its Subsidiaries of oil and gas properties and other assets related to the exploration, production and development of oil and gas properties.

     6.12 Covenant to Guarantee Obligations and Give Security. (a) Upon the formation or acquisition of any new direct or indirect Subsidiary (excluding any CFC or any Subsidiary that is held directly or indirectly by a CFC) by any Loan Party, then the Borrower shall, at the Borrower’s expense:

          (i) within 20 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), cause such Subsidiary, and cause each direct and indirect parent (except, if applicable, Lariat, Cholla Pipeline, L.P. or Sagebrush Pipeline, LLC) of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ obligations under the Loan Documents,

          (ii) subject in the case of Oil and Gas Properties to Section 6.12(b), within 30 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), cause such Subsidiary and each direct and indirect parent (except, if applicable, Lariat, L.L.C., Cholla Pipeline, L.P. or Sagebrush Pipeline, LLC) of such Subsidiary (if it has not already done so) to duly execute and deliver to the Administrative Agent deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages, leasehold deeds of trust, Security Agreement Supplements and other security and pledge agreements, as specified by and in form and substance satisfactory to the Administrative Agent (including delivery of all Pledged Equity in and of such Subsidiary, and other instruments of the type specified in Section 4.01(a)(iii)), securing payment of all the Obligations of such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such real and personal properties, provided however, that notwithstanding the foregoing, neither the Borrower nor any Subsidiary will be required to grant a security interest in the Equity Interest of any CFC in excess of 66% of the Equity Interest of such CFC,

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          (iii) subject in the case of Oil and Gas Properties to Section 6.12(b), within 30 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), cause such Subsidiary and each direct and indirect parent (except, if applicable, Lariat, Cholla Pipeline, L.P. or Sagebrush Pipeline, LLC) of such Subsidiary (if it has not already done so) to take whatever action (including the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages, leasehold deeds of trust, Security Agreement Supplements and security and pledge agreements delivered pursuant to this Section 6.12, enforceable against all third parties in accordance with their terms, and

          (iv) within 60 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clauses (i), (ii) and (iii) above, and as to such other matters as the Administrative Agent may reasonably request.

     (b) At all times the Obligations shall be secured by Liens covering and encumbering at least 80% of the total Attributed Value of the Proved Reserves attributable to the Engineered Oil and Gas Properties. To the extent additional Oil and Gas Properties need to be secured by Liens in favor of the Administrative Agent to effect the foregoing, within 30 days after the delivery of each Engineering Report, the Loan Parties that own Engineered Oil and Gas Properties shall execute and deliver (i) mortgages and deeds of trust in form and substance acceptable to the Administrative Agent, together with such other assignments, conveyances, amendments, agreements and other writings (each duly authorized and executed) as the Administrative Agent shall deem necessary to grant, evidence and perfect the Liens on such additional properties required by this Section 6.12(c) and (ii) evidence of title with respect to such additional properties reasonably satisfactory to the Administrative Agent.

     6.13 Compliance with Environmental Laws. Comply, and cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew all material Environmental Permits necessary for its current operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance in all material respects with the requirements of all applicable Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is not required by applicable Environmental Laws or being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

     6.14 Further Assurances. Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (a) correct any material defect or error that may

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be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) to the fullest extent permitted by applicable law, subject any Loan Party’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (ii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iii) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so.

     6.15 Production Proceeds. Notwithstanding that, by the terms of the various Mortgages, certain Guarantors and Borrower are and will be assigning to Administrative Agent and Lenders all of the “Production Proceeds” (as defined therein) accruing to the property covered thereby, so long as no Event of Default has occurred such Loan Parties may continue to receive from the purchasers of production all such Production Proceeds, subject, however, to the Liens created under the Mortgages, which Liens are hereby affirmed and ratified. Upon the occurrence of an Event of Default, Administrative Agent and Lenders may exercise all rights and remedies granted under the Mortgages, including the right to obtain possession of all Production Proceeds then held by Loan Parties or to receive directly from the purchasers of production all other Production Proceeds. In no case shall any failure, whether purposed or inadvertent, by Administrative Agent or Lenders to collect directly any such Production Proceeds constitute in any way a waiver, remission or release of any of their rights under the Mortgages, nor shall any release of any Production Proceeds by Administrative Agent or Lenders to Loan Parties constitute a waiver, remission, or release of any other Production Proceeds or of any rights of Administrative Agent or Lenders to collect other Production Proceeds thereafter.

ARTICLE VII.

NEGATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:

     7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, or sign or file or suffer to exist under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or assign any accounts or other right to receive income, other than the following:

     (a) Liens pursuant to any Loan Document;

     (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount

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secured or benefited thereby is not increased except as contemplated by Section 7.03(c), (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(c);

     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

     (d) operators’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 90 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

     (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

     (f) Liens to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

     (g) (i) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person and (ii) Immaterial Title Deficiencies;

     (h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);

     (i) Liens on pipelines and pipeline facilities that arise by operation of law or other like Liens arising by operation of law in the ordinary course of business and incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that do not constitute Indebtedness and that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

     (j) customary contractual Liens under operating lease agreements or which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out and farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for obligations that do not constitute Indebtedness and that are not delinquent or that are being contested in good faith by appropriate action and for which adequate reserves have been

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maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the property covered by such Lien for the purposes for which such property is held by the Borrower or any Subsidiary or materially impair the value of such property subject thereto;

     (k) Permitted Encumbrances;

     (l) Liens existing on assets at the time of acquisition thereof, or Liens existing on assets of an Person at the time such Person became a Subsidiary, which in each case (i) were not created in contemplation thereof and (ii) do not encumber Oil and Gas Properties to be included in the Borrowing Base;

     (m) UCC financing statements filed in connection with an operating lease under which the Borrower or a Subsidiary is the lessee;

     (n) Liens on assets of Lariat securing obligations of Lariat;

     (o) Liens securing Indebtedness permitted under Section 7.03(f); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; and

     (p) Liens created by the Citi Payoff Documents securing reimbursement obligations in respect of the Citi L/Cs; provided that the aggregate amount of cash collateral pledged thereunder shall not exceed $20,000,000.

     7.02 Investments. Make any Investments, except:

     (a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalents;

     (b) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $500,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

     (c) Investments of the Borrower in any now existing or hereafter acquired wholly-owned Subsidiary and Investments of any Subsidiary in the Borrower or in another now existing or hereafter acquired wholly-owned Subsidiary; provided, however, that (i) in the case of any Investments in Lariat, the aggregate amount of such Investment shall not exceed (x) $1,000,000 less (y) the aggregate amount of Restricted Payments made to Lariat pursuant to Section 7.06(a) and (ii) in the case of an Investment constituting the acquisition from a third party of a Person which thereby becomes a wholly-owned Subsidiary, such Investment is permitted pursuant to another clause of this Section 7.02;

     (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and

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Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

     (e) Investments in Oil and Gas Properties (or in Persons substantially all of whose assets consist of Oil and Gas Properties and which become wholly-owned Subsidiaries pursuant to such Investment);

     (f) Guarantees permitted by Section 7.03;

     (g) Investments received in connection with bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

     (h) Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each a “venture”) entered into by the Borrower or a Subsidiary with others in the ordinary course of business; provided that (i) any such venture is engaged exclusively in oil and gas exploration, development, production, processing and related activities, including transportation, (ii) the interest in such venture is acquired in the ordinary course of business and on fair and reasonable terms and (iii) the aggregate net amount of such Investments after the date hereof does not exceed $10,000,000;

     (i) Investments in SageBrush Pipeline LLC in an aggregate amount not exceeding $7,500,000; and

     (j) other Investments not exceeding $5,000,000 in the aggregate in any fiscal year of the Borrower.

     7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

     (a) Indebtedness under the Loan Documents;

     (b) Indebtedness in respect of the Bridge Facility and any refinancing thereof, provided that such refinancing is (i) unsecured, (ii) requires no scheduled amortization prior to the 6^th anniversary of the Closing Date and (iii) is otherwise on market terms and conditions;

     (c) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and the direct or any contingent obligor with respect thereto is not changed, as a result of or in connection with such refinancing, refunding, renewal or extension and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate

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applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate;

     (d) Guarantees of the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Guarantor;

     (e) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party (other than customary netting arrangements);

     (f) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(o); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $15,000,000;

     (g) Indebtedness of the Borrower or a Subsidiary owing to the Borrower or a wholly-owned Subsidiary (other than Lariat);

     (h) Indebtedness incurred by Lariat;

     (i) Indebtedness in respect of the Citi L/Cs in an aggregate amount not exceeding $20,000,000;

     (j) other unsecured Indebtedness in an aggregate principal amount not to exceed $10,000,000 at any time outstanding; and

     (k) Indebtedness in respect of surety bonds obtained by the Borrower or a Subsidiary in the ordinary course of business and supporting other obligations undertaken by the Borrower or a Subsidiary in the ordinary course of business which other obligations do not constitute Indebtedness.

     7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

     (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person;

     (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor

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in such a transaction is a wholly-owned Subsidiary, then the transferee must either be the Borrower or a wholly-owned Subsidiary;

     (c) Dispositions permitted by Section 7.05(g); and

     (d) the Borrower and its Subsidiaries may consummate the Acquisition.

     7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:

     (a) Dispositions of obsolete or worn out property or assets, whether now owned or hereafter acquired, in the ordinary course of business;

     (b) Dispositions of inventory (including Hydrocarbons sold after severance) in the ordinary course of business;

     (c) Dispositions of equipment or real property or other asset (other than (x) Oil and Gas Properties or (y) Investments in Subsidiaries) to the extent that (i) such equipment, property or other asset is exchanged for credit against the purchase price of similar replacement equipment, property or other asset or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement equipment, property, or other asset;

     (d) Dispositions of property or assets by any Subsidiary to the Borrower or to a wholly-owned Subsidiary or by the Borrower to any wholly-owned Subsidiary; provided that if the transferor of such property or assets is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor;

     (e) Dispositions permitted by Section 7.04(a), (b) or (d);

     (f) a Disposition for fair value of Oil and Gas Properties in the Piceance Basin;

     (g) Dispositions (including Casualty Events) of Oil and Gas Properties which are sold or otherwise transferred for fair consideration to Persons who are not Affiliates of Borrower (2) farmouts of undeveloped acreage and assignments in connection with such farmouts or the abandonment, farm-out, the exchange and (3) Dispositions of Oil and Gas Properties which are not included in the most recently delivered Engineering Report in the ordinary course of business, provided that (i) no Event of Default exists at the time of and after giving effect to any such sale or other transfer of Collateral (other than Defaults that will be cured upon the application of the proceeds of such sale or other transfer), (ii) the Borrower must first give notice to the Administrative Agent of any such sale, (iii) if the Oil and Gas Properties so sold or transferred, or all equity of the Subsidiary owning the Oil and Gas Properties so sold or transferred, on a cumulative basis since the then most recent Determination Date, represent more than ten percent of the total Attributed Value of all of the Proved Reserves of the Engineered Oil and Gas Properties, as determined in the most recently delivered Engineering Report, the sale or other transfer may not be made until Administrative Agent and the Lenders have made a Special Determination as contemplated in Section 2.05(b), and (iv) concurrently with such sale or other transfer the Borrower must pay in full any Borrowing Base Deficiency that results from such Special Determination; and

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     (h) Dispositions of interest in Oil and Gas Properties in respect of Immaterial Title Deficiencies in order to discharge such Immaterial Title Deficiencies or an obligation giving rise thereto.

     7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

     (a) each Subsidiary may make Restricted Payments to the Borrower, the Guarantors and any other Person that owns an Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made; provided, however, that in the case of any Restricted Payments to Lariat Services, Inc., the aggregate amount of such Restricted Payments shall not exceed (i) $1,000,000 less (ii) the aggregate amount of Investment in Lariat made pursuant to Section 7.02(c);

     (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

     (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;

     (d) (i) so long as no Event of Default exists, the Borrower may pay regular cash dividends on the Preferred Stock and make cash payments pursuant to Section 6(f) of the Certificate of Designations for the Preferred Stock; (ii) so long as no Default and no Borrowing Base Deficiency exists, the Borrower may make cash payments pursuant to Section 7(a) or 9(e) of the Certificate of Designations for the Preferred Stock; and (iii) the Borrower may make payment-in-kind dividends on the Preferred Stock and issue its common stock upon conversion of the Preferred Stock; and

     (e) the Borrower and each Subsidiary may repurchase Equity Interests held by an employee, officer or director upon termination of employment; provided that the aggregate amount of such Restricted Payments shall not exceed $ 500,000.

     7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto.

     7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (i) transactions between or among the Borrower and any of its wholly-owned Subsidiaries or between and among any wholly-owned Subsidiaries or (ii) payment of customary

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cash and non-cash compensation, including stock option and similar employee benefit plans, to directors and officers on an arm’s length basis.

     7.09 Burdensome Agreements. After the date of this Agreement, enter into any Contractual Obligation (other than (x) this Agreement or any other Loan Document and (y) the Bridge Facility and the documentation governing any permitted refinancing thereof) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person to secure any of the Loan Documents; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(f) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness or property subject to a Lien permitted hereunder which secures such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person; or amend any Contractual Obligation existing on the date of this Agreement so as to impose or make more restrictive such a limitation.

     7.10 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

     7.11 Financial Covenants.

     (a) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 2.5:1.0.

     (b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter of the Borrower to be greater 4.0 : 1.0.

     (c) Consolidated Current Ratio. Permit the ratio of Consolidated Current Ratio as of the end of any fiscal quarter of the Borrower to be less than 1.0 : 1.0.

     7.12 Hedge Transactions.

     Enter into any Oil and Gas Hedge Transactions which would cause the notional volume of Hydrocarbons for each of crude oil and natural gas, calculated separately, with respect to which a settlement payment is calculated under such Oil and Gas Hedge Transactions (other than basis swaps, floors and puts on volumes hedged pursuant to Swap Contracts) to exceed eighty five percent (85%) of Borrower’s or such Subsidiary’s reasonably anticipated production from Proved Reserves during the period from the immediately preceding settlement date (or the commencement of such Hedge Transaction if there is no prior settlement date) to such settlement date.

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ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

     8.01 Events of Default. Any of the following shall constitute an Event of Default:

     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within three days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a), 6.05(a), 6.11 or 6.12 or Article VII; or

     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

     (d) Representations and Warranties. Any representation, warranty, or certification made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

     (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) and the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or

     (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any

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receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

     (h) Judgments. There is entered against the Borrower or any Subsidiary (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or

     (j) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any material provision of any Loan Document; or any Loan Party denies that it has any material or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any material provision of any Loan Document; or

     (k) Change of Control. There occurs any Change of Control.

     (l) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Section 4.01 or 6.12 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority Lien (subject to Liens permitted by Section 7.01) on any material portion of the Collateral purported to be covered thereby;

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     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of Required Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

     (d) exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

     8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

     First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

     Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be employees of any Lender or the L/C Issuer) and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

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     Third, to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings and amounts payable under Swap Contracts, ratably among the Lenders, the L/C Issuer and the Lender Counterparties in proportion to the respective amounts described in this clause Fourth held by them;

     Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

ARTICLE IX.

ADMINISTRATIVE AGENT

     9.01 Appointment and Authority.

     (a) Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except to the extent Sections 9.01(b) and 9.06 expressly contemplate rights of others, the provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and the Borrower shall not have rights as a third party beneficiary of any of such provisions.

     (b) The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (in its capacities as a Lender and potential Lender Counterparty) and the L/C Issuer hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the

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direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X (including Section 10.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

     9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

     9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.

     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this

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Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

     9.04 Reliance by Administrative Agent.

     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

     9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has

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accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

     Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.

     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, the Arranger shall have no powers, duties or responsibilities under this Agreement.

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     9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

     (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(i) and (j), 2.09 and 10.04) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

     9.10 Collateral and Guaranty Matters. The Lenders and the L/C Issuer irrevocably authorize the Administrative Agent, at its option and in its discretion,

     (a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations and obligations with respect to Swap Contracts) and the expiration or termination of all Letters of Credit, (ii) that is Disposed of or to be Disposed of as part of or in connection with any Disposition permitted hereunder or under any other Loan Document, or (iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required Lenders;

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     (b) to subordinate or release any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i); and

     (c) to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

ARTICLE X.

MISCELLANEOUS

     10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

     (a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

     (b) postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

     (c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate;

     (d) change Section 2.14 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

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     (e) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Lender;

     (f) release all or substantially all of the value of the Guaranty without the written consent of each Lender; or

     (g) release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;

     and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iv) Section 10.06(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

     10.02 Notices; Effectiveness; Electronic Communication.

     (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

     (i) if to the Borrower, the Administrative Agent or the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

     (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient,

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shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

     (b) Electronic Communications. Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

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     (d) Change of Address, Etc. Each of the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent and the L/C Issuer and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

     (e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

     10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     10.04 Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the L/C Issuer, in connection with the

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enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the L/C Issuer in its

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capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.13(d).

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

     (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

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10.06 Successors and Assigns.

     (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section, or (iv) to an SPC in accordance with the provisions of subsection (h) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

     (i) Minimum Amounts.

     (A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

     (B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met..

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     (ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;

     (iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

     (A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

     (B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and

     (C) the consent of the L/C Issuer and the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment.

     (iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount, if any, required as set forth in Schedule 10.06; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

     (v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

     (vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee

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Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

     Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and

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such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

     (h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the option to provide all or any part of any Committed Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Committed Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Committed Loan, the Granting Lender shall be obligated to make such Committed Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to the Administrative Agent as is required under Section 2.13(b)(ii). Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.04), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Committed Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Committed Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee in the amount of $2,500, assign all or any portion of its right to receive payment with respect to any Committed Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information

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relating to its funding of Committed Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

     (i) Resignation as L/C Issuer or Swing Line Lender after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrower, resign as Swing Line Lender.. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

     10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or

104

(y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

     For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as nonpublic and confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to confidential information of a similar nature.

     Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

     10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

     10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude

105

voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

     10.10 Counterparts; Integration; Effectiveness.This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and, except as otherwise expressly provided in the Commitment Letter, supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     10.11 Survival of Representations and Warranties.All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

     10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     10.13 Replacement of Lenders. If (i) any Lender requests compensation under Section 3.04, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, (iii) any Lender is a Defaulting Lender, or (iv) any Lender is unwilling to approve an increase in the Borrowing Base or other amendment hereto which has been approved by Super-Majority Lenders but requires approval of such Lender to be effective, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this

106

Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

     (d) in the case of an assignment resulting from clause (iv) above, such assignment will result in effectiveness of such increase or amendment; and

     (e) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

     10.14 Governing Law; Jurisdiction; Etc.

     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     (b) SUBMISSION TO JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO

107

THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) WAIVER OF VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     10.15 Waiver of Jury Trial.EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     10.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent and the Arranger, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, the Administrative Agent and the Arranger each is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Administrative Agent nor the Arranger has assumed or will assume

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an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent or the Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and neither the Administrative Agent nor the Arranger has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent and the Arranger and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent nor the Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Administrative Agent and the Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent and the Arranger with respect to any breach or alleged breach of agency or fiduciary duty.

     10.17 USA PATRIOT Act Notice.Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

109

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

RIATA ENERGY, INC. (d/b/a SandRidge Energy, Inc.)
By:	/s/ Tom L. Ward
Name:	Tom L. Ward
Title:	Chairman and Chief Executive Officer

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Suzanne M. Paul
Name:	Suzanne M. Paul
Title:	Vice President

BANK OF AMERICA, N.A., as a Lender, Swing Line Lender and L/C Issuer
By:	/s/ Charles W. Patterson
Name:	Charles W. Patterson
Title:	Managing Director

SCHEDULE 2.01

COMMITMENTS
AND APPLICABLE PERCENTAGES

			Applicable
Lender	Commitment		Percentage
Bank of America, N.A.	$	750,000,000		100.000000000	%
Total	$	750,000,000		100.000000000	%

SCHEDULE 5.03

GOVERNMENTAL AUTHORIZATIONS

None.

SCHEDULE 5.05

SUPPLEMENT TO INTERIM FINANCIAL STATEMENTS

(Continued on next page)

     Supplement to Interim Financial Statements: Existing Indebtedness

	6/30/2006		9/30/2006		11/13/2006		Collateral
SYMBOL ENERGY
LARCO		2,287,129.15		2,287,129.15		2,287,129.15	NA
SAGEBRUSH
BANK OF AMERICA		4,000,000.00		4,000,000.00		4,000,000.00	All Bank of America cash accounts
ROC		700,000.00		1,325,000.00		1,325,000.00	NA
PREMIUM ASSIGNMENT		10,359.97		—			NA
		4,710,359.97		5,325,000.00		5,325,000.00
ALSATE
N/P REI		7,970,907.91		7,970,907.91		7,970,907.91	NA
PREMIUM ASSIGNMENT		322,860.95		304,162.45		229,672.13	Unsecured
		8,293,768.86		8,275,070.36		8,200,580.04
HONDO HEAVY HAUL
N/P JOHN DEERE		—		—		168,012.51	John Deere 724J Loader with 9' Forks
N/P PACCAR FINANCIAL		384,994.98		358,536.00		351,780.61	Quantity of 6 2003 Peterbilt 379-127 Vehicles
		384,994.98		358,536.00		519,793.12
LARIAT
MERRILL LYNCH #1		15,672,564.49		14,778,781.18		14,473,910.39	Rig #1 - Rig #7 and Ancillary Equipment
MERRILL LYNCH #2		2,002,641.96		1,856,607.25		1,818,373.93	Rig #13 and All Associated Equipment
MERRILL LYNCH #3		4,105,940.24		3,890,110.21		3,815,375.61	Rig #12 and All Associated Equipment
MERRILL LYNCH #4		2,109,383.64		2,000,975.86		1,963,550.55	Rig #14 and All Associated Equipment
MERRILL LYNCH #5		914,242.41		869,762.16		854,396.64	Service/Workover Rigs
MERRILL LYNCH #6		1,589,597.17		1,512,265.89		1,485,551.88	Rig #15 and All Associated Equipment
MERRILL LYNCH #7		1,837,650.55		1,749,080.20		1,718,787.04	Rig #16 and All Associated Equipment

	6/30/2006		9/30/2006		11/13/2006		Collateral
MERRILL LYNCH #8		2,318,074.35		2,207,733.29		2,169,571.35	Rig #19 and All Associated Equipment
MERRILL LYNCH #9		812,153.10		774,503.80		761,471.46	Misc Trucks & Equipment
MERRILL LYNCH #10		8,134,304.10		5,766,007.12		5,766,007.12	Rig #22 and 3 Pulling Units
MERRILL LYNCH #11		5,924,100.00		7,918,474.04		7,807,394.01	Rig #24 and All Associated Equipment
MERRILL LYNCH #12		—		7,997,535.00		7,916,205.44	Rig #26
MERRILL LYNCH #13		—		888,615.00		888,615.00	Pulling Units 11, 12, 13, & 17
MERRILL LYNCH #14		—		—		6,220,305.00	Rig #28
PREMIUM ASSIGNMENT		441,536.00		254,692.21		128,148.37	Unsecured
DAIMLER CHRYSLER #7493		1,288.60		—		0.00	NA
DAIMLER CHRYSLER #11970		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
DAIMLER CHRYSLER #11974		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #83592		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #83593		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #81856		38,941.00		35,915.54		33,867.81	2007 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #66004		83,400.00		77,119.75		72,869.43	2007 Western Star 4900 Tractor
N/P DIAMLERCHRYSLER #81858		40,320.19		37,294.73		35,246.11	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81859				38,521.62		36,474.56	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81860				38,521.62		36,474.46	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81861				39,535.67		37,501.23	2007 Sterling Acterra Tractor
N/P JOHN DEERE #2582		95,019.00		77,576.97		65,853.97	2005 330CLC Excavator
N/P JOHN DEERE CREDIT #9496		42,503.97		39,359.77		37,226.34	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6211		76,246.09		70,605.85		66,778.80	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #2526		39,847.85		36,900.15		34,900.04	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6277		70,985.96		65,734.84		62,171.82	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #64644				61,286.53		57,754.11	544H Loader
N/P JOHN DEERE CREDIT #79513		78,447.04		72,458.80		68,395.35	544H Loader
N/P JOHN DEERE CREDIT #79321		58,765.00		54,417.91		51,468.28	544H Loader

	6/30/2006		9/30/2006		11/13/2006		Collateral
N/P JOHN DEERE CREDIT #87862						72,076.66	544H Loader
JOHN DEERE CREDIT #6762		17,207.00		14,048.33		11,925.55	2005 310SG Wheel Loader Backhoe
N/P JDC #3291		6,357.00		1,600.45		0.00	NA
N/P JDC #3935		118,732.00		102,352.48		91,272.96	724J Loader
CIT GROUP		5,504.00
PACCAR #24856 & #24870				155,126.70		149,818.25	Quantity of 2 2004 Peterbilts
PACCAR		147,882.47		114,592.70		92,124.20	Kenworths
PACCAR #5780267						296,538.19	Quantity of 2 2007 Peterbilts and Quantity of 2 2004 Peterbilts
PACCAR #5783865						152,716.41	Quantity of 2 2004 Peterbilts
GMAC #9231		3,393.16		846.15
GMAC #9210		1,942.00		—			NA
		47,018,494.77		53,808,158.87		59,546,586.14
REI
BANK OF AMERICA		36,435,900.00		102,403,656.50		117,452,113.25	Oil & Gas Properties
LARCO
RIATA ENERGY		5,635,243.89		5,635,243.89		5,635,243.89	NA
RIAGRA
N/P REI		8,983,980.36		8,983,980.36		8,983,980.36	NA
JOHN DEERE		—		—		0.00	NA
		8,983,980.36		8,983,980.36		8,983,980.36
ROC
N/P REI		62,333.53		62,333.53		62,333.53	NA
PREMIUM ASSIGNMENT		6,108.00		—		0.00	NA
		68,441.53		62,333.53		62,333.53
PSEC
N/P REI		31,813,722.36		31,813,722.36		31,813,722.36	NA

	6/30/2006		9/30/2006		11/13/2006		Collateral
PREMIUM ASSIGNMENT		71,336.64		38,566.48		30,967.38	Unsecured
SUBORDINATED DEBT-REI		6,540,000.00		6,540,000.00		6,540,000.00	NA
SUBORDINATED DEBT-OUTSIDE		—
		38,425,059.00		38,392,288.84		38,384,689.74
PSPC
N/P REI		5,902,097.77		5,902,097.77		5,902,097.77	NA
HONDO
PACCAR		9,640.31		—		0.00	NA
TOTAL		158,155,110.59		231,433,495.27		252,299,546.99
LESS INTER-CO NOTES		69,895,414.97		70,520,414.97		70,520,414.97
TOTAL		88,259,695.62		160,913,080.30		181,779,132.02

SCHEDULE 5.06

LITIGATION

     ConocoPhillips Company, (Successor by merger to Conoco, Inc.), Plaintiff, vs. Riata Energy, Inc., Wes-Tex Drilling Company, L.P., Manti Resources, Inc., and Manti Longfellow, Ltd., Defendants; No. 9846; In the 112^th District Court in and for Pecos County, Tx

     Riata Energy, Inc. and Riata Piceance, LLC, Plaintiffs, V. Elliott Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P., Defendants.; No. 04-11461-E; In the 101^st Judicial District Court in and for Dallas County, Tx

     Harvey Y. Yates Company, Plaintiff, v Riata Energy, Inc. Defendant; No. 10376; In the 112^TH District Court in and for Pecos County, Tx

SCHEDULE 5.09

ENVIRONMENTAL MATTERS

None.

SCHEDULE 5.13

SUBSIDIARIES,
OTHER EQUITY INVESTMENTS
AND LOAN PARTY INFORMATION

(Continued on next page)

SCHEDULE 5.13

Riata Energy, Inc. dba SandRidge Energy, Inc.

PART A AND PART B — all Subsidiaries and Equity Interests of Loan Parties

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
REI	Riata Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0002820
SUBSIDIARY ENTITIES
	Algerita Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1400800	100%REI
AEI	Alsate Management and Investment Co	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541245	100%REI
	Cup Of The Day #1, LLC	701 S. Tyler, Ste 102	Amarillo, TX 79201	13-4301747	100%AEI
CSLLC	Chaparral Supply, LLC	P. O. Box 1417	Ft. Stockton, Texas 79735	26-0036758	100%AEI
IEL	Integra Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2887527	85%AEI
	Cholla Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	01-0557493	100%IEL
CHOLP	Cholla Pipeline, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	26-0025092	36%IEL, 17%ROC
TPL	Transpecos Logging, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2897434	100%AEI
	Black Bayou Exploration, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-4790561	100%REI
LSI	Lariat Services, Inc.	2402 West Wall	Midland, TX 79701	75-2500702	100%REI
LARCO	Lariat Compression Company	5432 N. Highway 1053	Ft. Stockton, TX 79735	75-2545523	100%LSI
SYMENE	Symbol Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2882968	100%LARCO
HONDO	Hondo Heavy Haul	13416 W. 1-20 East	Odessa, TX 79765	20-3568524	100%LSI
	Larclay, GP, LLC	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4727861	50%LSI
	Larclay, L.P.	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4728095	50%LSI
MCRLLC	Midcontinent Resources, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0096928	100%REI
PSEML	PetroSource Energy Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1237622	100%REI
PSEC	PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2629471	99%REI, 1% PSEM
PSCO2	PSCO2, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0547903	99%PSEC, 1% PSEML
PSPC	PetroSource Production Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1918006	99%PSEC, 1% PSEML
	PSE Holdings, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2950920	100%REI
PSEM	PSE Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2622462	100%REI
RLC	Riagra Land & Cattle	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2569335	100%REI
RDI	Riata Drilling Company, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2563168	100%REI
RIAN	Riata Energy Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0333569	100%REI
REIPIC	Riata Piceance, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0023468	100%REI
	Riata Wolfcamp Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2214412	100%REI
ROC	ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541148	100%REI
SBP	Sagebrush Pipeline, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1550515	70%ROC
SMM	Sierra Madera Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	43-1969581	100%REI
SMCO2	Sierra Madera CO2 Pipeline, Ltd	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0881558	99%REI, 1% SMM

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
SandRidge Holdings, Inc. Acquisition		1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-5878401	100% REI
NEG	NEG Oil & Gas, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	03-0573934	100% Sandridge
SUBSIDIARY ENTITIES
NEGH	NEG Holding, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2958833	100%NEG
NEGO	NEG Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776535	100%NEGH
NGXGP	NGX GP of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776542	100%NEGO
NGXLP	NGX LP Of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776545	100%NEGO
NGXELP	NGX Energy Limited Partnership	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776546	99%NGXLP, 1%NGXGP
SHANA	Shana National LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776549	100%NEGO
MIDR	Mid River, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776548	100%NEG
OFFGP	Offshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776539	100%NEG
OFFLP	Offshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776538	100%NEG
NOFFSH	National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	11-3758786	99%OFFLP, 1%OFFGP
ONGP	Onshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0833283	100%NEG
ONLP	Onshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776536	100%NEG
NONSH	National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0953489	99%ONLP, 1%ONGP
GBPIPE	Galveston Bay Pipeline Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0595703	100%NONSH
GBPROC	Galveston Bay Processing Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0570422	100%NONSH
PART C — LOAN PARTIES INFORMATION

Company Name	Address	City/State/Zip	Jurisdiction	FEIN Number
Alsate Investment and Management Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541245
Integra Energy, L.L.C.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2887527
Lariat Compression Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2545523
NEG Oil & Gas LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	03-0573934
NEG Operating LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	87-0776535
National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	11-3758786
National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	47-0953489
PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-2629471
PetroSource Production Company, L.P.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-1918006
Riata Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	76-0002820
ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541148
Sandridge Holdings, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	20-5878401

SCHEDULE 5.22

SALE OF PRODUCTION

None.

SCHEDULE 7.01

EXISTING LIENS

Liens granted to Bank of America, N.A. on the plant and pipeline owned by SageBrush Pipeline, LLC pursuant to $4,000,000 Note (the “Note”) issued by SageBrush Pipeline, LLC as Borrower to Bank of America, N.A. as lender with a maturity of January 31, 2007.

SCHEDULE 7.03

EXISTING INDEBTEDNESS

(Continued on next page)

	6/30/2006		9/30/2006		11/13/2006		Collateral
SYMBOL ENERGY
LARCO		2,287,129.15		2,287,129.15		2,287,129.15	NA
SAGEBRUSH
BANK OF AMERICA		4,000,000.00		4,000,000.00		4,000,000.00	All Bank of America cash accounts
ROC		700,000.00		1,325,000.00		1,325,000.00	NA
PREMIUM ASSIGNMENT		10,359.97		—			NA
		4,710,359.97		5,325,000.00		5,325,000.00
ALSATE
N/P REI		7,970,907.91		7,970,907.91		7,970,907.91	NA
PREMIUM ASSIGNMENT		322,860.95		304,162.45		229,672.13	Unsecured
		8,293,768.86		8,275,070.36		8,200,580.04
HONDO HEAVY HAUL
N/P JOHN DEERE		—		—		168,012.51	John Deere 724J Loader with 9’ Forks Quantity of 6 2003 Peterbilt 379-127 Vehicles
N/P PACCAR FINANCIAL		384,994.98		358,536.00		351,780.61
		384,994.98		358,536.00		519,793.12
LARIAT
MERRILL LYNCH #1		15,672,564.49		14,778,781.18		14,473,910.39	Rig #1 - Rig #7 and Ancillary Equipment
MERRILL LYNCH #2		2,002,641.96		1,856,607.25		1,818,373.93	Rig #13 and All Associated Equipment
MERRILL LYNCH #3		4,105,940.24		3,890,110.21		3,815,375.61	Rig #12 and All Associated Equipment
MERRILL LYNCH #4		2,109,383.64		2,000,975.86		1,963,550.55	Rig #14 and All Associated Equipment
MERRILL LYNCH #5		914,242.41		869,762.16		854,396.64	Service/Workover Rigs
MERRILL LYNCH #6		1,589,597.17		1,512,265.89		1,485,551.88	Rig #15 and All Associated Equipment
MERRILL LYNCH #7		1,837,650.55		1,749,080.20		1,718,787.04	Rig #16 and All Associated Equipment
MERRILL LYNCH #8		2,318,074.35		2,207,733.29		2,169,571.35	Rig #19 and All Associated Equipment

	6/30/2006		9/30/2006		11/13/2006		Collateral
MERRILL LYNCH #9		812,153.10		774,503.80		761,471.46	Misc Trucks & Equipment
MERRILL LYNCH #10		8,134,304.10		5,766,007.12		5,766,007.12	Rig #22 and 3 Pulling Units
MERRILL LYNCH #11		5,924,100.00		7,918,474.04		7,807,394.01	Rig #24 and All Associated Equipment
MERRILL LYNCH #12		—		7,997,535.00		7,916,205.44	Rig #26
MERRILL LYNCH #13		—		888,615.00		888,615.00	Pulling Units 11, 12, 13, & 17
MERRILL LYNCH #14		—		—		6,220,305.00	Rig #28
PREMIUM ASSIGNMENT		441,536.00		254,692.21		128,148.37	Unsecured
DAIMLER CHRYSLER #7493		1,288.60		—		0.00	NA
DAIMLER CHRYSLER #11970		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
DAIMLER CHRYSLER #11974		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #83592		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #83593		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #81856		38,941.00		35,915.54		33,867.81	2007 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #66004		83,400.00		77,119.75		72,869.43	2007 Western Star 4900 Tractor
N/P DIAMLERCHRYSLER #81858		40,320.19		37,294.73		35,246.11	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81859				38,521.62		36,474.56	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81860				38,521.62		36,474.46	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81861				39,535.67		37,501.23	2007 Sterling Acterra Tractor
N/P JOHN DEERE #2582		95,019.00		77,576.97		65,853.97	2005 330CLC Excavator
N/P JOHN DEERE CREDIT #9496		42,503.97		39,359.77		37,226.34	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6211		76,246.09		70,605.85		66,778.80	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #2526		39,847.85		36,900.15		34,900.04	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6277		70,985.96		65,734.84		62,171.82	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #64644				61,286.53		57,754.11	544H Loader
N/P JOHN DEERE CREDIT #79513		78,447.04		72,458.80		68,395.35	544H Loader
N/P JOHN DEERE CREDIT #79321		58,765.00		54,417.91		51,468.28	544H Loader

	6/30/2006		9/30/2006		11/13/2006		Collateral
N/P JOHN DEERE CREDIT #87862						72,076.66	544H Loader
JOHN DEERE CREDIT #6762		17,207.00		14,048.33		11,925.55	2005 310SG Wheel Loader Backhoe
N/P JDC #3291		6,357.00		1,600.45		0.00	NA
N/P JDC #3935		118,732.00		102,352.48		91,272.96	724J Loader
CIT GROUP		5,504.00
PACCAR #24856 & #24870				155,126.70		149,818.25	Quantity of 2 2004 Peterbilts
PACCAR		147,882.47		114,592.70		92,124.20	Kenworths
							Quantity of 2 2007 Peterbilts and
PACCAR #5780267						296,538.19	Quantity of 2 2004 Peterbilts
PACCAR #5783865						152,716.41	Quantity of 2 2004 Peterbilts
GMAC #9231		3,393.16		846.15
GMAC #9210		1,942.00		—			NA
		47,018,494.77		53,808,158.87		59,546,586.14
REI
BANK OF AMERICA		36,435,900.00		102,403,656.50		117,452,113.25	Oil & Gas Properties
LARCO
RIATA ENERGY		5,635,243.89		5,635,243.89		5,635,243.89	NA
RIAGRA
N/P REI		8,983,980.36		8,983,980.36		8,983,980.36	NA
JOHN DEERE		—		—		0.00	NA
		8,983,980.36		8,983,980.36		8,983,980.36
ROC
N/P REI		62,333.53		62,333.53		62,333.53	NA
PREMIUM ASSIGNMENT		6,108.00		—		0.00	NA
		68,441.53		62,333.53		62,333.53
PSEC
N/P REI		31,813,722.36		31,813,722.36		31,813,722.36	NA
PREMIUM ASSIGNMENT		71,336.64		38,566.48		30,967.38	Unsecured

	6/30/2006		9/30/2006		11/13/2006		Collateral
SUBORDINATED DEBT-REI		6,540,000.00		6,540,000.00		6,540,000.00	NA
SUBORDINATED DEBT-OUTSIDE		—
		38,425,059.00		38,392,288.84		38,384,689.74
PSPC
N/P REI		5,902,097.77		5,902,097.77		5,902,097.77	NA
HONDO
PACCAR		9,640.31		—		0.00	NA
TOTAL		158,155,110.59		231,433,495.27		252,299,546.99
LESS INTER-CO NOTES		69,895,414.97		70,520,414.97		70,520,414.97
TOTAL		88,259,695.62		160,913,080.30		181,779,132.02

SCHEDULE 10.02

ADMINISTRATIVE AGENT’S OFFICE;
CERTAIN ADDRESSES FOR NOTICES

BORROWER:
Riata Energy, Inc. (d/b/a Sandridge Energy, Inc.)
1601 Northwest Expressway, Suite 1600
Oklahoma City, OK 73118
Attention: Matt McCann
Telephone: (405) 753-5600
Telecopier: (405) 753-5988
Electronic Mail: mmccann@sdrge.com
Website Address:       www.sandridgeenergy.com
U.S. Taxpayer Identification Number: 76-0002820

ADMINISTRATIVE AGENT:

Administrative Agent’s Office
(for payments and Requests for Credit Extensions):
Bank of America, N.A.
Bank of America Plaza
901 Main Street
Mail Code: TX1-492-14-14
Dallas, TX 75202-3714
Attention: Tracy F. Mackie
Telephone: (214) 209-2154
Telecopier: (214) 290-9425
Account No.: 129-2000-883
Ref: SandRidge Energy, Inc.
ABA# 026009593

Other Notices as Administrative Agent:
Bank of America, N.A.
Agency Management
231 South LaSalle Street
Mail Code: IL1-231-08-30
Chicago, IL 60697
Attention: Suzanne M. Paul
Telephone: (312) 923-1640
Telecopier: (877) 206-8435
Electronic Mail: suzanne.m.paul@bankofamerica.com

L/C ISSUER:

Bank of America, N.A.
Trade Operations
1000 West Temple Street
Mail Code: CA9-705-07-05
Los Angeles, CA 90012-1514
Attention: Tai Anh Lu
Telephone: (213) 481-7840
Telecopier: (213) 580-8442
Electronic Mail: tai_anh.lu@bankofamerica.com

SWING LINE LENDER:

Bank of America, N.A.
Bank of America Plaza
901 Main Street
Mail Code: TX1-492-14-14
Dallas, TX 75202-3714
Attention: Tracy F. Mackie
Telephone: (214) 209-2154
Telecopier: (214) 290-9425
Account No.: 129-2000-883
Ref: SandRidge Energy, Inc.
ABA# 026009593

SCHEDULE 10.06

PROCESSING AND RECORDATION FEES

     The Administrative Agent will charge a processing and recordation fee (an “Assignment Fee”) in the amount of $2,500 for each assignment; provided, however, that in the event of two or more concurrent assignments to members of the same Assignee Group (which may be effected by a suballocation of an assigned amount among members of such Assignee Group) or two or more concurrent assignments by members of the same Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group), the Assignment Fee will be $2,500 plus the amount set forth below:

Transaction	Assignment Fee
First four concurrent assignments or suballocations to members of an Assignee Group (or from members of an Assignee Group, as applicable)		-0-
Each additional concurrent assignment or suballocation to a member of such Assignee Group (or from a member of such Assignee Group, as applicable)	$	500

EXHIBIT A

FORM OF COMMITTED LOAN NOTICE

Date:                     , _____

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned hereby requests (select one):

     o A Borrowing of Committed Loans            o A conversion or continuation of Loans

1.	On			(a Business Day).
2.	In the amount of $		.
			.
3.	Comprised of		.
			.
		[Type of Committed Loan requested]
4.	For Eurodollar Rate Loans: with an Interest Period of _____________ months.

     The Committed Borrowing, if any, requested herein complies with the provisos to the first sentence of Section 2.01 of the Agreement.

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Committed Loan Notice

A-1

EXHIBIT B

FORM OF SWING LINE LOAN NOTICE

Date:                     , _____

To: Bank of America, N.A., as Swing Line Lender Bank of America, N.A., as Administrative Agent

     Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned hereby requests a Swing Line Loan:

1.	On	(a Business Day).
2.	In the amount of $		.
		.

     The Swing Line Borrowing requested herein complies with the requirements of the provisos to the first sentence of Section 2.04(a) of the Agreement.

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Swing Line Loan Notice

B-1

EXHIBIT C

FORM OF NOTE

     FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to                      or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

     The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. Except as otherwise provided in Section 2.04(f) of the Agreement with respect to Swing Line Loans, all payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

     This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Note is also entitled to the benefits of the Guaranty and is secured by the Collateral. Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

     The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

Form of Note

C-1

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

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Note

C-2

LOANS AND PAYMENTS WITH RESPECT THERETO

				Amount of
				Principal or	Outstanding
			End of	Interest	Principal
	Type of	Amount of	Interest	Paid This	Balance	Notation
Date	Loan Made	Loan Made	Period	Date	This Date	Made By

Form of Note

C-3

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                     ,

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                          of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

     1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

     1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

     2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

     3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

Form of Compliance Certificate

D-1

[select one:]

     [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

—or—

     [the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

     4. The representations and warranties of the Borrower contained in Article V of the Agreement, and any representations and warranties of any Loan Party that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered.

     5. The financial covenant analyses and information set forth on Schedules 2 and 3 attached hereto are true and accurate on and as of the date of this Certificate.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                     ,                     .

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Compliance Certificate

D-2

For the Quarter/Year ended                                          (“Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

I.	Section 7.11 (a) – Consolidated Fixed Charge Coverage Ratio.
	A.	Consolidated EBITDAX for four consecutive fiscal quarters ending on above date (“Subject Period”) (from Schedule 3)	$
	B.	Consolidated Fixed Charges for Subject Period:	$
	C.	Consolidated Fixed Charge Coverage Ratio (Line I.A ¸ Line I.B):	to 1
	D.	Minimum Required Consolidated Fixed Charge Coverage Ratio	2.5 to 1
II.	Section 7.11 (b) – Consolidated Leverage Ratio.
	A.	Consolidated Funded Indebtedness at Statement Date:	$
	B.	Consolidated EBITDAX for Subject Period (Line I.A.):	$
	C.	Consolidated Leverage Ratio (Line II.A ¸ Line II.B):	to 1
	D.	Maximum Permitted Consolidated Leverage Ratio	4 to 1
III.	Section 7.11 (c) – Consolidated Current Ratio.
	A.	Consolidated Current Assets at Statement Date:	$
	B.	Consolidated Current Liabilities at Statement Date:	$
	C.	Consolidated Current Ratio (Line III.A ¸ Line III.B):	to 1
	D.	Minimum Required Consolidated Current Ratio:	1 to 1

Form of Compliance Certificate

D-3

For the Quarter/Year ended                                          (“Statement Date”)

SCHEDULE 3

to the Compliance Certificate

($ in 000’s)

Consolidated EBITDAX

(in accordance with the definition of Consolidated EBITDAX

as set forth in the Agreement)

	Quarter	Quarter	Quarter	Quarter	Twelve Months
Consolidated	Ended	Ended	Ended	Ended	Ended
EBITDA
Consolidated Net Income
+ income or franchise taxes
+ interest expense
+ depreciation expense
+ amortization expense
+ exploration expense
+ non-cash loss on change in fair value of derivative instruments
+ other non-cash expenses
- non-cash gain on change in fair value of derivative instruments
- income tax credits
- interest income
- other non-cash income
= Consolidated EBITDAX

Form of Compliance Certificate

D-4

EXHIBIT E

ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]¹ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]² Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]³ hereunder are several and not joint.]⁴ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Line Loans included in such facilities⁵) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims,

1	For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
2	For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
3	Select as appropriate.
4	Include bracketed language if there are either multiple Assignors or multiple Assignees.
5	Include all applicable subfacilities.

Form of Assignment and Assumption

E-1

malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.	Assignor[s]:
2.	Assignee[s]:
	[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]
3.	Borrower(s):
4.	Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement
5.	Credit Agreement: Credit Agreement, dated as of November 21, 2006 among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.) , the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer, and Swing Line Lender
6.	Assigned Interest[s]:6

			Aggregate		Percentage
			Amount of	Amount of	Assigned of
		Facility	Commitment/Loans	Commitment/Loans	Commitment/		CUSIP
Assignor[s]7	Assignee[s]8	Assigned9	for all Lenders10	Assigned	Loans11		Number
			$	$		%
			$	$		%
			$	$		%

[7.      Trade Date:                                          ]¹²

6	The reference to “Loans” in the table should be used only if the Credit Agreement provides for Term Loans.
7	List each Assignor, as appropriate.
8	List each Assignee, as appropriate.
9	Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Revolving Credit Commitment”, “Term Loan Commitment”, etc.).
10	Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.
11	Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
12	To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

Form of Assignment and Assumption

E-2

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

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

ASSIGNOR [NAME OF ASSIGNOR]
By:
	Title:
ASSIGNEE [NAME OF ASSIGNEE]
By:
	Title:

[Consented to and]¹³ Accepted:

BANK OF AMERICA, N.A., as
  Administrative Agent, L/C Issuer and Swing Line Lender

By:
	Title:

Consented to:¹⁴

RIATA ENERGY, INC.
(d/b/a SandRidge Energy, Inc.)

By:
	Title:

13	To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
14	To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.

Form of Assignment and Assumption

E-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

[                    ]¹⁵

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

     1. Representations and Warranties.

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

     1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b)(iii) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section ___thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without

¹⁵ Describe Credit Agreement at option of Administrative Agent.

Annex A-1

reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

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

     3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York [confirm that choice of law provision parallels the Credit Agreement].

Annex A-2

EXHIBIT F

EXECUTION COPY

GUARANTY

dated as of November 21, 2006

from

THE GUARANTORS NAMED HEREIN

and

THE ADDITIONAL GUARANTORS REFERRED TO HEREIN

in favor of

THE GUARANTEED PARTIES REFERRED HEREIN

TABLE OF CONTENTS

Section	Page
Section 1. Guaranty; Limitation of Liability.		1
Section 2. Guaranty Absolute.		2
Section 3. Waivers and Acknowledgments.		3
Section 4. Subrogation.		4
Section 5. Payments Free and Clear of Taxes, Etc.		5
Section 6. Representations and Warranties.		7
Section 7. Covenants.		8
Section 8. Amendments, Guaranty Supplements, Etc.		8
Section 9. Notices, Etc.		8
Section 10. No Waiver; Remedies.		9
Section 11. Right of Set-off.		9
Section 12. Subordination		9
Section 13. Continuing Guaranty; Assignments under the Credit Agreement.		10
Section 14. Execution in Counterparts.		11
Section 15. Terms Generally; References and Titles.		11
Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.		12
Exhibit A — Guaranty Supplement

GUARANTY

          GUARANTY dated as of November 21, 2006 made by the Persons listed on the signature pages hereof and the Additional Guarantors (as defined in Section 8(b)) (such Persons so listed and the Additional Guarantors being, collectively, the “Guarantors” and, individually, each a “Guarantor”) in favor of the Guaranteed Parties (as defined below).

          PRELIMINARY STATEMENT. Riata Energy Inc. (d/b/a SandRidge Energy Inc.), a Texas Corporation (the “Borrower”), is party to a Credit Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with certain Lenders party thereto, Bank of America, N.A., as administrative agent (the “Administrative Agent”), L/C Issuer and Swing Line Lender. Each Guarantor may receive, directly or indirectly, a portion of the proceeds of the Loans under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to the making of Loans and the issuance of Letters of Credit by the Guaranteed Parties under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty. The Lenders, the Administrative Agent, the Swing Line Lender, the L/C Issuer and Lender Counterparties are herein called the “Guaranteed Parties”.

          NOW, THEREFORE, in consideration of the premises and in order to induce the Guaranteed Parties to enter into, and to make Loans and to issue Letters of Credit under, the Credit Agreement and to enter into Swap Contracts with Lender Counterparties from time to time, each Guarantor, jointly and severally with each other Guarantor, agrees as follows:

          Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty, any other Loan Document or any Swap Contract with a Lender Counterparty. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) Each Guarantor and by its acceptance of this Guaranty the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform

Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the Guarantors irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means law with respect to any proceeding of the type referred to in Section 8.01(f) of the Credit Agreement or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty or any other guaranty, then, subject to Section 4, each Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents and Swap Contracts with Lender Counterparties.

          Section 2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents and Swap Contracts with Lender Counterparties, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of any other Loan Party arising under the Loan Documents or otherwise with respect to any Loan or Letter of Credit or any Swap Contract with a Lender Counterparty, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

          (a) any lack of validity or enforceability of any Loan Document or any Swap Contract with a Lender Counterparty or any agreement or instrument relating thereto;

          (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, of any other Loan Party under or in respect of the Loan Documents or Swap Contracts with Lender Counterparties, or any other amendment or waiver of or any consent to departure from any Loan Document or Swap Contract with a Lender Counterparty, including any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

          (c) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

2

          (d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other obligations of any Loan Party arising under the Loan Documents or otherwise with respect to any Loan or Letter of Credit or any Swap Contract with a Lender Counterparty or any other assets of any Loan Party or any of its Subsidiaries;

          (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

          (f) any failure of any Guaranteed Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to such Guaranteed Party;

          (g) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

          (h) any other circumstance (including any statute of limitations) or any existence of or reliance on any representation by any Guaranteed Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Guaranteed Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had been due but not made at such time.

          Section 3. Waivers and Acknowledgments. (a) Each Guarantor unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Guaranteed Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any Collateral.

          (b) Each Guarantor unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

          (c) Each Guarantor unconditionally and irrevocably waives:

     (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Guaranteed Party that in any manner impairs, reduces,

3

releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person or any Collateral, and

     (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

          (d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage or other security agreement by non-judicial sale, and each Guarantor hereby waives any defense to the recovery by the Administrative Agent and the other Guaranteed Parties against such Guarantor of any deficiency after such non-judicial sale and any defense or benefits that may be afforded by applicable law.

          (e) Each Guarantor unconditionally and irrevocably waives any duty on the part of any Guaranteed Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party or any of its Subsidiaries now or hereafter known by such Guaranteed Party.

          (f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and Swap Contracts with Lender Counterparties and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits and it has determined that this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of such Guarantor.

          Section 4. Subrogation. Each Guarantor unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty or any other Loan Document or obligations under Swap Contracts with Lender Counterparties, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Guaranteed Party against the Borrower, any other Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit and all Swap Contracts with Lender Counterparties shall have expired or been terminated or cash collateralized to the satisfaction of the LC Issuer or the Lender Counterparty, as the case may be, and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of:

4

          (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty,

          (b) the irrevocable termination or expiration in whole of all Commitments and

          (c) the latest date of expiration or termination of all Letters of Credit and all Swap Contracts with Lender Counterparties,

such amount shall be received and held in trust for the benefit of the Guaranteed Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents and the Swap Contracts with Lender Counterparties, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If:

     (i) any Guarantor shall make payment to any Guaranteed Party of all or any part of the Guaranteed Obligations,

     (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash,

     (iii) all Commitments shall have been irrevocably terminated or shall have irrevocably expired in whole and

     (iv) all Letters of Credit and all Swap Contracts with Lender Counterparties shall have expired or been terminated or cash collateralized to the satisfaction of the LC Issuer or the Lender Counterparty, as the case may be,

the Guaranteed Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment or other condition made by such Guarantor pursuant to this Guaranty.

          Section 5. Payments Free and Clear of Taxes, Etc.

          (a) Any and all payments by or on account of any obligation of any Guarantor hereunder or under any other Loan Document or Swap Contracts with Lender Counterparties shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if a Guarantor shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, the LC Issuer, or the Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and

5

(iii) such Guarantor shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

          (b) Without limiting the provisions of subsection (a) above, each Guarantor shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

          (c) Each Guarantor shall indemnify each Guaranteed Party, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes which (i) arise from any payment made hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and (ii) are paid by such Guaranteed Party, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority but net of any foreign tax credit or the benefit of any deduction or other tax benefit determined in good faith by such Guaranteed Party to be attributable to the imposition of such Indemnified Tax. A certificate as to the amount of such payment or liability delivered in good faith to a Guarantor by a Guaranteed Party (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Guaranteed Party, shall be conclusive absent manifest error.

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

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Guarantor is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document or any Swap Contracts with Lender Counterparties shall deliver to such Guarantor (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by a Guarantor or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by a Guarantor or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by such Guarantor or the Administrative Agent as will enable such Guarantor or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

          (f) Without limiting the generality of the foregoing, in the event that a Guarantor is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under the Credit Agreement (and from time to time thereafter upon the request of the

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Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

          (g) If any Guaranteed Party determines that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Guarantor or with respect to which a Guarantor has paid additional amounts pursuant to this Section, it shall pay to such Guarantor an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Guarantor under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Guaranteed Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that such Guarantor, upon the request of such Guaranteed Party, agrees to repay the amount paid over to such Guarantor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Guaranteed Party in the event Guaranteed Party is required to repay such refund to such Governmental Authority. This Guaranty shall not be construed to require any Guaranteed Party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Guarantor or any other Person, and each Guaranteed Party shall make its determination under this subsection in its sole discretion.

          Section 6. Representations and Warranties. Each Guarantor makes each representation and warranty made in the Loan Documents and Swap Contracts with Lender Counterparties by the Borrower with respect to such Guarantor and each Guarantor hereby further represents and warrants as follows:

          (a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

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          (b) Such Guarantor has, independently and without reliance upon any Guaranteed Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and such Guarantor has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party.

          Section 7. Covenants. So long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding, any Guaranteed Party shall have any Commitment or any Swap Contract with a Lender Counterparty shall be in effect, each Guarantor will perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan Documents and Swap Contracts with Lender Counterparties on its or their part to be performed or observed or that the Borrower has agreed to cause such Guarantor or such Subsidiaries to perform or observe.

          Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor herefrom shall in any event be effective unless the same shall be entered into in accordance with Section 10.01 of the Credit Agreement.

          (b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Subsidiary Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement and all other Guaranty Supplements.

          Section 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied, or delivered to it, if to any Guarantor, addressed to it in care of the Borrower at the Borrower’s address in accordance with Section 10.02 of the Credit Agreement, if to the Administrative Agent or any other Guaranteed Party, at its address in accordance with Section 10.02 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively. Delivery of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart thereof.

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          Section 10. No Waiver; Remedies. No failure on the part of any Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

          Section 11. Right of Set-off. To secure the repayment of the Guaranteed Obligations, each Guarantor grants to each Guaranteed Party, and each of their respective Affiliates, a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Guaranteed Party, at common Law, under the Loan Documents and Swap Contracts with Lender Counterparties, or otherwise, and each of which shall be upon and against:

          (a) any and all moneys, securities or other property (and the proceeds therefrom) of such Guarantor now or hereafter held or received by or in transit to any Guaranteed Party, from or for the account of such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise,

          (b) any and all deposits (general or special, time or demand, provisional or final) of such Guarantor with any Guaranteed Party, or any of their respective Affiliates and

          (c) any other credits and claims of Borrower at any time existing against any Guaranteed Party, including claims under certificates of deposit. At any time and from time to time after the occurrence of any Event of Default, each Guaranteed Party is authorized to foreclose upon, or to offset against the Guaranteed Obligations then due and payable (in either case without notice to such Guarantor), any and all items hereinabove referred to; irrespective of whether or not such Guaranteed Party shall have made any demand under this Guaranty, any other Loan Document or any Swap Contracts with Lender Counterparties and although such obligations of such Guarantor may be contingent or unmatured or are owed to a branch or office of such Guaranteed Party different from the branch or office holding such items.

The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other..

          Section 12. Subordination. Each Guarantor subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 12:

          (a) Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan

9

Party), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

          (b) In any proceeding under any Bankruptcy Law relating to any other Loan Party, the Guaranteed Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations.

          (c) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Guaranteed Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

          (d) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion:

     (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and

     (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

          Section 13. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall:

          (a) remain in full force and effect until it is released in accordance with the Credit Agreement,

          (b) be binding upon the Guarantor, its successors and assigns and

          (c) inure to the benefit of and be enforceable by the Guaranteed Parties and their permitted successors, transferees and assigns.

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Without limiting the generality of clause (c) of the immediately preceding sentence, any Guaranteed Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including all or any portion of its Commitments, the Loans owing to it and the Note or Notes held by it) or Swap Contracts with Lender Counterparties to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Guaranteed Party herein or otherwise, in each case as and to the extent provided in Section 10.06 of the Credit Agreement in the case of Loans and Commitments or the applicable Swap Contract in the case of a Swap Contract. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Guaranteed Parties.

          Section 14. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

          Section 15. Terms Generally; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context requires otherwise:

          (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

          (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns;

          (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Guaranty in its entirety and not to any particular provision hereof;

          (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Guaranty;

          (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time; and

          (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

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References to any document, instrument, or agreement shall include:

     (i) all exhibits, schedules, and other attachments thereto, and

     (ii) 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 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. 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.

          Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          (b) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACTS WITH LENDER COUNTERPARTIES, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR SWAP CONTRACT WITH A LENDER COUNTERPARTY SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY AGAINST ANY GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO

12

THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (d) EACH GUARANTOR IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9. NOTHING IN THIS GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

          (e) EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. EACH GUARANTOR (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS AND SWAP CONTRACTS WITH LENDER COUNTERPARTIES HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

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          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first-above written.

NEG OIL & GAS LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL ONSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL OFFSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
ROC GAS COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
LARIAT COMPRESSION COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

ALSATE MANAGEMENT AND INVESTMENT COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
INTEGRA ENERGY, L.L.C. By: Alsate Management and Investment Company,         managing member
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
PETROSOURCE ENERGY COMPANY, LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
PETROSOURCE PRODUCTION COMPANY, L.P.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NEG OPERATING LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

SANDRIDGE HOLDINGS, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

Exhibit A
To The
Guaranty

FORM OF GUARANTY SUPPLEMENT

_________ __, ____

BANK OF AMERICA, N.A., as Administrative Agent
9 West 57^th Street
New York, New York 10019

Credit Agreement dated as of November 21, 2006 among
Riata Energy Inc. (d/b/a SandRidge Energy Inc.) (the “Borrower”),
the Guaranteed Parties party to the Credit Agreement,
Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer

Ladies and Gentlemen:

          Reference is made to the above-captioned Credit Agreement and to the Guaranty referred to therein (such Guaranty, as in effect on the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, together with this Guaranty Supplement, being the “Guaranty”). Capitalized terms defined in the Guaranty or in the Credit Agreement and not otherwise defined herein are used herein as therein defined.

          Section 1. Guaranty; Limitation of Liability. (a) The undersigned absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty, any other Loan Document or any Swap Contract with a Lender Counterparty. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) The undersigned, and by their acceptance of this Guaranty Supplement, the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder. To

A-1

effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the undersigned hereby irrevocably agree that the Obligations of the undersigned under this Guaranty Supplement and the Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of the undersigned under this Guaranty Supplement and the Guaranty not constituting a fraudulent transfer or conveyance.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty Supplement, the Guaranty or any other guaranty, then, subject to Section 4, the undersigned will contribute, to the maximum extent permitted by applicable law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents and Swap Contracts with Lender Counterparties.

          Section 2. Obligations Under the Guaranty. The undersigned hereby agrees, as of the date first-above written, to be bound as a Guarantor by all of the terms and conditions of the Guaranty to the same extent as each of the other Guarantors thereunder. The undersigned further agrees, as of the date first above written, that each reference in the Subsidiary Guaranty to an “Additional Guarantor” or a “Guarantor” shall also mean and be a reference to the undersigned, and each reference in any other Loan Document to a “Guarantor” or a “Loan Party” shall also mean and be a reference to the undersigned.

          Section 3. Representations and Warranties. As of the date first-above written, the undersigned makes each representation and warranty set forth in Section 6 of the Guaranty to the same extent as each other Guarantor.

          Section 4. Delivery by Telecopier. Delivery of an executed counterpart of a signature page to this Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty Supplement.

          Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          (b) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN

A-2

SUCH FEDERAL COURT. THE UNDERSIGNED AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY SUPPLEMENT, THE GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY AGAINST THE UNDERSIGNED OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (d) THE UNDERSIGNED IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9 OF THE GUARANTY. NOTHING IN THIS GUARANTY SUPPLEMENT OR THE GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

          (e) THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY SWAP CONTRACT WITH A LENDER COUNTERPARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. THE UNDERSIGNED (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS AND SWAP CONTRACTS WITH LENDER COUNTERPARTIES HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS

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SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

Very truly yours, [NAME OF ADDITIONAL GUARANTOR]
By
	Title:

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EXHIBIT G

OPINION OF COUNSEL TO LOAN PARTIES

EXHIBIT H

EXECUTION COPY

SECURITY AGREEMENT

dated as of November 21, 2006

from

the Grantors referred to herein,
Grantors,

to

BANK OF AMERICA, N.A.,
as Administrative Agent

TABLE OF CONTENTS

Section		Page
Section 1.	Grant of Security	2
Section 2.	Security for Obligations	5
Section 3.	Grantors Remain Liable	5
Section 4.	Delivery and Control of Security Collateral	5
Section 5.	Maintaining the Account Collateral	7
Section 6.	Representations and Warranties	9
Section 7.	Further Assurances	10
Section 8.	Post-Closing Changes; Collections on Receivables and Related Contracts	11
Section 9.	As to Intellectual Property Collateral	12
Section 10.	Voting Rights; Dividends; Etc.	13
Section 11.	Additional Shares	14
Section 12.	Administrative Agent Appointed Attorney-in-Fact	14
Section 13.	Administrative Agent May Perform	14
Section 14.	The Administrative Agent’s Duties	14
Section 15.	Remedies	15
Section 16.	Indemnity and Expenses	17
Section 17.	Subordination of Liens. Each Grantor confirms that:	19
Section 18.	Amendments; Waivers; Additional Grantors; Etc.	19
Section 19.	Notices, Etc.	20
Section 20.	Continuing Security Interest; Assignments under the Credit Agreement	20
Section 21.	Release; Termination	20
Section 22.	Terms Generally; References and Titles	21
Section 23.	Execution in Counterparts	22
Section 24.	Governing Law	22

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Schedules
Schedule I	—	Location, Type of Organization, Jurisdiction of Organization and Organizational Identification Number
Schedule II	—	Pledged Equity
Exhibits
Exhibit A	—	Form of Security Agreement Supplement
Exhibit B	—	Form of Deposit Account Control Agreement
Exhibit C	—	Form of Account Control Agreement (Deposit Account/Securities Account)
Exhibit D	—	Form of Securities Account Control Agreement
Exhibit E	—	Form of Intellectual Property Security Agreement
Exhibit F	—	Form of Intellectual Property Security Supplement

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SECURITY AGREEMENT

          SECURITY AGREEMENT dated as of November 21, 2006 made by RIATA ENERGY INC., a Texas corporation (d/b/a SandRidge Energy Inc.) (the “Borrower”), the other Persons listed on the signature pages hereof and the Additional Grantors (as defined in Section 18) (the Borrower, the Persons so listed and the Additional Grantors being collectively the “Grantors”), to BANK OF AMERICA, N.A.., as administrative agent (the “Administrative Agent”) for the Secured Parties (as hereinafter defined)).

PRELIMINARY STATEMENTS.

          (1) The Borrower has entered into the Credit Agreement dated as of November 21, 2006 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with certain Lenders party thereto and Bank of America, N.A., as administrative agent (the “Administrative Agent”).

          (2) As contemplated in the Credit Agreement, the Grantors owe, and may hereafter owe Obligations to Lender Counterparties. The Swap Contracts under which such Obligations are owed are herein called the “Lender Hedging Contracts”.

          (3) The Grantors are entering into this Agreement in order to grant to the Administrative Agent for the ratable benefit of the Secured Parties a security interest in the Collateral (as hereinafter defined).

          (4) Each Grantor is the owner of the shares of stock or other Equity Interests (the “Initial Pledged Equity”) set forth opposite such Grantor’s name on and as otherwise described in Schedule II hereto and issued by the Persons named therein.

          (5) It is a condition precedent to the making of Loans and the issuance of Letters of Credit by the Secured Parties under the Credit Agreement and the entry into Lender Hedging Contracts from time to time, that the Grantors shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement.

          (6) Each Grantor will derive substantial direct and indirect benefit from the transactions contemplated by the Loan Documents and the Lender Hedging Contracts.

          (7) Unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) and/or in the Federal Book Entry Regulations (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9 and/or the Federal Book Entry Regulations. “UCC” means the Uniform Commercial Code as in effect, from time to time, in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority. “Federal Book Entry Regulations” means (a)

the federal regulations contained in Subpart B (“Treasury/Reserve Automated Debt Entry System (TRADES)”) governing book-entry securities consisting of U.S. Treasury bonds, notes and bills and Subpart D (“Additional Provisions”) of 31 C.F.R. Part 357, 31 C.F.R. § 357.2, § 357.10 through § 357.14 and § 357.41 through § 357.44 and (b) to the extent substantially identical to the federal regulations referred to in clause (a) above (as in effect from time to time), the federal regulations governing other book-entry securities.

          NOW, THEREFORE, in consideration of the premises and in order to induce the Secured Parties to make Loans and issue Letters of Credit under the Credit Agreement and to induce the Secured Parties to ender into the Lender Hedging Contracts from time to time, each Grantor agrees with the Administrative Agent for the ratable benefit of the Secured Parties as follows:

          Section 1. Grant of Security. Each Grantor grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in such Grantor’s right, title and interest in and to the following, in each case, as to each type of property described below, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”):

     (a) all equipment in all of its forms, including all machinery, tools, motor vehicles, furniture and fixtures, and all parts thereof and all accessions thereto and all software related thereto, including software that is embedded in and is part of the equipment (any and all such property being the “Equipment”);

     (b) all inventory in all of its forms, including:

     (i) all raw materials, work in process, finished goods and materials used or consumed in the manufacture, production, preparation or shipping thereof,

     (ii) goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including goods in which such Grantor has an interest or right as consignee) and

     (iii) goods that are returned to or repossessed or stopped in transit by such Grantor),

and all accessions thereto and products thereof and documents therefor, and all software related thereto, including software that is embedded in and is part of the inventory (any and all such property being the “Inventory”);

     (c) all chattel paper (including tangible chattel paper and electronic chattel paper), instruments (including promissory notes), deposit accounts, general intangibles (including payment intangibles and rights as administrative agent or other agent under any loan agreements relating to Pledged Debt (as defined below)) and other obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services and whether or not earned by performance, and all rights now or hereafter existing in and to all supporting obligations and in and to all security agreements, mortgages, Liens, leases, letters of credit and other contracts securing or

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otherwise relating to the foregoing property (any and all of such accounts, chattel paper, instruments, deposit accounts, general intangibles and other obligations, to the extent not referred to in clause (d), (e) or (f) below, being the “Receivables”, and any and all such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related Contracts”);

     (d) the following (the “Security Collateral”):

     (i) the Initial Pledged Equity and the certificates, if any, representing the Initial Pledged Equity, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Equity and all subscription warrants, rights or options issued thereon or with respect thereto;

     (ii) all additional shares of stock and other Equity from time to time acquired by such Grantor in any manner (such shares and other Equity, together with the Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or other Equity, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity and all subscription warrants, rights or options issued thereon or with respect thereto;

     (iii) all Indebtedness from time to time owed to such Grantor (such Indebtedness, the “Pledged Debt”) and the instruments, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; and

     (iv) all other investment property (including all (A) securities, whether certificated or uncertificated, (B) security entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Grantor has now, or acquires from time to time hereafter, any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, distributions, value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property and all subscription warrants, rights or options issued thereon or with respect thereto;

     (e) the following (collectively, the “Account Collateral”):

     (i) all deposit accounts and all funds from time to time credited thereto, all interest, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds,

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and all certificates and instruments, if any, from time to time representing or evidencing such deposit accounts;

     (ii) all promissory notes, certificates of deposit, checks and other instruments from time to time delivered to or otherwise possessed by the Administrative Agent for or on behalf of such Grantor, including those delivered or possessed in substitution for or in addition to any or all of the then existing Account Collateral; and

     (iii) all interest, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then-existing Account Collateral;

     (f) the following (collectively, the “Intellectual Property Collateral”):

     (i) all patents, patent applications, utility models and statutory invention registrations, all inventions claimed or disclosed therein and all improvements thereto;

     (ii) all trademarks and service marks, together, in each case, with the goodwill symbolized thereby;

     (iii) all copyrights, whether registered or unregistered;

     (iv) all computer software, programs and databases;

     (g) all books and records (including customer lists, credit files, printouts and other computer output materials and records) of such Grantor pertaining to any of the Collateral; and

     (h) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral (including proceeds, collateral and supporting obligations that constitute property of the types described in clauses (a) through (g) of this Section 1 and this clause (h)) and, to the extent not otherwise included, all (A) payments under insurance (whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, (B) tort claims, including all commercial tort claims and (C) cash,

provided that the following property is excluded from the foregoing security interests: (A) voting Equity Interests in any CFC, to the extent (but only to the extent) required to prevent the Collateral from including more than 66% of all voting Equity Interests in such CFC, (B) Equipment leased by a Grantor under a lease or otherwise financed pursuant to a purchase-money financing arrangement that prohibits the granting of a Lien on such Equipment, (C) any general intangible, investment property or other rights arising under any contract, instrument, license or other document or under any law, regulation, permit, order or decree of any Governmental Authority if (but only to the extent that) the grant of a security interest therein

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would constitute a violation of a legally effective restriction in respect of such general intangible, investment property or other rights in favor of a third party, unless and until all required consents shall have been obtained (for the avoidance of doubt, the restrictions described herein are not negative pledge or similar undertakings in favor of a lender or other financial counterparty), (D) Equity Interests in Cholla Pipeline, LP, Integra Energy, L.L.C. and Sagebrush Pipeline, LLC unless and until any requisite consent of other holders of Equity Interests therein are obtained and (E) to the extent that (and only to the extent that) the grant of a security interest therein would constitute a material violation of applicable Law, any other property (any and all such excluded property being the “Excluded Personal Property”). Each Grantor shall, if requested to do so by the Administrative Agent, use commercially reasonable efforts to obtain any such required consent that is reasonably obtainable with respect to Collateral which the Administrative Agent reasonably determines to be material.

          Section 2. Security for Obligations. This Agreement secures, in the case of each Grantor, the payment of all Obligations of any Loan Party (all such Obligations being the “Secured Obligations”).

          Section 3. Grantors Remain Liable. Anything herein to the contrary notwithstanding:

     (a) each Grantor shall remain liable under the contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed;

     (b) the exercise by the Administrative Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral; and

     (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, any other Loan Document or any Lender Hedging Contract, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

     Section 4. Delivery and Control of Security Collateral. (a) Subject to Section 4(i) below, all certificates or instruments representing or evidencing Security Collateral shall be delivered to and held by or on behalf of the Administrative Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Administrative Agent. The Administrative Agent shall have the right, at any time in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 10(a). In addition, the Administrative Agent shall have the right, upon the occurrence and during the continuance of an Event of Default at any time to exchange certificates or instruments representing or evidencing Security Collateral for certificates or instruments of smaller or larger denominations.

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          (b) Subject to Section 4(i) below, with respect to any Security Collateral in which any Grantor has any right, title or interest and that constitutes an uncertificated security, such Grantor will cause the issuer thereof either:

     (i) to register the Administrative Agent as the registered owner of such security or

     (ii) to agree in an authenticated record with such Grantor and the Administrative Agent that such issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Grantor, such authenticated record to be in form and substance satisfactory to the Administrative Agent.

With respect to any Security Collateral in which any Grantor has any right, title or interest and that is not an uncertificated security, upon the request of the Administrative Agent, such Grantor will notify each such issuer of Pledged Equity that such Pledged Equity is subject to the security interest granted hereunder. Each Grantor that is the issuer of any Security Collateral or Pledged Equity belonging to another Grantor acknowledges the security interest granted hereunder in such Security Collateral and will take the actions described above in this subsection (b).

          (c) Subject to Section 4(i) below, with respect to any Security Collateral in which any Grantor has any right, title or interest and that constitutes a security entitlement in which the Administrative Agent is not the entitlement holder, such Grantor will cause the securities intermediary with respect to such security entitlement either:

     (i) to identify in its records the Administrative Agent as the entitlement holder of such security entitlement against such securities intermediary or

     (ii) to agree in an authenticated record with such Grantor and the Administrative Agent that such securities intermediary will comply with entitlement orders (that is, notifications communicated to such securities intermediary directing transfer or redemption of the financial asset to which such Grantor has a security entitlement) originated by the Administrative Agent without further consent of such Grantor, such authenticated record to be in substantially the form of Exhibit C hereto (in the case of a combined Deposit Account and Securities Account) or Exhibit D hereto (in any other case) or otherwise in form and substance satisfactory to the Administrative Agent (such agreements together being the “Securities Account Control Agreements”).

          (d) Subject to Section 4(i) below, no Grantor will add any securities intermediary that maintains a Securities Account for such Grantor or open any new securities account with any then-existing securities intermediary unless:

     (i) the Administrative Agent shall have received at least 10 days’ prior written notice of such securities intermediary or such new securities account, and

     (ii) the Administrative Agent shall have received, in the case of a securities intermediary that is not the Administrative Agent, a Securities Account Control Agreement authenticated by such new securities intermediary and such Grantor, or a

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supplement to an existing Securities Account Control Agreement with such then-existing securities intermediary, covering such new securities account.

No Grantor shall terminate any securities intermediary or terminate any Securities Account, except that a Grantor may terminate a Securities Account, and terminate a securities intermediary with respect to such Securities Account if it gives the Administrative Agent at least 10 days’ prior written notice of such termination (and, upon such termination, Schedule V hereto shall be automatically amended to delete such securities intermediary and Securities Account).

          (e) Subject to Section 4(i) below, upon any termination by a Grantor of any Securities Account or any securities intermediary with respect thereto, such Grantor will immediately:

     (i) transfer all property held in such terminated Securities Account to another Securities Account, and

     (ii) notify all Obligors that were making payments to such Securities Account to make all future payments to another Securities Account, in each case so that the Administrative Agent shall have a continuously perfected security interest in such Account Collateral, funds and property.

          (f) So long as no Event of Default shall have occurred and be continuing, each Grantor shall have sole right to direct the disposition of funds with respect to each of its Securities Accounts.

          (g) The Administrative Agent may transfer, direct the transfer of, or sell property credited to any Securities Account to satisfy the Grantor’s obligations under the Loan Documents and the Lender Hedging Contracts if an Event of Default shall have occurred and be continuing.

          (h) Upon the request of the Administrative Agent upon the occurrence and during the continuance of an Event of Default, such Grantor will notify each such issuer of Pledged Debt that such Pledged Debt is subject to the security interest granted hereunder.

          (i) Subsections (a) through (e) above shall not be applicable to any Collateral except Pledged Equity prior to the occurrence of an Event of Default.

          Section 5. Maintaining the Account Collateral. Upon the occurrence of an Event of Default,

          (a) Each Grantor will maintain all Account Collateral only with the Administrative Agent or with banks (the “Pledged Account Banks”) that have agreed, in a record authenticated by the Grantor, the Administrative Agent and the Pledged Account Banks, to:

     (i) comply with instructions originated by the Administrative Agent directing the disposition of funds in the Account Collateral without the further consent of the Grantor and

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     (ii) waive or subordinate in favor of the Administrative Agent all claims of the Pledged Account Banks (including claims by way of a security interest, lien or right of setoff or right of recoupment) to the Account Collateral, which authenticated record shall be substantially in the form of Exhibit C hereto (in the case of a combined Deposit Account and Securities Account) or of Exhibit B hereto (in any other case), or shall otherwise be in form and substance reasonably satisfactory to, and as negotiated in good faith by, the Administrative Agent (such agreements together being the “Account Control Agreements”), provided that each Grantor shall have up to 30 days following the date hereof to provide any such Account Control Agreement.

          (b) Each Grantor will promptly instruct each Person obligated at any time to make any payment to such Grantor for any reason (an “Obligor”) to make such payment to a Deposit Account.

          (c) Except for any deposit account holding LC Collateral, no Grantor will add any bank that maintains a deposit account for such Grantor or open any new deposit account with any then existing Pledged Account Bank unless:

     (i) the Administrative Agent shall have received at least 10 days’ prior written notice of such additional bank or such new deposit account, and

     (ii) the Administrative Agent shall have received, in the case of a bank or Pledged Account Bank that is not the Administrative Agent, an Account Control Agreement authenticated by such new bank and such Grantor, or a supplement to an existing Account Control Agreement with such then existing Pledged Account Bank, covering such new deposit account.

No Grantor shall terminate any bank as a Pledged Account Bank or terminate any Account Collateral, except that a Grantor may terminate a Deposit Account, and terminate a bank as a Pledged Account Bank with respect to such Deposit Account if it gives the Administrative Agent at least 10 days’ prior written notice of such termination.

          (d) Upon any termination by a Grantor of any Deposit Account or any Pledged Account Bank with respect thereto, such Grantor will immediately:

     (i) transfer all funds held in such terminated Deposit Account to another Deposit Account, and

     (ii) notify all Obligors that were making payments to such Deposit Account to make all future payments to another Deposit Account, in each case so that the Administrative Agent shall have a continuously perfected security interest in such Account Collateral, funds and property.

          (e) So long as no Event of Default shall have occurred and be continuing, each Grantor shall have sole right to direct the disposition of funds with respect to each of its Deposit Accounts.

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          (f) The Administrative Agent may, at any time and without notice to, or consent from, a Grantor transfer, or direct the transfer of, funds from the Account Collateral to satisfy the Grantor’s obligations under the Loan Documents and Lender Hedging Contracts if an Event of Default shall have occurred and be continuing.

          (g) Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall be authorized to send to each Pledged Account Bank a Notice of Exclusive Control as defined in and under any Account Control Agreement.

          Section 6. Representations and Warranties. Each Grantor represents and warrants as follows:

     (a) Such Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC, is correctly set forth in Schedule I (as amended as provided in Section 10(a)). As of the Closing Date, such Grantor is located (within the meaning of Section 9-307 of the UCC), is the type of organization and is organized in the state or jurisdiction set forth in Schedule I (as amended as provided in Section 8(a)). The information set forth in Schedule I(as amended as provided in Section 8(a)) with respect to such Grantor is true and accurate in all respects. Such Grantor has not, within the prior five years, changed its name, location, chief executive office, place where it maintains its agreements, type of organization, jurisdiction of organization or organizational identification number from those set forth in Schedule I (as amended as provided in Section 8(a)) except as disclosed in Schedule I.

     (b) All Security Collateral consisting of certificated securities have been delivered to the Administrative Agent.

     (c) Such Grantor is the legal and beneficial owner of the Collateral of such Grantor free and clear of any Lien, claim, option or right of others, except for the security interest created under this Agreement or as permitted under the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of such Collateral or listing such Grantor or any trade name of such Grantor as debtor is on file in any recording office, except such as may have been filed in favor of the Administrative Agent relating to the Loan Documents or as otherwise permitted under the Credit Agreement.

     (d) The Pledged Equity pledged by such Grantor hereunder has been duly authorized and validly issued and in the case of corporate securities is fully paid and non-assessable. With respect to the Pledged Equity that is an uncertificated security, such Grantor has caused the issuer thereof either:

     (i) to register the Administrative Agent as the registered owner of such security or

     (ii) to agree in an authenticated record with such Grantor and the Administrative Agent that such issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Grantor.

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If such Grantor is an issuer of Pledged Equity, such Grantor confirms that it has received notice of such security interest.

     (e) The Initial Pledged Equity pledged by such Grantor constitutes the percentage of the issued and outstanding Equity of the issuers thereof indicated on Schedule II.

     (f) All filings and other actions (including (A) actions necessary to obtain control of Collateral as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC and (B) actions necessary to perfect the Administrative Agent’s security interest with respect to Collateral evidenced by a certificate of ownership) necessary to perfect the security interest in the Collateral of such Grantor created under this Agreement have been duly made or taken and are in full force and effect, and this Agreement creates in favor of the Administrative Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral of such Grantor (subject to Permitted Liens), securing the payment of the Secured Obligations except as otherwise expressly contemplated hereby.

     (g) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for:

     (i) the grant by such Grantor of the security interest granted hereunder or for the execution, delivery or performance of this Agreement by such Grantor,

     (ii) the perfection or maintenance of the security interest created hereunder (including the first priority nature of such security interest), except for the filing of financing and continuation statements under the UCC, which financing statements have been duly filed and are in full force and effect, or

     (iii) the exercise by the Administrative Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally.

          Section 7. Further Assurances. (a) From time to time, at the expense of such Grantor, each Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or desirable, or that the Administrative Agent may reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor. Without limiting the generality of the foregoing, each Grantor will promptly with respect to Collateral of such Grantor:

     (i) upon the occurrence of an Event of Default, mark conspicuously each document included in Inventory, each chattel paper included in Receivables, each Related

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Contract, and, at the reasonable request of the Administrative Agent, each of its records pertaining to such Collateral with a legend, in form and substance satisfactory to the Administrative Agent, indicating that such document, chattel paper, Related Contract or Collateral is subject to the security interest granted hereby;

     (ii) execute or authenticate and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Administrative Agent may request, in order to perfect and preserve the security interest granted or purported to be granted by such Grantor hereunder;

     (iii) deliver and pledge to the Administrative Agent for benefit of the Secured Parties certificates representing Security Collateral that constitutes certificated securities, accompanied by undated stock or bond powers executed in blank;

     (iv) take all action necessary to ensure that the Administrative Agent has control of Collateral consisting of deposit accounts, electronic chattel paper, investment property, letter-of-credit rights and transferable records as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC;

     (v) upon the occurrence of an Event of Default, at the reasonable request of the Administrative Agent, take all action to ensure that the Administrative Agent’s security interest is noted on any certificate of ownership related to any Collateral evidenced by a certificate of ownership; and

     (vi) deliver to the Administrative Agent evidence that all other action that the Administrative Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest created by such Grantor under this Agreement has been taken.

          (b) Each Grantor authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, including one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Grantor, in each case without the signature of such Grantor, and regardless of whether any particular asset described in such financing statements falls within the scope of the UCC or the granting clause of this Agreement. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Each Grantor ratifies its authorization for the Administrative Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

          (c) Each Grantor will furnish to the Administrative Agent from time to time statements and schedules further identifying and describing the Collateral of such Grantor and such other reports in connection with such Collateral as the Administrative Agent may reasonably request, all in reasonable detail.

          Section 8. Post-Closing Changes; Collections on Receivables and Related Contracts. (a) No Grantor will change its name, type of organization, jurisdiction of organization, organizational identification number or location from those set forth in Section 6(a) without first

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giving at least 30 days’ prior written notice to the Administrative Agent and taking all action required by the Administrative Agent for the purpose of perfecting or protecting the security interest granted by this Agreement. Except for Permitted Liens, no Grantor will become bound by a security agreement authenticated by another Person (determined as provided in Section 9-203(d) of the UCC) without giving the Administrative Agent 30 days’ prior written notice thereof and taking all action required by the Administrative Agent to ensure that the perfection and first priority nature of the Administrative Agent’s security interest in the Collateral will be maintained. . Schedule I to this Agreement may be supplemented from time to time by the Grantors, or by Additional Grantors at the time of the change or addition of any Additional Grantor, by prior written notice (as provided herein or as provided in the Credit Agreement) to the Administrative Agent and from the date of such notice such Schedule shall be deemed automatically amended to reflect the information set forth in such notice.

          (b) Except as otherwise provided in this subsection (c), each Grantor will continue to collect, at its own expense, all amounts due or to become due such Grantor under Receivables and Related Contracts. In connection with such collections, such Grantor may take such action as such Grantor may deem necessary or advisable to enforce collection of the Receivables and Related Contracts; provided that the Administrative Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the Obligors under any Receivables and Related Contracts of the assignment of such Receivables and Related Contracts to the Administrative Agent and to direct such Obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Administrative Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Receivables and Related Contracts, to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done, and to otherwise exercise all rights with respect to such Receivables and Related Contracts, including those set forth set forth in Section 9-607 of the UCC.

          Section 9. As to Intellectual Property Collateral. Subject to Section 9(c) below, with respect to its Intellectual Property Collateral, each Grantor will execute or otherwise authenticate an Intellectual Property Security Agreement, in substantially the form set forth in Exhibit E hereto or otherwise in form and substance satisfactory to the Administrative Agent, for recording the security interest granted hereunder to the Administrative Agent in such Intellectual Property Collateral with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities necessary to perfect the security interest hereunder in such Intellectual Property Collateral.

          (b) Subject to Section 9(c) below, should any Grantor obtain an ownership interest in any item of the type set forth in Section 1(f) that is not on the date hereof a part of the Intellectual Property Collateral:

     (i) this Agreement shall automatically apply thereto, and

     (ii) any such item and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to this Agreement.

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          (c) This Section shall only be applicable upon the occurrence of an Event of Default.

Each Grantor shall give prompt written notice to the Administrative Agent identifying such items, and such Grantor shall execute and deliver to the Administrative Agent with such written notice, or otherwise authenticate, an Intellectual Property Security Agreement Supplement substantially in the form of Exhibit F hereto or otherwise in form and substance satisfactory to the Administrative Agent covering such items, which supplement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities necessary to perfect the security interest hereunder in such items.

          Section 10. Voting Rights; Dividends; Etc. (a) Except as set forth in subsection (b):

     (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral of such Grantor or any part thereof for any purpose; provided that such Grantor will not exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of the Security Collateral or any part thereof.

Each Grantor shall be entitled to receive and retain any and all dividends, interest and other distributions paid in respect of the Security Collateral of such Grantor if and to the extent that the payment thereof is not otherwise prohibited by the terms of the Loan Documents.

     (ii) The Administrative Agent will execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of an Event of Default:

(i) All rights of each Grantor:

     (A) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 10(a)(i) shall, upon notice to such Grantor by the Administrative Agent, cease and

     (B) to receive the dividends, interest and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 10(a)(ii) shall automatically cease,

and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends, interest and other distributions.

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     (ii) All dividends, interest and other distributions that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 10(b) shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Administrative Agent as Security Collateral in the same form as so received (with any necessary indorsement).

     (iii) The Administrative Agent shall be authorized to send to each Securities Intermediary as defined in and under any Security Control Agreement a Notice of Exclusive Control as defined in and under such Security Account Control Agreement.

          Section 11. Additional Shares. Each Grantor will pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any additional Equity or other securities of each issuer of the Pledged Equity.

          Section 12. Administrative Agent Appointed Attorney-in-Fact. Each Grantor irrevocably appoints the Administrative Agent such Grantor’s attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time , upon the occurrence and during the continuance of an Event of Default, in the Administrative Agent’s discretion, to take any action and to execute any instrument that the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

     (a) to obtain and adjust insurance required to be paid to the Administrative Agent pursuant to Section 6.07 of the Credit Agreement

     (b) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,

     (c) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) or (b) above, and

     (d) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral.

          Section 13. Administrative Agent May Perform. If any Grantor fails to perform any agreement contained herein, the Administrative Agent may, but without any obligation to do so and without notice, itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor under Section 16.

          Section 14. The Administrative Agent’s Duties. (a) The powers conferred on the Administrative Agent hereunder are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it

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hereunder, the Administrative Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.

          (b) Anything contained herein to the contrary notwithstanding, the Administrative Agent may from time to time, when the Administrative Agent deems it to be necessary, appoint one or more subagents for the Administrative Agent hereunder with respect to all or any part of the Collateral. If the Administrative Agent so appoints any such subagent with respect to any Collateral:

     (i) the assignment and pledge of such Collateral and the security interest granted in such Collateral by each Grantor hereunder shall be deemed for purposes of this Security Agreement to have been made to such subagent, in addition to the Administrative Agent, for the ratable benefit of the Secured Parties, as security for the Secured Obligations of such Grantor,

     (ii) such subagent shall automatically be vested, in addition to the Administrative Agent, with all rights, powers, privileges, interests and remedies of the Administrative Agent hereunder with respect to such Collateral, and

     (iii) the term “Administrative Agent,” when used herein in relation to any rights, powers, privileges, interests and remedies of the Administrative Agent with respect to such Collateral, shall include such subagent;

provided that no such subagent shall be authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent.

          Section 15. Remedies. If any Event of Default shall have occurred and be continuing:

     (a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a Secured Party upon default under the UCC (whether or not the UCC applies to the affected Collateral) and also may:

     (i) require each Grantor to, and each Grantor will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place and time to be designated by the Administrative Agent that is reasonably convenient to both parties;

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     (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable;

     (iii) occupy any premises owned or leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; and

     (iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including:

     (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Receivables, the Related Contracts and the other Collateral,

     (B) withdraw, or cause or direct the withdrawal, of all funds with respect to the Account Collateral and

     (C) exercise all other rights and remedies with respect to the Receivables, the Related Contracts and the other Collateral, including those set forth in Section 9-607 of the UCC.

To the extent that notice of sale shall be required by law, at least 10 days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

     (b) Any cash held by or on behalf of the Administrative Agent and all cash proceeds received by or on behalf of the Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Administrative Agent pursuant to Section 16) in whole or in part by the Administrative Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations, in accordance with Section 8.03 of the Credit Agreement.

     (c) The Administrative Agent may, without notice to any Grantor, except as required by law and at any time or from time to time, charge, set-off and otherwise apply

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all or any part of the Secured Obligations against any funds held with respect to the Account Collateral or in any other deposit account.

     (d) In the event of any sale or other disposition of any of the Intellectual Property Collateral of any Grantor, the goodwill symbolized by any trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Administrative Agent or its designee such Grantor’s know-how and expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services of such Grantor.

     (e) The Grantors recognize that the Administrative Agent may deem it impracticable to effect a public sale of all or any part of the Security Collateral and that the Administrative Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. The Grantors acknowledge that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agree that such private sales shall be deemed to have been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the Issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended. Any offer to sell such securities that has been:

     (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such an offer may be so advertised without prior registration under such Securities Act), or

     (ii) made privately in the manner described above to not less than 15 bona-fide offerees,

shall be deemed to involve a “public disposition” for the purposes of Section 9.610(c) of the UCC (or any successor or similar, applicable statutory provision), notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the Administrative Agent or any other Secured Party may, in such event, bid for the purchase of such securities.

          Section 16. Indemnity and Expenses. (a) Each Grantor shall indemnify Administrative Agent (and any sub-agent thereof), each Secured Party and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any

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Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Grantor arising out of, in connection with, or as a result of:

     (i) the execution or delivery of this Agreement, any other Loan Document, any Lender Hedging Contract or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby,

     (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom, or

     (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Grantor, and regardless of whether any Indemnitee is a party thereto.

THE FOREGOING INDEMNIFICATION WILL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNITEE, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or if a Grantor has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

          (b) Each Grantor will upon demand pay to the Administrative Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Administrative Agent may incur in connection with:

          (i) the administration of this Agreement,

     (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral of such Grantor,

     (iii) the exercise or enforcement of any of the rights of the Administrative Agent or the other Secured Parties hereunder or

     (iv) the failure by such Grantor to perform or observe any of the provisions hereof.

          (c) To the fullest extent permitted by applicable law, no Grantor shall assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other

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Loan Document, any Lender Hedging Contract or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (a) shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement, the other Loan Documents, the Lender Hedging Contracts or the transactions contemplated hereby or thereby.

          Section 17. Subordination of Liens. Each Grantor confirms that: any and all Liens securing debts, liabilities and other Obligations owed to such Grantor by any other Loan Party (“Subordinated Liens”) shall be subordinate to any and all Liens under the Security Documents securing the Secured Obligations (“Senior Liens”) as if the Senior Liens were created, filed, recorded and otherwise perfected prior in time to the creation, filing, recording and other perfection of the Subordinated Liens, and

          (b) by reason of this Agreement, the Administrative Agent, for the benefit of the Secured Parties, has a perfected, first-priority Lien on each Subordinated Lien and the right, to the exclusion of any Grantor, to enforce, exercise remedies, grant waivers, release and take any and all other actions with respect to such Subordinated Lien.

          Section 18. Amendments; Waivers; Additional Grantors; Etc. (a) No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom shall in any event be effective unless the same shall be entered into in accordance with Section 10.01 of the Credit Agreement. No failure on the part of the Administrative Agent or any other Secured Party to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.

          (b) Upon the execution and delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit A hereto (each a “Security Agreement Supplement”):

     (i) such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor hereunder, and each reference in this Agreement and the other Loan Documents to “Grantor” shall also mean and be a reference to such Additional Grantor, and each reference in this Agreement, the other Loan Documents and the Lender Hedging Contracts to “Collateral” shall also mean and be a reference to the Collateral of such Additional Grantor, and

     (ii) the supplemental schedules attached to each Security Agreement Supplement shall be incorporated into and become a part of and supplement the respective Schedule hereto, and the Administrative Agent may attach such supplemental schedules to such Schedules; and each reference to such Schedules shall mean and be a reference to such Schedules as supplemented pursuant to each Security Agreement Supplement.

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          Section 19. Notices, Etc. All notices and other communications provided for hereunder shall be delivered in the manner provided in the Credit Agreement, in the case of the Borrower or the Administrative Agent, addressed to it at its address specified in the Credit Agreement and, in the case of each Grantor other than the Borrower, addressed to it at its address set forth opposite such Grantor’s name on the signature pages hereto or on the signature page to the Security Agreement Supplement pursuant to which it became a party hereto; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall be effective when and as provided in the Credit Agreement. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Security Agreement Supplement or Schedule hereto shall be effective as delivery of an original executed counterpart thereof.

          Section 20. Continuing Security Interest; Assignments under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall:

          (a) remain in full force and effect until the latest of:

               (i) the payment in full of all Secured Obligations,

               (ii) the termination or expiration of all Commitments and

               (iii) the termination or expiration of all Letters of Credit and all Lender Hedging Contracts with a Lender Counterparty,

     (b) be binding upon each Grantor, its successors and assigns and

     (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns.

Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including all or any portion of its Commitment, the Loans owing to it and the Note or Notes, if any, held by it), to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case as provided in the Credit Agreement.

          Section 21. Release; Termination. (a) Upon any sale, lease, transfer or other disposition of any item of Collateral of any Grantor or release of any Guaranty by a Grantor, in each case in accordance with the terms of the Loan Documents (other than sales of Inventory in the ordinary course of business), the Administrative Agent will, at such Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided that:

     (i) at the time of such request and such release no Event of Default shall have occurred and be continuing,

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     (ii) such Grantor shall have delivered to the Administrative Agent, at least 10 Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a form of release for execution by the Administrative Agent and a certificate of such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Administrative Agent may request and

     (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied, or any payment to be made in connection therewith, in accordance with the Credit Agreement shall, to the extent so required, be paid or made to, or in accordance with the instructions of, the Administrative Agent when and as required under the Credit Agreement.

          (b) Upon the payment in full of all Secured Obligations, the termination or expiration of all Commitments and the termination or expiration of all Letters of Credit and all Lender Hedging Contracts, the security interest hereunder shall terminate and all rights to the Collateral shall revert to the Grantors.

          (c) Upon any termination of the security interests and/or release of Collateral as provided in this Section 21, the Administrative Agent will, at the expense of the applicable Grantor, execute and deliver to such Grantor such documents as it shall reasonably request to evidence the termination of such security interests or the release of such Collateral, as the case may be.

          Section 22. Terms Generally; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context requires otherwise:

     (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

     (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns;

     (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof;

     (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement;

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     (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time; and

     (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

References to any document, instrument, or agreement shall include:

     (i) all exhibits, schedules, and other attachments thereto, and

     (ii) shall include all documents, instruments, or agreements issued or executed in replacement thereof.

Titles appearing at the beginning of any subdivision are for convenience only and do not constitute any part of such subdivision and shall be disregarded in construing the language contained in such subdivisions. 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. 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.

          Section 23. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

          Section 24. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

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          IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

RIATA ENERGY INC. (D/B/A SANDRIDGE ENERGY INC.)
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NEG OIL & GAS LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL ONSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL OFFSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

ROC GAS COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
LARIAT COMPRESSION COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
ALSATE MANAGEMENT AND INVESTMENT COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
INTEGRA ENERGY, L.L.C.
By:	AREP Oil & Gas LLC, sole member
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

PETROSOURCE ENERGY COMPANY, LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
PETROSOURCE PRODUCTION COMPANY, L.P.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NEG OPERATING LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
SANDRIDGE HOLDINGS, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

Schedule I to the
Security Agreement

LOCATION, TYPE OF ORGANIZATION, JURISDICTION OF ORGANIZATION AND ORGANIZATIONAL IDENTIFICATION
NUMBER

			Jurisdiction of	Organizational I.D.
Grantor	Location	Type of Organization	Organization	No.
Alsate Investment and Management Company	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Corporation	Texas		013132050
Integra Energy, L.L.C.	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Liability Company	Texas		704537522
Lariat Compression Company	5432 N. Highway 1053, Fort Stockton, TX 79735	Corporation	Texas		131393100
NEG Oil & Gas LLC	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Liability Company	Delaware		3889949
NEG Operating LLC	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Corporation	Delaware		3279526
National Offshore LP	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Partnership	Delaware		3912597
National Onshore LP	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Partnership	Delaware		3912600
PetroSource Energy Company, LP	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Partnership	Texas		800463223
PetroSource Production Company, L.P.	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Limited Partnership	Texas		800417062
Riata Energy, Inc.	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Corporation	Texas		73245900
ROC Gas Company	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Corporation	Texas		123053800

Schedule I-1

			Jurisdiction of	Organizational I.D.
Grantor	Location	Type of Organization	Organization	No.
Sandridge Holdings, Inc.	1601 NW Expressway, Suite 1600, Oklahoma City, OK 73118	Corporation	Delaware		4250995

Schedule I-2

Schedule II to the
Security Agreement

PLEDGED EQUITY

							Percentage
							of
			Certificate		Number		Outstanding
Grantor	Issuer	Class of Equity	No(s)		of Shares		Shares
Alsate Management and Investment Company	Cup of the Day #1, LLC	Membership Interests		n/a		n/a		100	%
Alsate Management and Investment Company	Chaparral Supply, LLC	Membership Interests		n/a		n/a		100	%
Alsate Management and Investment Company	Transpecos Logging, LLC	Membership Interests		n/a		n/a		100	%
Integra Energy, L.L.C.	Cholla Management, LLC	Membership Interests		n/a		n/a		100	%
Lariat Compression Company	Symbol Energy, Inc.	Common Stock		1		100,000		100	%
National Onshore LP	Galveston Bay Pipeline Company	Common stock		1		1,000		100	%
National Onshore LP	Galveston Bay Processing Corporation	Common stock		1		1,000		100	%
NEG Oil & Gas LLC	NEG Holding, LLC	Membership Interests		n/a		n/a		100	%
NEG Oil & Gas LLC	Mid River, LLC	Membership Interests		n/a		n/a		100	%
NEG Oil & Gas LLC	Offshore GP LLC	Membership Interests		n/a		n/a		100	%
NEG Oil & Gas LLC	Offshore LP LLC	Membership Interests		n/a		n/a		100	%
NEG Oil & Gas LLC	Onshore GP LLC	Membership Interests		n/a		n/a		100	%

Schedule II-1

							Percentage
							of
			Certificate		Number		Outstanding
Grantor	Issuer	Class of Equity	No(s)		of Shares		Shares
NEG Oil & Gas LLC	Onshore LP LLC	Membership Interests		n/a		n/a		100	%
NEG Operating LLC	NGX GP of Delaware LLC	Membership Interests		n/a		n/a		100	%
NEG Operating LLC	NGX LP of Delaware LLC	Membership Interests		n/a		n/a		100	%
NEG Operating LLC	Shana National LLC	Membership Interests		n/a		n/a		100	%
PetroSource Energy Company, LP	PetroSource Production Company, L.P.	Limited Partnership Interests		n/a		n/a		99	%
PetroSource Energy Company, LP	PSCO2, LP	Limited Partnership Interests		n/a		n/a		99	%
Riata Energy, Inc.	Algerita Energy, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	Alsate Management and Investment Company	Common stock		1		100,000		100	%
Riata Energy, Inc.	Black Bayou Exploration, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	Lariat Services, Inc.	Common stock		1		100,000		100	%
Riata Energy, Inc.	Midcontinent Resources, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	PetroSource Energy Company, LP	Limited Partnership Interests		n/a		n/a		99	%
Riata Energy, Inc.	PetroSource Energy Management, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	PSE Holdings, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	PSE Management, LLC	Membership Interests		n/a		n/a		100	%

Schedule II-2

							Percentage
							of
			Certificate		Number		Outstanding
Grantor	Issuer	Class of Equity	No(s)		of Shares		Shares
Riata Energy, Inc.	Riagra Land & Cattle	Corporation		1		100,000		100	%
Riata Energy, Inc.	Riata Drilling Company, Inc.	Common stock		1		100,000		100	%
Riata Energy, Inc.	Riata Energy Operating, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	Riata Piceance, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	Riata Wolfcamp Management, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	ROC Gas Company	Common stock		1		100,000		100	%
Riata Energy, Inc.	Sandridge Holdings, Inc.	Common Stock		1		100,000		100	%
Riata Energy, Inc.	Sierra Madera Management, LLC	Membership Interests		n/a		n/a		100	%
Riata Energy, Inc.	Sierra Madera CO2 Pipeline, Ltd.	Limited Partnership Interests		n/a		n/a		99	%
Sandridge Holdings, Inc.	NEG Oil & Gas LLC	Membership Interests		n/a		n/a		100	%

Schedule II-3

Exhibit A to the
Security Agreement

FORM OF SECURITY AGREEMENT SUPPLEMENT

[Date of Security Agreement Supplement]

BANK OF AMERICA, N.A.,

as the Administrative Agent for the
Secured Parties referred to in the
Credit Agreement referred to below

9 West 57^th Street
New York, New York 10019

Riata Energy Inc. (d/b/a SandRidge Energy Inc.)

Ladies and Gentlemen:

          Reference is made to (i) the Credit Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Riata Energy Inc. (d/b/a SandRidge Energy Inc.), the Lenders party thereto and Bank of America, N.A.., as Administrative Agent (together with any successor Administrative Agent appointed pursuant to the Credit Agreement, the “Administrative Agent”) and L/C Issuer and (ii) the Security Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) made by the Grantors from time to time party thereto in favor of the Administrative Agent for the Secured Parties. Terms defined in the Credit Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement or the Security Agreement.

          SECTION 1. Grant of Security. The undersigned hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in, all of its right, title and interest in and to all of the Collateral of the undersigned, whether now owned or hereafter acquired by the undersigned, wherever located and whether now or hereafter existing or arising, including the property and assets of the undersigned set forth on the attached supplemental schedules to the Schedules to the Security Agreement.

          SECTION 2. Security for Obligations. The grant of a security interest in, the Collateral by the undersigned under this Security Agreement Supplement and the Security Agreement secures the payment of all Obligations of any Loan Party that are now or hereafter existing under or in respect of the Loan Documents and all Obligations of any Loan Party under Lender Hedging Contracts that are now or hereafter existing, in each case whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest,

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premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.

          SECTION 3. Supplements to Security Agreement Schedules. The undersigned has attached hereto supplemental Schedules to the respective Schedules to the Security Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental schedules have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Security Agreement and are complete and correct.

          SECTION 4. Representations and Warranties. The undersigned makes as of the date hereof each representation and warranty set forth in Section 6 of the Security Agreement (as supplemented by the attached supplemental schedules) to the same extent as each other Grantor.

          SECTION 5. Obligations Under the Security Agreement. The undersigned hereby agrees, as of the date first above written, to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as each of the other Grantors. The undersigned further agrees, as of the date first above written, that each reference in the Security Agreement to an “Additional Grantor” or a “Grantor” shall also mean and be a reference to the undersigned.

          SECTION 6. Governing Law. This Security Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

Very truly yours, [NAME OF ADDITIONAL GRANTOR]
By
	Title:
	Address for notices:

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Exhibit B to the
Security Agreement

FORM OF DEPOSIT ACCOUNT CONTROL AGREEMENT

          ACCOUNT CONTROL AGREEMENT (this “Agreement”) dated as of                                         ,                                          , among                     , a ______ (the “Grantor”), Bank of America, N.A., as Administrative Agent (the “Administrative Agent”), and                     , a                      (“                    ”), as securities intermediary and depository bank (the “Account Holder”).

     PRELIMINARY STATEMENTS:

          (1) The Grantor has granted the Secured Party a security interest (the “Security Interest”) in the following accounts maintained by the Account Holder for the Grantor (each, an “Account” and collectively, the “Accounts”):

          [Insert account numbers and other identifying information.]

          (2) Terms defined in Article 9 of the Uniform Commercial Code in effect in the State of New York (“N.Y. Uniform Commercial Code”) are used in this Agreement as such terms are defined in such Article 9.

          NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto hereby agree as follows:

          SECTION 1. The Accounts. The Grantor and Account Holder represent and warrant to, and agree with, the Administrative Agent that:

     (a) The Account Holder maintains each Account for the Grantor, and funds held by the Account Holder for the account of the Grantor are, and will continue to be, credited to an Account in accordance with instructions given by the Grantor (unless otherwise provided herein).

     (b) To the extent that funds are credited to any Account, such Account is a deposit account; and to the extent that financial assets are credited to any Account, such Account is a securities account. The Account Holder is the bank with which each Account that is a deposit account is maintained. The Grantor is the Account Holder’s customer with respect to the Accounts.

     (c) Notwithstanding any other agreement to the contrary, the Account Holder’s jurisdiction with respect to each Account for purposes of the N.Y. Uniform Commercial Code is, and will continue to be for so long as the Security Interest shall be in effect, the State of New York.

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     (d) The Grantor and Account Holder do not know of any claim to or interest in any Account or any property (including funds and financial assets) credited to any Account, except for claims and interests of the parties referred to in this Agreement.

          SECTION 2. Control by Administrative Agent. The Account Holder will comply with:

          (a) instructions directing disposition of the funds in any and all of the Accounts,

          (b) notifications that the Account Holder receives directing it to transfer funds in any and all of the Accounts, and

     (c) other directions concerning any and all of the Accounts, including directions to distribute to the Administrative Agent proceeds of any such transfer or interest or any and all of the Accounts

(any such instruction, notification or direction referred to in clause (a), (b) or (c) above being an “Account Direction”), in each case of clauses (a), (b) and (c) above originated by the Administrative Agent without further consent by the Grantor or any other Person.

          SECTION 3. Grantor’s Rights in Accounts.

          (a) Except as otherwise provided in this Section 3, the Account Holder will comply with Account Directions and other directions concerning each Account originated by the Grantor without further consent by the Administrative Agent.

          (b) Until the Account Holder receives a notice from the Administrative Agent that the Administrative Agent will exercise exclusive control over any Account (a “Notice of Exclusive Control” with respect to such Account), the Account Holder may distribute to the Grantor all interest and funds in such Account.

          (c) The Account Holder will not comply with any Account Direction originated by the Grantor that would require the Account Holder to make a free delivery of any funds or financial asset to the Grantor or any other Person.

          (d) If the Account Holder receives from the Administrative Agent a Notice of Exclusive Control with respect to any Account, the Account Holder will comply only with Account Directions originated by the Administrative Agent and will cease:

     (i) complying with Account Directions or other directions concerning such Account originated by the Grantor, and

     (ii) distributing to the Grantor interest and dividends on property (including funds and financial assets) in such Account.

          SECTION 4. Priority of Administrative Agent’s Security Interest. (a) The Account Holder:

B-2

     (i) subordinates to the Security Interest and in favor of the Administrative Agent any security interest, lien, or right of recoupment or setoff that the Account Holder may have, now or in the future, against any Account or property (including any funds and financial assets) credited to any Account, and

     (ii) agrees that it will not exercise any right in respect of any such security interest or lien or any such right of recoupment or setoff until the Security Interest is terminated,

except that the Account Holder:

     (A) will retain its prior security interest and lien on property credited to any Account,

     (B) may exercise any right in respect of such security interest or lien, and

     (C) may exercise any right of recoupment or setoff against any Account,

in the case of clauses (A), (B) and (C) above, to secure or to satisfy, and only to secure or to satisfy, payment:

     (I) for such property,

     (II) for its customary fees and expenses for the routine maintenance and operation of such Account, and

     (III) for the face amount of any items that have been credited to such Account but are subsequently returned unpaid because of uncollected or insufficient funds.

          (b) The Account Holder will not enter into any other agreement with any Person relating to Account Directions or other directions with respect to any Account.

          SECTION 5. Statements, Confirmations, and Notices of Adverse Claims. (a) The Account Holder will send copies of all statements and confirmations for each Account simultaneously to the Administrative Agent and the Grantor.

          (b) When the Account Holder knows of any claim or interest in any Account or any property (including funds and financial assets) credited to any Account other than the claims and interests of the parties referred to in this Agreement, the Account Holder will promptly notify the Administrative Agent and the Grantor of such claim or interest.

          SECTION 6. The Account Holder’s Responsibility. (a) Except for permitting a withdrawal, delivery, or payment in violation of Section 3, the Account Holder will not be liable to the Administrative Agent for complying with Account Directions or other directions concerning any Account from the Grantor that are received by the Account Holder before the Account Holder receives and has a reasonable opportunity to act on a Notice of Exclusive Control.

B-3

          (b) The Account Holder will not be liable to the Grantor or the Administrative Agent for complying with a Notice of Exclusive Control or with an Account Direction or other direction concerning any Account originated by the Administrative Agent, even if the Grantor notifies the Account Holder that the Administrative Agent is not legally entitled to issue the Notice of Exclusive Control or Account Direction or such other direction unless the Account Holder takes the action after it is served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process.

          (c) This Agreement does not create any obligation of the Account Holder except for those expressly set forth in this Agreement and in Article 4 of the N.Y. Uniform Commercial Code. In particular, the Account Holder need not investigate whether the Administrative Agent is entitled under the Administrative Agent’s agreements with the Grantor to give an Account Direction or other direction concerning any Account or a Notice of Exclusive Control. The Account Holder may rely on notices and communications it believes given by the appropriate party.

          SECTION 7. Indemnity. The Grantor will indemnify the Account Holder, its officers, directors, employees and agents against claims, liabilities and expenses arising out of this Agreement (including reasonable attorney’s fees and disbursements), except to the extent the claims, liabilities or expenses are caused by the Account Holder’s gross negligence or willful misconduct as found by a court of competent jurisdiction in a final, non-appealable judgment.

          SECTION 8. Termination; Survival. (a) The Administrative Agent may terminate this Agreement by notice to the Account Holder and the Grantor. If the Administrative Agent notifies the Account Holder that the Security Interest has terminated, this Agreement will immediately terminate.

          (b) The Account Holder may terminate this Agreement on 60 days’ prior notice to the Administrative Agent and the Grantor; provided that before such termination the Account Holder and the Grantor shall make arrangements to transfer the property (including all funds and financial assets) credited to each Account to another Account Holder that shall have executed, together with the Grantor, a control agreement in favor of the Administrative Agent in respect of such property in substantially the form of this Agreement or otherwise in form and substance satisfactory to the Administrative Agent.

          (c) Sections 6 and 7 will survive termination of this Agreement.

          SECTION 9. Governing Law. This Agreement and each Account will be governed by the law of the State of New York. The Account Holder and the Grantor may not change the law governing any Account without the Administrative Agent’s express prior written agreement.

          SECTION 10. Entire Agreement. This Agreement is the entire agreement, and supersedes any prior agreements, and contemporaneous oral agreements, of the parties concerning its subject matter.

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          SECTION 11. Amendments. No amendment of, or waiver of a right under, this Agreement will be binding unless it is in writing and signed by the party to be charged.

          SECTION 12. Notices. A notice or other communication to a party under this Agreement will be in writing (except that Account Directions may be given orally), will be sent to the party’s address set forth under its name below or to such other address as the party may notify the other parties and will be effective on receipt.

          SECTION 13. Binding Effect. This Agreement shall become effective when it shall have been executed by the Grantor, the Administrative Agent and the Account Holder, and thereafter shall be binding upon and inure to the benefit of the Grantor, the Administrative Agent and the Account Holder and their respective successors and assigns.

          SECTION 14. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

[NAME OF GRANTOR]
By
	Name:
	Title:
Address:
BANK OF AMERICA, N.A., as Administrative Agent
By
	Name:
	Title:
Address:
[NAME OF ACCOUNT HOLDER]
By
	Name:
	Title:
Address:

B-6

Exhibit C to the
Security Agreement

FORM OF ACCOUNT CONTROL AGREEMENT
(Deposit Account/Securities Account)

          ACCOUNT CONTROL AGREEMENT (this “Agreement”) dated as of                                         ,      , among                     , a                      (the “Grantor”), Bank of America, N.A., as Administrative Agent (the “Administrative Agent”), and                     , a                      (“                    ”), as securities intermediary and depository bank (the “Account Holder”).

PRELIMINARY STATEMENTS:

          (1) The Grantor has granted the Secured Party a security interest (the “Security Interest”) in the following accounts maintained by the Account Holder for the Grantor (each, an “Account” and collectively, the “Accounts”):

          [Insert account numbers and other identifying information.]

          (2) Terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New York (“N.Y. Uniform Commercial Code”) are used in this Agreement as such terms are defined in such Article 8 or 9.

          NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto hereby agree as follows:

          SECTION 1. The Accounts. The Grantor and Account Holder represent and warrant to, and agree with, the Administrative Agent that:

     (a) The Account Holder maintains each Account for the Grantor, and all property (including all funds and financial assets) held by the Account Holder for the account of the Grantor are, and will continue to be, credited to an Account in accordance with instructions given by the Grantor (unless otherwise provided herein).

     (b) To the extent that funds are credited to any Account, such Account is a deposit account; and to the extent that financial assets are credited to any Account, such Account is a securities account. The Account Holder is (i) the bank with which each Account that is a deposit account is maintained and (ii) the securities intermediary with respect to financial assets held in any Account that is a securities account. The Grantor is (x) the Account Holder’s customer with respect to the Accounts and (y) the entitlement holder with respect to financial assets credited from time to time to any Account.

     (c) Notwithstanding any other agreement to the contrary, the Account Holder’s jurisdiction with respect to each Account for purposes of the N.Y. Uniform Commercial Code is, and will continue to be for so long as the Security Interest shall be in effect, the State of New York.

C-1

     (d) The Grantor and Account Holder do not know of any claim to or interest in any Account or any property (including funds and financial assets) credited to any Account, except for claims and interests of the parties referred to in this Agreement.

          SECTION 2. Control by Administrative Agent. The Account Holder will comply with:

          (a) all instructions directing disposition of the funds in any and all of the Accounts,

     (b) all notifications and entitlement orders that the Account Holder receives directing it to transfer or redeem any financial asset in any and all of the Accounts, and

     (c) all other directions concerning any and all of the Accounts, including directions to distribute to the Administrative Agent proceeds of any such transfer or redemption or interest or dividends on property in any and all of the Accounts

          (any such instruction, notification or direction referred to in clause (a), (b) or (c) above being an “Account Direction”), in each case of clauses (a), (b) and (c) above originated by the Administrative Agent without further consent by the Grantor or any other Person.

          SECTION 3. Grantor’s Rights in Accounts.

          (a) Except as otherwise provided in this Section 3, the Account Holder will comply with Account Directions and other directions concerning each Account originated by the Grantor without further consent by the Administrative Agent.

          (b) Until the Account Holder receives a notice from the Administrative Agent that the Administrative Agent will exercise exclusive control over any Account (a “Notice of Exclusive Control” with respect to such Account), the Account Holder may distribute to the Grantor all interest and regular cash dividends on property (including funds and financial assets) in such Account.

          (c) The Account Holder will not comply with any Account Direction originated by the Grantor that would require the Account Holder to make a free delivery of any funds or financial asset to the Grantor or any other Person.

          (d) If the Account Holder receives from the Administrative Agent a Notice of Exclusive Control with respect to any Account, the Account Holder will comply only with Account Directions originated by the Administrative Agent and will cease:

     (i) complying with Account Directions or other directions concerning such Account originated by the Grantor and

     (ii) distributing to the Grantor interest and dividends on property (including funds and financial assets) in such Account.

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          SECTION 4. Priority of Administrative Agent’s Security Interest. (a) The Account Holder:

     (i) subordinates to the Security Interest and in favor of the Administrative Agent any security interest, lien, or right of recoupment or setoff that the Account Holder may have, now or in the future, against any Account or property (including any funds and financial assets) credited to any Account, and

     (ii) agrees that it will not exercise any right in respect of any such security interest or lien or any such right of recoupment or setoff until the Security Interest is terminated,

except that the Account Holder:

          (A) will retain its prior security interest and lien on property credited to any Account,

          (B) may exercise any right in respect of such security interest or lien, and

          (C) may exercise any right of recoupment or setoff against any Account,

in the case of clauses (A), (B) and (C) above, to secure or to satisfy, and only to secure or to satisfy, payment:

     (I) for such property,

     (II) for its customary fees and expenses for the routine maintenance and operation of such Account, and

     (III) for the face amount of any items that have been credited to such Account but are subsequently returned unpaid because of uncollected or insufficient funds.

          (b) The Account Holder will not enter into any other agreement with any Person relating to Account Directions or other directions with respect to any Account.

          SECTION 5. Statements, Confirmations, and Notices of Adverse Claims. (a) The Account Holder will send copies of all statements and confirmations for each Account simultaneously to the Administrative Agent and the Grantor.

          (b) When the Account Holder knows of any claim or interest in any Account or any property (including funds and financial assets) credited to any Account other than the claims and interests of the parties referred to in this Agreement, the Account Holder will promptly notify the Administrative Agent and the Grantor of such claim or interest.

          SECTION 6. The Account Holder’s Responsibility. (a) Except for permitting a withdrawal, delivery, or payment in violation of Section 3, the Account Holder will not be liable to the Administrative Agent for complying with Account Directions or other directions

C-3

concerning any Account from the Grantor that are received by the Account Holder before the Account Holder receives and has a reasonable opportunity to act on a Notice of Exclusive Control.

          (b) The Account Holder will not be liable to the Grantor or the Administrative Agent for complying with a Notice of Exclusive Control or with an Account Direction or other direction concerning any Account originated by the Administrative Agent, even if the Grantor notifies the Account Holder that the Administrative Agent is not legally entitled to issue the Notice of Exclusive Control or Account Direction or such other direction unless the Account Holder takes the action after it is served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process.

          (c) This Agreement does not create any obligation of the Account Holder except for those expressly set forth in this Agreement and, in the case of any Account that is a securities account, in Part 5 of Article 8 of the N.Y. Uniform Commercial Code and, in the case of any Account that is a deposit account, in Article 4 of the N.Y. Uniform Commercial Code. In particular, the Account Holder need not investigate whether the Administrative Agent is entitled under the Administrative Agent’s agreements with the Grantor to give an Account Direction or other direction concerning any Account or a Notice of Exclusive Control. The Account Holder may rely on notices and communications it believes given by the appropriate party.

          SECTION 7. Indemnity. The Grantor will indemnify the Account Holder, its officers, directors, employees and agents against claims, liabilities and expenses arising out of this Agreement (including reasonable attorney’s fees and disbursements), except to the extent the claims, liabilities or expenses are caused by the Account Holder’s gross negligence or willful misconduct as found by a court of competent jurisdiction in a final, non-appealable judgment.

          SECTION 8. Termination; Survival. (a) The Administrative Agent may terminate this Agreement by notice to the Account Holder and the Grantor. If the Administrative Agent notifies the Account Holder that the Security Interest has terminated, this Agreement will immediately terminate.

          (b) The Account Holder may terminate this Agreement on 60 days’ prior notice to the Administrative Agent and the Grantor; provided that before such termination the Account Holder and the Grantor shall make arrangements to transfer the property (including all funds and financial assets) credited to each Account to another Account Holder that shall have executed, together with the Grantor, a control agreement in favor of the Administrative Agent in respect of such property in substantially the form of this Agreement or otherwise in form and substance satisfactory to the Administrative Agent.

          (c) Sections 6 and 7 will survive termination of this Agreement.

          SECTION 9. Governing Law. This Agreement and each Account will be governed by the law of the State of New York. The Account Holder and the Grantor may not change the law governing any Account without the Administrative Agent’s express prior written agreement.

C-4

          SECTION 10. Entire Agreement. This Agreement is the entire agreement, and supersedes any prior agreements, and contemporaneous oral agreements, of the parties concerning its subject matter.

          SECTION 11. Amendments. No amendment of, or waiver of a right under, this Agreement will be binding unless it is in writing and signed by the party to be charged.

          SECTION 12. Financial Assets. To the fullest extent permitted by applicable law, all property (other than funds) credited from time to time to any Account will be treated as financial assets under Article 8 of the N.Y. Uniform Commercial Code.

          SECTION 13. Notices. A notice or other communication to a party under this Agreement will be in writing (except that Account Directions may be given orally), will be sent to the party’s address set forth under its name below or to such other address as the party may notify the other parties and will be effective on receipt.

          SECTION 14. Binding Effect. This Agreement shall become effective when it shall have been executed by the Grantor, the Administrative Agent and the Account Holder, and thereafter shall be binding upon and inure to the benefit of the Grantor, the Administrative Agent and the Account Holder and their respective successors and assigns.

          SECTION 15. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

C-5

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

[NAME OF GRANTOR]
By
	Name:
	Title:
Address:
BANK OF AMERICA, N.A., as Administrative Agent
By
	Name:
	Title:
Address:
[NAME OF ACCOUNT HOLDER]
By
	Name:
	Title:
Address:

C-6

Exhibit D to the
Security Agreement

FORM OF SECURITIES ACCOUNT CONTROL AGREEMENT

          CONTROL AGREEMENT dated as of _________, ___, among____________, a ____________ (the “Grantor”), BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”), and ____________, a ____________ (“____________”), as securities intermediary (the “Securities Intermediary”).

PRELIMINARY STATEMENTS:

          (1) The Grantor has granted the Administrative Agent a security interest (the “Security Interest”) in account no. ____________ maintained by the Securities Intermediary for the Grantor (the “Account”).

          (2) Terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New York (“N.Y. Uniform Commercial Code”) are used in this Agreement as such terms are defined in such Article 8 or 9.

          NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto hereby agree as follows:

          SECTION 1. The Account. The Grantor and Securities Intermediary represent and warrant to, and agree with, the Grantor and the Administrative Agent that:

     (a) The Securities Intermediary maintains the Account for the Grantor, and all property held by the Securities Intermediary for the account of the Grantor is, and will continue to be, credited to the Account.

     (b) The Account is a securities account. The Securities Intermediary is the securities intermediary with respect to the property credited from time to time to the Account. The Grantor is the entitlement holder with respect to the property credited from time to time to the Account.

     (c) The State of New York is, and will continue to be, the Securities Intermediary’s jurisdiction of organization for purposes of Section 8-110(e) of the UCC so long as the Security Interest shall remain in effect.

     (d) The Grantor and Securities Intermediary do not know of any claim to or interest in the Account or any property credited to the Account, except for claims and interests of the parties referred to in this Agreement.

          SECTION 2. Control by Administrative Agent. The Securities Intermediary will comply with all notifications it receives directing it to transfer or redeem any property in the Account (each an “Entitlement Order”) or other directions concerning the Account (including

D-1

directions to distribute to the Administrative Agent proceeds of any such transfer or redemption or interest or dividends on property in the Account) originated by the Administrative Agent without further consent by the Grantor or any other person.

          SECTION 3. Grantor’s Rights in Account.

          (a) Except as otherwise provided in this Section 3, the Securities Intermediary will comply with Entitlement Orders originated by the Grantor without further consent by the Administrative Agent.

          (b) Until the Securities Intermediary receives a notice from the Administrative Agent that the Administrative Agent will exercise exclusive control over the Account (a “Notice of Exclusive Control”), the Securities Intermediary may distribute to the Grantor all interest and regular cash dividends on property in the Account.

          (c) The Securities Intermediary will not comply with any Entitlement Order originated by the Grantor that would require the Securities Intermediary to make a free delivery to the Grantor or any other person.

          (d) If the Securities Intermediary receives from the Administrative Agent a Notice of Exclusive Control, the Securities Intermediary will cease:

     (i) complying with Entitlement Orders or other directions concerning the Account originated by the Grantor and

     (ii) distributing to the Grantor interest and dividends on property in the Account.

          SECTION 4. Priority of Administrative Agent’s Security Interest. (a) The Securities Intermediary subordinates in favor of the Administrative Agent any security interest, lien, or right of setoff it may have, now or in the future, against the Account or property in the Account, except that the Securities Intermediary will retain its prior lien on property in the Account to secure payment for property purchased for the Account and normal commissions and fees for the Account.

          (b) The Securities Intermediary will not agree with any Person not party to this Agreement that the Securities Intermediary will comply with Entitlement Orders originated by such Person.

          SECTION 5. Statements, Confirmations, and Notices of Adverse Claims. (a)The Securities Intermediary will send copies of all statements and confirmations for the Account simultaneously to the Grantor and the Administrative Agent.

          (b) When the Securities Intermediary knows of any claim or interest in the Account or any property credited to the Account other than the claims and interests of the parties referred to in this Agreement, the Securities Intermediary will promptly the Administrative Agent and the Grantor of such claim or interest.

D-2

          SECTION 6. The Securities Intermediary’s Responsibility. (a) Except for permitting a withdrawal, delivery, or payment in violation of Section 3, the Securities Intermediary will not be liable to the Administrative Agent for complying with Entitlement Orders or other directions concerning the Account from the Grantor that are received by the Securities Intermediary before the Securities Intermediary receives and has a reasonable opportunity to act on a Notice of Exclusive Control.

          (b) The Securities Intermediary will not be liable to the Grantor or the Administrative Agent for complying with a Notice of Exclusive Control or with an Entitlement Order or other direction concerning the Account originated by the Administrative Agent , even if the Grantor notifies the Securities Intermediary that the Administrative Agent is not legally entitled to issue the Notice of Exclusive Control or Entitlement Order or such other direction unless the Securities Intermediary takes the action after it is served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process.

          (c) This Agreement does not create any obligation of the Securities Intermediary except for those expressly set forth in this Agreement and in Part 5 of Article 8 of the N.Y. Uniform Commercial Code. In particular, the Securities Intermediary need not investigate whether the Administrative Agent is entitled under the Administrative Agent’s agreements with the Grantor or Administrative Agent to give an Entitlement Order or other direction concerning the Account or a Notice of Exclusive Control. The Securities Intermediary may rely on notices and communications it believes given by the appropriate party.

          SECTION 7. Indemnity. The Grantor will indemnify the Securities Intermediary, its officers, directors, employees and agents against claims, liabilities and expenses arising out of this Agreement (including reasonable attorney’s fees and disbursements), except to the extent the claims, liabilities or expenses are caused by the Securities Intermediary’s gross negligence or willful misconduct as found by a court of competent jurisdiction in a final, non-appealable judgment.

          SECTION 8. Termination; Survival. (a) The Administrative Agent may terminate this Agreement by notice to the Securities Intermediary and the Grantor. If the Administrative Agent notifies the Securities Intermediary that the Security Interest has terminated, this Agreement will immediately terminate.

          (b) The Securities Intermediary may terminate this Agreement on 60 days’ prior notice to the Administrative Agent and the Grantor; provided that before such termination the Securities Intermediary and the Grantor shall make arrangements to transfer the property in the Account to another securities intermediary that shall have executed, together with the Grantor, a control agreement in favor of the Administrative Agent in respect of such property in substantially the form of this Agreement or otherwise in form and substance satisfactory to the Administrative Agent.

          (c) Sections 6 and 7 will survive termination of this Agreement.

D-3

          SECTION 9. Governing Law. This Agreement and the Account will be governed by the law of the State of New York. The Securities Intermediary and the Grantor may not change the law governing the Account without the Administrative Agent’s express prior written agreement.

          SECTION 10. Entire Agreement. This Agreement is the entire agreement, and supersedes any prior agreements, and contemporaneous oral agreements, of the parties concerning its subject matter.

          SECTION 11. Amendments. No amendment of, or waiver of a right under, this Agreement will be binding unless it is in writing and signed by the party to be charged.

          SECTION 12. Financial Assets. To the fullest extent permitted by applicable law, all property credited from time to time to the Account will be treated as financial assets under Article 8 of the N.Y. Uniform Commercial Code.

          SECTION 13. Notices. A notice or other communication to a party under this Agreement will be in writing (except that Entitlement Orders may be given orally), will be sent to the party’s address set forth under its name below or to such other address as the party may notify the other parties and will be effective on receipt.

          SECTION 14. Binding Effect. This Agreement shall become effective when it shall have been executed by the Grantor, the Administrative Agent and the Securities Intermediary, and thereafter shall be binding upon and inure to the benefit of the Grantor, the Administrative Agent and the Securities Intermediary and their respective successors and assigns.

          SECTION 15. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

D-4

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

[NAME OF GRANTOR]
By
	Title:
Address:
BANK OF AMERICA, N.A., as Administrative Agent
By
	Title:
Address: 9 West 57th Street New York, New York 10019
[NAME OF SECURITIES INTERMEDIARY]
By
	Title:
Address:

D-5

Exhibit E to the
Security Agreement

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

          This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) dated _________, ______, is made by the Persons listed on the signature pages hereof (collectively, the “Grantors”) in favor of BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

          WHEREAS, Riata Energy Inc. (d/b/a SandRidge Energy Inc.), a Texas Corporation, has entered into a Credit Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with Bank of America, N.A.., as Administrative Agent and L/C Issuer, Banc of America Securities LLC, as sole lead arranger and sole book manager, and the Secured Parties party thereto.

          WHEREAS, as a condition precedent to the making of Loans and the issuance of Letters of Credit by the Secured Parties under the Credit Agreement and the entry into Contracts with Lender Counterparties from time to time, each Grantor has executed and delivered that certain Security Agreement dated as of November 21, 2006 made by the Grantors to the Administrative Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”). Terms defined in the Credit Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement or the Security Agreement.

          WHEREAS, under the terms of the Security Agreement, the Grantors have granted to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this Agreement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other governmental authorities.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:

          SECTION 1. Grant of Security. Each Grantor hereby grants to the Administrative Agent for the ratable benefit of the Secured Parties a security interest in all of such Grantor’s right, title and interest in and to the following (the “Collateral”):

     (i) the patents and patent applications set forth in Schedule A hereto;

     (ii) the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair

E-1

the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together with the goodwill symbolized thereby;

     (iii) all copyrights, whether registered or unregistered, now owned or hereafter acquired by such Grantor, including the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto;

     (iv) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

     (v) any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

     (vi) any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral of or arising from any of the foregoing.

          SECTION 2. Security for Obligations. The grant of a security interest in the Collateral by each Grantor under this Agreement secures the payment of all Obligations of any Loan Party that are now or hereafter existing under or in respect of the Loan Documents and all Obligations of any Loan Party that are now or hereafter existing under or in respect of the Lender Hedging Contracts, in each case whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.

          SECTION 3. Recordation. Each Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer record this Agreement.

          SECTION 4. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

          SECTION 5. Grants, Rights and Remedies. This Agreement has been entered into in conjunction with the provisions of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Administrative Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

          SECTION 6. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

E-2

          IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

[NAME OF GRANTOR]
By
	Name:
	Title:
Address for Notices:
[NAME OF GRANTOR]
By
	Name:
	Title:
Address for Notices:

E-3

Exhibit F to the
Security Agreement

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT

          This INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (this “Supplement”) dated _________, ______, is made by the Person listed on the signature page hereof (the “Grantor”) in favor of BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

          WHEREAS, Riata Energy Inc. (d/b/a SandRidge Energy Inc.), a Texas Corporation, has entered into a Credit Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with Bank of America, N.A.., as Administrative Agent and L/C Issuer, Banc of America Securities LLC, as sole lead arranger and sole book manager, and the Secured Parties party thereto.

          WHEREAS, pursuant to the Credit Agreement, the Grantor and certain other Persons have executed and delivered the Security Agreement dated as of November 21, 2006 made by the Grantor and such other Persons to the Administrative Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) and the Intellectual Property Security Agreement dated _________, ______(as amended, amended and restated, supplemented or otherwise modified from time to time, the “IP Security Agreement”). Terms defined in the Credit Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement or the Security Agreement.

          WHEREAS, under the Security Agreement, the Grantor has granted to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in the Additional Collateral (as defined in Section 1 below) of the Grantor and has agreed as a condition thereof to execute this Supplement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other governmental authorities.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:

          SECTION 1. Grant of Security. Each Grantor hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of such Grantor’s right, title and interest in and to the following (the “Additional Collateral”):

     (i) the patents and patent applications set forth in Schedule A hereto;

     (ii) the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair

F-1

the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together with the goodwill symbolized thereby;

     (iii) the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto;

     (iv) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

     (v) all any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

     (vi) any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the foregoing or arising from any of the foregoing.

          SECTION 2. Supplement to Security Agreement. Schedule VI to the Security Agreement is, effective as of the date hereof, hereby supplemented to add to such Schedule the Additional Collateral.

          SECTION 3. Security for Obligations. The grant of a security interest in the Additional Collateral by the Grantor under this Supplement secures the payment of Obligations of any Loan Party that are now or hereafter existing under or in respect of the Loan Documents and all Obligations of any Loan Party that are now or hereafter existing under or in respect of the Lender Hedging Contracts, in each case whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.

          SECTION 4. Recordation. The Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer to record this Supplement.

          SECTION 5. Grants, Rights and Remedies. This Supplement has been entered into in conjunction with the provisions of the Security Agreement. The Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Administrative Agent with respect to the Additional Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

          SECTION 6. Governing Law. This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

F-2

          IN WITNESS WHEREOF, the Grantor has caused this Supplement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

[NAME OF GRANTOR]
By
	Name:
	Title:
Address for Notices:

F-3

EXHIBIT I

MORTGAGES

Appendix V to Form

I-1

EX-10.7

Exhibit 10.7

BRIDGE LOAN AGREEMENT

Dated as of November 21, 2006

among

RIATA ENERGY, INC.
(d/b/a SandRidge Energy, Inc.)
as the Borrower,

BANK OF AMERICA, N.A.,
as Administrative Agent

and

The Other Lenders Party Hereto

BANC OF AMERICA SECURITIES LLC
CREDIT SUISSE SECURITIES (USA) LLC
GOLDMAN SACHS CREDIT PARTNERS L.P.
LEHMAN BROTHERS INC.
Lead Arrangers and Bookrunners

TABLE OF CONTENTS

Section	Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS		1
1.01 Defined Terms		1
1.02 Other Interpretive Provisions		22
1.03 Accounting Terms		23
1.04 Petroleum Terms		23
1.05 Rounding		24
1.06 Times of Day		24
ARTICLE II. THE COMMITMENTS AND LOANS		24
2.01 Loans		24
2.02 Borrowings, Conversions and Continuations of Loans		24
2.03 Prepayments		25
2.04 Repayment of Loans		27
2.05 Interest		27
2.06 Fees		28
2.07 Computation of Interest and Fees		28
2.08 Evidence of Debt		28
2.09 Payments Generally; Administrative Agent’s Clawback		28
2.10 Sharing of Payments by Lenders		30
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY		31
3.01 Taxes		31
3.02 Illegality		33
3.03 Inability to Determine Rates		33
3.04 Increased Costs; Reserves on Eurodollar Rate Loans		33
3.05 Compensation for Losses		35
3.06 Mitigation Obligations; Replacement of Lenders		35
3.07 Survival		36
ARTICLE IV. CONDITIONS PRECEDENT TO LOANS		36
ARTICLE V. REPRESENTATIONS AND WARRANTIES		39
5.01 Existence, Qualification and Power		39
5.02 Authorization; No Contravention		39
5.03 Governmental Authorization; Other Consents		39
5.04 Binding Effect		40
5.05 Financial Statements; No Material Adverse Effect		40
5.06 Litigation		41
5.07 No Default		41
5.08 Ownership of Property; Liens		41
5.09 Environmental Compliance		41
5.10 Insurance		42
5.11 Taxes		42
5.12 ERISA Compliance		42
5.13 Subsidiaries; Equity Interests; Loan Parties		43
5.14 Margin Regulations; Investment Company Act		43
5.15 Disclosure		43
5.16 Compliance with Laws		44

i

Section	Page
5.17 Solvency		44
5.18 Casualty, Etc.		44
5.19 Labor Matters		44
ARTICLE VI. AFFIRMATIVE COVENANTS		44
6.01 Financial Statements		44
6.02 Certificates; Other Information		45
6.03 Notices		48
6.04 Payment of Obligations		49
6.05 Preservation of Existence, Etc.		49
6.06 Maintenance of Properties		49
6.07 Maintenance of Insurance		49
6.08 Compliance with Laws		49
6.09 Books and Records		49
6.10 Inspection Rights		49
6.11 Use of Proceeds		50
6.12 Covenant to Guarantee Obligations		50
6.13 Compliance with Environmental Laws		50
6.14 [Reserved]		51
6.15 Use of Proceeds of the Permanent Securities		51
6.16 Exchange Notes		51
6.17 Change of Control		52
6.18 Registration Rights		53
ARTICLE VII. NEGATIVE COVENANTS		53
7.01 Liens		53
7.02 Investments		55
7.03 Indebtedness		56
7.04 Fundamental Changes		57
7.05 Dispositions		57
7.06 Restricted Payments		58
7.07 Change in Nature of Business		59
7.08 Transactions with Affiliates		59
7.09 Burdensome Agreements		59
7.10 Use of Proceeds		59
7.11 Financial Covenants		60
7.12 Hedge Transactions		60
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES		60
8.01 Events of Default		60
8.02 Remedies Upon Event of Default		62
8.03 Application of Funds		62
ARTICLE IX. ADMINISTRATIVE AGENT		63
9.01 Appointment and Authority		63
9.02 Rights as a Lender		63
9.03 Exculpatory Provisions		64
9.04 Reliance by Administrative Agent		64
9.05 Delegation of Duties		65
9.06 Resignation of Administrative Agent		65
9.07 Non-Reliance on Administrative Agent and Other Lenders		66
9.08 No Other Duties, Etc.		66

ii

Section	Page
9.09 Administrative Agent May File Proofs of Claim		66
9.10 Guaranty Matters		67
ARTICLE X. MISCELLANEOUS		67
10.01 Amendments, Etc.		67
10.02 Notices; Effectiveness; Electronic Communication		68
10.03 No Waiver; Cumulative Remedies		70
10.04 Expenses; Indemnity; Damage Waiver		70
10.05 Payments Set Aside		71
10.06 Successors and Assigns		72
10.07 Treatment of Certain Information; Confidentiality		75
10.08 Right of Setoff		76
10.09 Interest Rate Limitation		76
10.10 Counterparts; Integration; Effectiveness		77
10.11 Survival of Representations and Warranties		77
10.12 Severability		77
10.13 Replacement of Lenders		77
10.14 Governing Law; Jurisdiction; Etc.		78
10.15 Waiver of Jury Trial		79
10.16 No Advisory or Fiduciary Responsibility		79
10.17 USA PATRIOT Act Notice		80

iii

SCHEDULES
	2.01	Commitments and Applicable Percentages
	5.03	Governmental Authorizations
	5.05	Supplement to Interim Financial Statements
	5.06	Litigation
	5.09	Environmental Matters
	5.13	Subsidiaries; Other Equity Investments and Loan Parties
	7.01	Existing Liens
	7.03	Existing Indebtedness
	10.02	Administrative Agent’s Office; Certain Addresses for Notices
	10.06	Processing and Recordation Fees
EXHIBITS
		Form of
	A	Loan Notice
	B	Note
	C	Compliance Certificate
	D	Assignment and Assumption
	E	Guaranty
	F	Opinion of Counsel to the Loan Parties

iv

BRIDGE LOAN AGREEMENT

     This BRIDGE LOAN AGREEMENT (“Agreement”) is entered into as of November 21, 2006 among RIATA ENERGY, INC., a Texas corporation (d/b/a SandRidge Energy, Inc.) (the “Borrower”), each LENDER from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, and BANC OF AMERICA SECURITIES LLC, CREDIT SUISSE SECURITIES (USA) LLC, GOLDMAN SACHS CREDIT PARTNERS L.P. and LEHMAN BROTHERS INC., as Lead Arrangers and Bookrunners.

PRELIMINARY STATEMENTS:

     Capitalized terms used but not defined in these Preliminary Statements shall have respective meanings set forth for such terms in Section 1.01 hereof.

     Pursuant to the Purchase and Sale Agreement dated November 21, 2006 (the “Acquisition Agreement”) by and among SandRidge Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Borrower (“Buyer”) , American Real Estate Partners, L.P., a Delaware limited partnership, American Real Estate Holdings Limited Partnership, a Delaware limited partnership, AREP Oil & Gas Holdings LLC, a Delaware limited liability company, AREP O & G Holdings LLC, a Delaware limited liability company (collectively, the “Seller”) and NEG Oil & Gas LLC, a Delaware limited liability company (the “Target”) , Buyer has agreed to acquire (the “Acquisition”) all of the membership interests of Target for not more than $1,269.0 million in cash, plus additional consideration in the form of common equity of the Borrower.

     The Borrower intends to finance the Acquisition, the costs and expenses related to the Transaction, the repayment of certain existing indebtedness of the Borrower and the Target and the Borrower’s and its Subsidiaries’ ongoing working capital and other general corporate purposes after consummation of the Acquisition from the following sources: (a) at least $500.0 million in cash proceeds to be received from the issuance and sale of convertible preferred equity (the “Preferred Stock”), (b) at least $244.0 million of common equity of the Target currently held by the Seller to be rolled over (directly or indirectly) into common equity of the Borrower; (c) up to $150.0 million under a revolving senior secured credit facility (the “Senior Credit Facility”) and (d) up to $850.0 million of senior unsecured loans under the bridge facility provided under this Agreement.

     The Borrower has requested that the Lenders provide a bridge loan facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

     In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

1

     “Acquisition” has the meaning specified in the Preliminary Statements.

     “Acquisition Agreement” has the meaning specified in the Preliminary Statements.

     “Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

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

     “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

     “Aggregate Commitments” means the Commitments of all the Initial Lenders.

     “Agreement” means this Bridge Loan Agreement.

     “Applicable Rate” means (i) with respect to Eurodollar Rate Loans, the sum of 4.50% plus the Incremental Margin, if any, and (ii) with respect to Base Rate Loans, the sum of 3.50% plus the Incremental Margin, if any.

     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

     “Arranger” means each of Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P. and Lehman Brothers Inc. in its capacity as lead arranger and book manager in respect of this Agreement.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.06(b), and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.

     “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

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     “Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2005, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

     “Bank of America” means Bank of America, N.A. and its successors.

     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.

     “Borrower” has the meaning specified in the introductory paragraph hereto.

     “Borrower Existing Credit Agreement” means that certain First Amended and Restated Master Credit Agreement dated as of January 12, 2006, among the Borrower (under its former name of Riata Energy, Inc.), Bank of America , N.A. and certain subsidiaries of Borrower from time to time party thereto as guarantors,

     “Borrower Materials” has the meaning specified in Section 6.02.

     “Borrowing” means a borrowing consisting of simultaneous Initial Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Initial Lenders pursuant to Section 2.01.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

     “Cash Equivalents” means any of the following types of Investments, to the extent owned by the Borrower or any of its Subsidiaries:

     (a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;

     (b) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or

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is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 90 days from the date of acquisition thereof;

     (c) commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof; and

     (d) Investments, classified in accordance with GAAP as current assets of the Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition.

     “Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Oil and Gas Property of the Borrower or any of its Subsidiaries having a fair market value in excess of $500,000.

     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

     “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

     “CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

     “Change of Control” means an event or series of events by which:

     (a) at any time prior to the creation of a Public Market, the Ward/Mitchell Group shall cease to own and control legally and beneficially (free and clear of all Liens), either directly or indirectly, equity securities in the Borrower representing more than 30% of the combined voting power of all of equity securities entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that the Ward/Mitchell Group has the right to acquire pursuant to any option right (as defined in clause (b) below)); or

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     (b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than the Ward/Mitchell Group becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than a Control Percentage of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such “person” or “group” has the right to acquire pursuant to any option right); for this purpose, “Control Percentage” means (i) prior to the creation of the Public Market, the percentage of which the Ward/Mitchell Group is the beneficial owner (determined as provided above) and (ii) at any time after the creation of a Public Market, the greater of 30% and the percentage in (i); or

     (c) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors).

     “Change of Control Offer” has the meaning set forth in Section 6.17.

     “Change of Control Payment” has the meaning set forth in Section 6.17.

     “Change of Control Payment Date” has the meaning set forth in Section 6.17.

     “Closing Date” means the date of the Borrowing hereunder, as specified by the Borrower in its Loan Notice.

     “Citi L/Cs” means letters of credit outstanding under the Target Existing Credit Agreements.

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     “Citi Payoff Documents” means documents executed and delivered in connection with the termination of the Target Existing Credit Agreements which shall be satisfactory in form and substance to the Administrative Agent.

     “Code” means the Internal Revenue Code of 1986.

     “Commitment” means, as to each Initial Lender, its obligation to make an Initial Loan to the Borrower pursuant to Section 2.01, in the amount set forth opposite such Lender’s name on Schedule 2.01.

     “Commitment Letter” means the letter agreement so denominated dated November 20, 2006 among the Borrower, the Administrative Agent, the Arranger and the other parties thereto.

     “Compliance Certificate” means a certificate substantially in the form of Exhibit C.

     “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.

     “Consolidated Current Assets” means, for any period, the aggregate amount of all assets of Borrower and its Consolidated Subsidiaries which would be properly classified as current assets in accordance with GAAP plus any Available Borrowing Base (as defined in the Senior Credit Facility), but excluding any unrealized assets resulting from compliance with the Financial Accounting Standards Board’s Statement 133 concerning mark-to-market requirements on hedging transactions.

     “Consolidated Current Liabilities” means, for any period, the aggregate amount of all liabilities of Borrower and its Consolidated Subsidiaries which would be properly classified as current liabilities in accordance with GAAP, but excluding current maturities under the Senior Credit Agreement, all amounts outstanding pursuant to this Agreement and any unrealized liabilities resulting from compliance with the Financial Accounting Standards Board’s Statement 133 concerning mark-to-market requirements on hedging transactions.

     “Consolidated Current Ratio” means, as of any date of determination, the ratio of (a) Consolidated Current Assets as of such date to (b) Consolidated Current Liabilities as of such date.

     “Consolidated EBITDAX” means for any period, the Consolidated Net Income of Borrower for such period; plus each of the following (without duplication) determined for Borrower and its Consolidated Subsidiaries on a Consolidated basis for such period: (a) any provision for (or less any benefit from) income or franchise taxes included in determining Consolidated Net Income; (b) any interest expense deducted in determining Consolidated Net Income; (c) any depreciation, depletion, amortization or exploration expense deducted in determining Consolidated Net Income; (d) any non-cash loss on change in fair value of derivative instruments deducted in determining Consolidated Net Income; and (e) any other non-cash charge, expense or loss deducted in determining Consolidated Net Income; and minus each

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of the following (without duplication) determined for Borrower and its Consolidated Subsidiaries on a Consolidated basis for such period, to the extent included in determining such Consolidated Net Income for such period: (a) any non-cash gain on change in fair value of derivative instruments; (b) any interest income included in determining Consolidated Net Income and (c) any other non-cash income or gains; provided however, that in determining Consolidated Net Income for the purposes of this definition for any period in which Borrower or any of its Consolidated Subsidiaries has acquired or acquires additional Consolidated Subsidiaries (whether by purchase, merger or otherwise) or has acquired or disposed of or acquires or disposes of producing Oil and Gas Properties, (1) the Consolidated Net Income of such acquired Consolidated Subsidiaries shall be included in such calculation on a pro forma basis as if they had been owned by Borrower and its Consolidated Subsidiaries throughout such period, (2) the revenues attributable to the oil and gas production from such acquired Oil and Gas Properties during such period, less the direct operating expenses and severance and ad valorem taxes incurred with respect to such properties during such period, shall be included in such calculation on a pro forma basis as if they had been owned by Borrower and its Consolidated Subsidiaries throughout such period, and (3) the revenues attributable to the oil and gas production from producing Oil and Gas Properties disposed of during such period, less the direct operating expenses and severance and ad valorem taxes incurred with respect to such properties during such period, shall be deducted in such calculation on a pro forma basis as if they had not been owned by Borrower and its Consolidated Subsidiaries throughout such period. Pro forma adjustments made in connection with Subsidiaries or Oil and Gas Properties acquired or disposed of shall be consistent with Article 11 of Regulation S-X and certified by the Borrower’s chief financial officer.

     “Consolidated Fixed Charges” means, for any period, the sum of (a) Consolidated Interest Charges for such period, (b) the aggregate amount of scheduled principal payments made during such period in respect of Long-Term Indebtedness of the Borrower and its Consolidated Subsidiaries (except payments made by the Borrower or any Consolidated Subsidiary to the Borrower or any Consolidated Subsidiary), and (c) the aggregate amount of principal payments (except scheduled principal payments) made during such period in respect of Long-Term Indebtedness of the Borrower and its Consolidated Subsidiaries (other than the Loans), but in the case of any principal payment other than scheduled principal payments, only to the extent that such payment reduced any scheduled principal payments that would have become due within one year after the date of such payment.

     “Consolidated Fixed Charge Coverage Ratio” means, as of the last day of any fiscal quarter, the ratio of (a) Consolidated EBITDAX for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Fixed Charges for such period.

     “Consolidated Funded Indebtedness” means, as of any date of determination, for the Borrower and its Consolidated Subsidiaries on a Consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (d) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (e) without duplication, all Guarantees with

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respect to outstanding Indebtedness of the types specified in clauses (a) through (d) above of Persons other than the Borrower or any Consolidated Subsidiary, and (f) all Indebtedness of the types referred to in clauses (a) through (e) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Consolidated Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Consolidated Subsidiary.

     “Consolidated Interest Charges” means, for any period, for the Borrower and its Consolidated Subsidiaries on a Consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP (but excluding amortization of debt discount and expense in connection with the Transaction), (b) to the extent not reflected in (a), plus the net amount payable under Swap Contracts in respect of interest rates (or minus the net amount receivable under Swap Contracts in respect of interest rates) plus (c) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP.

     “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDAX for the period of the four fiscal quarters most recently ended.

     “Consolidated Net Income” means, for any period, the net income (or loss) of Borrower and its Consolidated Subsidiaries for such period determined in accordance with GAAP, provided that the following shall be excluded in calculating Consolidated Net Income and Consolidated EBITDAX: (i) any extraordinary items of gain or loss, (ii) any gain or loss from the sale of assets other than in the ordinary course of business, (iii) any non-cash income, gains, losses or charges resulting from the requirements of SFAS 133 or 143 and (iv) any professional fees related to the Transaction.

     “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

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     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that (i) with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, and (ii) the Default Rate shall in no event be less than the Minimum Rate.

     “Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. The issuance of Equity Interests by any Subsidiary to any Person other than the Borrower or a wholly-owned Subsidiary shall be deemed a Disposition by the Borrower of its direct or indirect Equity Interest in such Subsidiary to the extent of the resulting dilution.

     “Dollar” and “$” mean lawful money of the United States.

     “Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States.

     “Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

     “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

     “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights

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for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

     “Equity Issuance” means the issuance of the Preferred Stock.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

     “Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

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     “Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the Eurodollar Rate.

     “Event of Default” has the meaning specified in Section 8.01.

     “Exchange Note” means a note of the Borrower issued pursuant to the Exchange Note Indenture.

     “Exchange Note Indenture” means the indenture to be entered into to give effect to the exchange right of the Lenders pursuant to Section 6.16, having terms and conditions substantially the same as those applicable to the Extended Loans, except (i) as otherwise contemplated by Section 6.16 (ii) covenants (including mandatory repurchase offers) and events of default will be as proposed by the Arrangers for the Permanent Securities and reasonably acceptable to the Borrower and (iii) as otherwise agreed by the Borrower and the Required Lenders, and such other terms and provisions not materially inconsistent therewith as may be customary for an indenture governing debt securities of such nature.

     “Exchange Request” has the meaning set forth in Section 6.16(b)

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), 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 such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a).

     “Existing Credit Agreements” mean collectively the Borrower Existing Credit Agreement and the Target Existing Credit Agreements.

     “Extended Loans” has the meaning set forth in Section 2.01(b).

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole

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multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

     “Fee Letter” means the letter agreement so denominated dated November 20, 2006 among the Borrower, the Administrative Agent, the Arranger and the other parties thereto.

     “Final Maturity Date” means the sixth anniversary of the Closing Date.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “FRB” means the Board of Governors of the Federal Reserve System of the United States.

     “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank).

     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether

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or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

     “Guarantors” means, collectively, (i) NEG Oil & Gas LLC, ROC Gas Company, National Onshore LP, National Offshore LP, NEG Operating LLC, Lariat Compression Company, Alsate Management and Investment Company, Integra Energy, L.L.C., Petrosource Energy Company, L.P., Petrosource Production Company, L.P. and SandRidge Holdings, Inc. and (ii) each Person which becomes a Guarantor after the Closing Date pursuant to Section 6.12.

     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit E.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     “Hedge Transaction” means any commodity, interest rate, currency or other swap, option, collar, futures contract or other contract pursuant to which a Person hedges risks related to commodity prices, interest rates, currency exchange rates, securities prices or financial market conditions. Hedge Transactions expressly include Oil and Gas Hedge Transactions.

     “Hydrocarbons” means oil, gas, casinghead gas, drip gasolines, natural gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith, and all products, by-products and all other substances derived therefrom or the processing thereof, and all other minerals and substances, including, but not limited to, sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium, and any and all other minerals, ores, or substances of value, and the products and proceeds therefrom, including, without limitation, all gas resulting from the insitu combustion of coal or lignite.

     “Immaterial Title Deficiencies” has the meaning set forth in the Senior Credit Facility.

     “Incremental Margin” means (i) prior to the date that is six months after the Closing Date, 0%, and (ii) on and after such date that is six months after the Closing Date 0.50% plus, for each further period of three months that shall have elapsed subsequent to such six month date, 0.25%.

     “Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

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     (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

     (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

     (c) net obligations of such Person under any Swap Contract;

     (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 90 days after the date on which such trade account payable was created);

     (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

     (f) capital leases and Synthetic Lease Obligations;

     (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (other than the Preferred Stock), valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

     (h) all Guarantees of such Person in respect of any of the foregoing.

     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitees” has the meaning specified in Section 10.04(b).

     “Information” has the meaning specified in Section 10.07.

     “Initial Lenders” means Banc of America Bridge LLC, Credit Suisse, Cayman Islands Branch, Goldman Sachs Credit Partners L.P. and Lehman Commercial Paper Inc.

     “Initial Loan” has the meaning set forth in Section 2.01(a).

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     “Initial Maturity Date” means the first anniversary of the Closing Date.

     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Initial Maturity Date or the Final Maturity Date, as applicable; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Initial Maturity Date or the Final Maturity Date, as applicable.

     “Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date three months thereafter provided that:

     (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

     (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Final Maturity Date.

     “Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

     “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

     “IRS” means the United States Internal Revenue Service.

     “Lariat” means Lariat Services, Inc., a Texas corporation and a wholly-owned Subsidiary of the Borrower.

     “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable

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administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

     “Lead Arranger” means Banc of America Securities LLC.

     “Lender” has the meaning specified in the introductory paragraph hereto.

     “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

     “Loan” means an Initial Loan or an Extended Loan.

     “Loan Documents” means this Agreement, the Notes, the Fee Letter, the Guaranty, the Exchange Note Indenture and Exchange Notes.

     “Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

     “Loan Parties” means, collectively, the Borrower and each Guarantor.

     “Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

     “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), results of operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of (i) the rights and remedies of the Administrative Agent or any Lender under any Loan Document or (ii) the ability of the Loan Parties to perform their obligations under the Loan Documents; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

     “Minimum Rate” means a rate per annum equal to the sum of 9.00% plus the Incremental Margin.

     “MNPI” has the meaning specified in Section 6.02.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is

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obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Net Cash Proceeds” means:

(a) with respect to any Disposition by the Borrower or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset and that is required to be repaid in connection with such transaction (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses incurred by the Borrower or such Subsidiary in connection with such transaction and (C) income taxes reasonably estimated to be actually payable within two years of the date of the relevant transaction as a result of any gain recognized in connection therewith and (D) the Swap Termination Value, if any, associated with such transaction; provided that, if the amount of any estimated taxes pursuant to subclause (C) exceeds the amount of taxes actually required to be paid in cash in respect of such Disposition, the aggregate amount of such excess shall constitute Net Cash Proceeds; and

(b) with respect to the sale or issuance of any Equity Interests by the Borrower or any of its Subsidiaries (or parent holding company), or the incurrence or issuance of any Indebtedness by the Borrower or any of its Subsidiaries, the excess of (i) the sum of the cash and Cash Equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by the Borrower or such Subsidiary in connection therewith.

     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit B.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

     “Oil and Gas Business” means the business of acquiring, exploring, or developing and operating Oil and Gas Properties and the production, marketing, processing and transporting of Hydrocarbons therefrom.

     “Oil and Gas Hedge Transaction” means a Hedge Transaction pursuant to which any Person hedges the price to be received by it for future production of Hydrocarbons.

     “Oil and Gas Properties” means all oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including, without limitation,

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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, storage, processing and handling assets.

     “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

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

     “Participant” has the meaning specified in Section 10.06(d).

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “PCAOB” means the Public Company Accounting Oversight Board.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permanent Securities” means the senior unsecured notes or any other debt securities or term loans of the Borrower to be issued after the Closing Date for the purpose of refinancing all or a portion of the outstanding Loans.

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

     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Platform” has the meaning specified in Section 6.02.

     “Preferred Stock” has the meaning set forth in the Preliminary Statements.

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     “Public Market” shall exist if (a) a Public Offering has been consummated and (b) any Equity Interests of the Borrower have been distributed by means of an effective registration statement under the Securities Act of 1933.

     “Public Offering” means a public offering of the Equity Interests of the Borrower pursuant to an effective registration statement under the Securities Act of 1933.

     “Public-Side Lender” has the meaning specified in Section 6.02.

     “Refinancing Fee” means a fee payable to each Lender equal to 2.0% of the aggregate outstanding principal amount of the Initial Loans of such Lender repaid, repurchased, redeemed or otherwise acquired or retired for value, in whole or in part, other than with the proceeds of (i) an issuance of Permanent Securities, (ii) the contemplated initial public offering of equity securities of the Borrower following the consummation of the Acquisition, (iii) an asset sale or (iv) the Senior Credit Facility. The Refinancing Fee shall be payable on the date of each such repayment, repurchase, redemption, acquisition or retirement for value.

     “Register” has the meaning specified in Section 10.06(c).

     “Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

     “Related Documents” means the Acquisition Agreement, and the documentation for the Equity Issuance.

     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Required Lenders” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the Commitments shall have or shall have been terminated, Lenders holding in the aggregate more than 50% of the outstanding principal amount of the Loans.

     “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

     “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the

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Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof).

     “Rollover Fee” means a fee payable to each Lender equal to 2.0% of the aggregate principal amount of any Extended Loans made by such Lender on the Initial Maturity Date, payable in full on the Initial Maturity Date.

     “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

     “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Securities Laws” means the Securities Act of 1933 and regulations thereunder, the Securities Exchange Act of 1934 and regulations thereunder, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

     “Seller” has the meaning specified in the Preliminary Statements.

     “Senior Credit Facility” has the meaning specified in the Preliminary Statements.

     “Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

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     “Super-Majority Lenders” means, as of any date of determination, Lenders holding in the aggregate 75% or more of the Total Outstandings.

     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

     “Syndication Completion Date” means the earlier of (i) the date on which the Bridge Lead Arranger notifies the Lenders that the Bridge Lead Arranger has completed its primary syndication of the Initial Loans to its satisfaction but in any event not later than 60 days after the initial launch of the syndication on IntraLinks or (ii) the 180^th day after the Closing Date.

     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

     “Target” has the meaning specified in the Preliminary Statements.

     “Target Existing Credit Agreements” means (i) that certain Credit Agreement dated as of December 20, 2005, among the Target (under its former name of AREP OIL & GAS LLC), Citicorp USA, Inc., as Administrative Agent, Bear Stearns Corporate Lending Inc., as the Syndication Agent and certain financial institutions from time to time party thereto as lenders and (ii) that certain Amended and Restated Credit Agreement, dated as of December 20, 2005, by and among NEG Operating LLC, a Delaware limited liability company, as borrower, NEG

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Oil & Gas Sub LLC (as assignee of Target), a Delaware limited liability company, as lender and administrative agent, and Citicorp USA, Inc., as Collateral Agent.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

     “Threshold Amount” means $2,500,000.

     “Transaction” means, collectively, the Acquisition, the Equity Issuance, the entering into and funding of the bridge loan facility under this Agreement, the entering into and funding of the Senior Credit Facility, the refinancing of certain outstanding Indebtedness of the Borrower and the Target under the Existing Credit Agreements, and all related transactions and the payment of the fees and expenses incurred in connection with the consummation of the foregoing.

     “Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “United States” and “U.S.” mean the United States of America.

     “Well Participation Program” means that the Well Participation Program effective as of June 8, 2006 by and among the Borrower and certain executive officers of the Borrower, as in effect on the Closing Date.

     “Ward/Mitchell Group” means (i) each of Tom L. Ward (“Ward”) and N. Malone Mitchell III (“Mitchell”); (ii) the wife of either of them; (iii) a lineal descendant of either of them; (iv) the estate of either of them; (v) any trust of which at least one of the trustees is Ward or Mitchell, or the principal beneficiaries of which are any one or more of the Persons in (i)-(iv); (vi) any Person which is Controlled by any one or more of the persons in (i)-(v); and (vii) any group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of which each of Ward and Mitchell is a member.

     1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document)

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shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

     (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

     1.03 Accounting Terms. (a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

     1.04 Petroleum Terms.

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     As used herein, the terms “proved reserves,” “proved developed reserves,” “proved developed producing reserves,” “proved developed nonproducing reserves,” and “proved undeveloped reserves” have the meaning given such terms from time to time and at the time in question by the Society of Petroleum Engineers of the American Institute of Mining Engineers.

     1.05 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

ARTICLE II.
THE COMMITMENTS AND LOANS

     2.01 Loans. (a) Subject to the terms and conditions set forth herein, each Initial Lender severally agrees to make a single term loan (an “Initial Loan”) to the Borrower on the Closing Date in the amount of such Initial Lender’s Commitment. The Commitments are not revolving in nature and shall terminate at the close of business on the Closing Date.

     (b) Each Lender severally agrees, if the Initial Loans have not been repaid prior to the Initial Maturity Date, that the then outstanding principal amount of each of its Initial Loans shall be automatically converted into a loan (individually, an “Extended Loan” and collectively, the “Extended Loans”) to the Borrower on the Initial Maturity Date in an aggregate principal amount equal to the then outstanding principal amount of such Initial Loan or Loans upon satisfaction of the following conditions: (i) no Default shall have occurred and be continuing; (ii) the Borrower shall have paid, or caused to be paid, in full all fees then due pursuant to Section 2.06; (iii) any Note requested pursuant to Section 2.08 to evidence Extended Loans shall have been duly issued; and (iv) no order, decree or injunction from any Governmental Authority enjoining the conversion of any Initial Loan into an Extended Loan shall be in effect. Upon the conversion of the Initial Loans into Extended Loans, each Lender shall cancel on its records a principal amount of the Initial Loans held by such Lender corresponding to the principal amount of the Extended Loans issued to such Lender, which corresponding principal amount of the Initial Loans shall be satisfied by the conversion of such Initial Loans into Extended Loans in accordance with this Section 2.01(b).

     2.02 Borrowings, Conversions and Continuations of Loans.

     (a) The Borrowing, each conversion of Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of

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any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each conversion or continuation of Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) in the case of a conversion or continuation, the principal amount of Loans to be converted or continued, and (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted. If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.

     (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its ratable share of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of the Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Closing Date. Upon satisfaction of the conditions set forth in Article IV, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.

     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to Loans.

     2.03 Prepayments.

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     (a) Optional. The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty, but subject to the Refinancing Fee, if applicable; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. three Business Days prior to any date of prepayment and (ii) any partial prepayment shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.

     (b) Mandatory.

          (i) If the Borrower or any of its Subsidiaries Disposes of any property (other than any Disposition of any property permitted by Section 7.05(g)) which results in the realization by such Person of Net Cash Proceeds, the Borrower shall, subject to the prior application of such Net Cash Proceeds pursuant to the provisions of the Senior Credit Facility regarding the application of such Net Cash Proceeds, prepay an aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds immediately upon receipt thereof by such Person; provided that, the proceeds of any Disposition permitted by Section 7.05(g) shall not constitute Net Cash Proceeds to the extent that (A) such proceeds are reinvested in replacement properties or assets, or other productive properties or assets, acquired by the Borrower or a Subsidiary of a kind then used or usable in the business of the applicable Person within 180 days from the date of receipt thereof or (B) if the applicable Borrower or Subsidiary intends to acquire replacement properties or assets, or other productive properties or assets, with such proceeds as part of a like-kind exchange under Section 1031 of the Code, the potential replacement properties or assets are identified by such Borrower or Subsidiary within 180 days from the date the ownership to the sold assets is transferred to the buyer of such property and the proceeds from such property are reinvested to acquire such replacement properties or assets within 180 days from the date the ownership to the sold assets is transferred to the buyer of such property; provided further that, the proceeds of any Casualty Event shall not constitute Net Cash Proceeds to the extent that such proceeds are reinvested in replacement properties or assets, or other productive properties or assets, acquired by the Borrower or a Guarantor of a kind then used or usable in the business of the applicable Person within 180 days from the date of receipt thereof.; and

          (ii) Upon the incurrence or issuance subsequent to the Closing Date by the Borrower or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.03 (b)-(k)) or the issuance subsequent to the Closing Date by the Borrower or any of its Subsidiaries (or by any direct or indirect parent holding company of which the Borrower is a wholly-owned Subsidiary) of any Equity Interests (other than any such issuance to the Borrower or a wholly owned Subsidiary), the Borrower shall

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prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by the Borrower or such Subsidiary.

     (c) Applications. Prepayments made pursuant to this Section 2.03 shall be applied ratably to the Loans of the Lenders.

     2.04 Repayment of Loans.

     (a) Subject to Section 2.01(b), the Initial Loans will mature on the Initial Maturity Date and, to the extent then unpaid, will be converted into Extended Loans or become due and payable pursuant to Section 2.01(b).

     (b) The Extended Loans will mature on the Final Maturity Date.

     2.05 Interest.

     (a) Subject to the provisions of subsections (b) and (c) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

     (b) Subject to the provisions of subsection (c) below, the rate of interest applicable to the Loans shall at no time be less than the Minimum Rate or greater than 11.00% per annum.

     (c) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iii) Upon the request of the Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

     (iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

     (v) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after

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judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

     2.06 Fees. The Borrower shall pay to the Administrative Agent, the Arrangers and the Lenders, as applicable, for their own respective accounts fees in the amounts and at the times specified in the Fee Letter, including, if applicable, the Rollover Fee and the Refinancing Fee. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

     2.07 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

     2.08 Evidence of Debt.

     The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

     2.09 Payments Generally; Administrative Agent’s Clawback.

     (a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its ratable share of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee

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shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

     (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the Closing Date that such Lender will not make available to the Administrative Agent such Lender’s share of the Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in the Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

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

     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the Initial Loans set forth in Article IV are

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not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or to make its payment under Section 10.04(c).

     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

     2.10 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

     (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

     (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans

     to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

     The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

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ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 Taxes.

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

     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

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

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

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by

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applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

     Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

     (f) Treatment of Certain Refunds. If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

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     3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

     3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

     3.04 Increased Costs; Reserves on Eurodollar Rate Loans.

     (a) Increased Costs Generally. If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e));

     (ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or

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     (iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or any other amount) then, upon request of such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

     (b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

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

     (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

     (e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such

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additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

     3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

     (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13;

including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

     3.06 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any

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Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13.

     3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV.
CONDITIONS PRECEDENT TO LOANS

     The obligation of each Initial Lender to make its Initial Loan hereunder is subject to satisfaction of the following conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

     (i) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

     (ii) a Note executed by the Borrower in favor of each Lender requesting a Note;

     (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;

     (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

     (v) a favorable opinion of Vinson and Elkins LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit F and such other matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request;

     (vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies, or an exhibit, of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such

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consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

     (vii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in paragraphs (xx) and (xxi) below have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;

     (viii) certificates attesting to the Solvency of each Loan Party before and after giving effect to the Transaction and the incurrence of indebtedness related thereto, from its chief financial officer;

     (ix) such reports and audits prepared by the Borrower or any of its Affiliates or any advisor engaged by the Borrower or any of its Affiliates with respect to the Target and its Subsidiaries as the Administrative Agent may reasonably request; and

     (x) certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lenders, together with all agreements, instruments and other documents delivered in connection therewith as the Administrative Agent shall reasonably request;

     (xi) the following financial information: (A) audited consolidated financial statements of each of the Borrower and the Target for the three fiscal years ended most recently prior to the Acquisition, unaudited consolidated financial statements of each of the Borrower and the Target for any interim quarterly periods that have ended since the most recent of such audited financial statements, and pro forma financial statements of the Borrower giving effect to the Transaction for the most recently completed fiscal year and the period commencing with the end of the most recently completed fiscal year and ending with the most recently completed quarter, which in each case, (1) shall be satisfactory in form and substance to the Lead Arranger and the Lenders, (2) shall not be materially inconsistent with the Information heretofore provided to the Lenders, and (3) shall meet the requirements of Regulation S-X under the Securities Act of 1933, as amended, and all other accounting rules and regulations of the SEC promulgated thereunder applicable to a registration statement under such Act on Form S-1; (B) forecasts prepared by management of the Borrower, each in form satisfactory to the Administrative Agent and the Lenders, of balance sheets, income statements and cash flow statements for the first year following the Closing Date and for each year commencing with the first fiscal year following the Closing Date for the term of this Agreement; and (C) evidence satisfactory to the Administrative Agent that (1) Consolidated EBITDAX for the twelve-month period ended June 30, 2006 calculated on a pro forma basis giving effect to the Transaction was not less than $290,000,000, (2) the ratio of Consolidated Funded Indebtedness at the Closing Date to Consolidated EBITDAX for the twelve months ended June 30, 2006 (which ratio shall be calculated reflecting the Transaction on a pro forma basis) was not greater than 3.3:1.0 and (3) the pro forma financial statements delivered pursuant to clause (A) above and the forecasts delivered pursuant to clause (B) above were prepared in good faith on the basis of the

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assumptions stated therein, which assumptions are fair in light of the then existing conditions, and, in the case of each of (1), (2) and (3) above, and the chief financial officer of the Borrower shall have provided the Administrative Agent and the Lenders a written certification to that effect.

     (xii) evidence of (x) the receipt by the Borrower of not less than $500,000,000 cash proceeds from the Preferred Stock and (y) the effectiveness of the Senior Credit Facility;

     (xiii) such other certificates, documents, or opinions as the Administrative Agent or the Required Lenders reasonably may require;

     (xiv) any fees required to be paid on or before the Closing Date shall have been paid;

     (xv) unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent);

     (xvi) the Closing Date shall have occurred on or before November 22, 2006;

     (xvii) all applicable waiting periods (including, without limitation, the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1975) shall have expired or terminated without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on any of the Borrower, the Target, their respective Subsidiaries or the Transaction or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable that in the judgment of the Lead Arranger could have such effect;

     (xviii) the Acquisition shall have been consummated substantially in accordance with the terms of the Acquisition Agreement, without any waiver or amendment not consented to by the Lenders of any material term, provision or condition set forth therein, other than waivers or amendments that could not reasonably be expected to have a Material Adverse Effect, and in compliance with all applicable requirements of Law;

     (xix) there shall have been no change, occurrence or development since June 30, 2006 that could reasonably be expected to have a Material Adverse Effect;

     (xx) the representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case

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they shall be true and correct as of such earlier date, and except that for purposes of this Article IV, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01;

          (xxi) no Default shall exist, or would result from the Initial Loans or from the application of the proceeds thereof.

     Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Article IV, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Administrative Agent and the Lenders that:

     5.01 Existence, Qualification and Power. Each Loan Party and each of its Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents and (as of the Closing Date only) Related Documents to which it is a party and consummate the Transaction, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document and (as of the Closing Date only) Related Document to which such Person is or is to be a party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation that is material to the Loan Parties to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.

     5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan

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Document or Related Document, or for the consummation of the Transaction, except for (i) the authorizations, approvals, actions, notices and filings listed on Schedule 5.03, all of which have been duly obtained, taken, given or made and are in full force and effect, (ii) routine authorizations, approvals, actions, notices and filings in the ordinary course of business (e.g. tax filings, annual reports, environmental filings, etc. ); (iii) any necessary authorizations, approvals, actions, notices and filings (including the filing of a shelf registration statement) necessary in order to comply with Sections 6.16 and 6.18 and (iv) authorizations, approvals and consents necessary in connection with the Borrower’s mineral class leases with the general land office of State of Texas. All applicable waiting periods in connection with the Transaction have expired without any action having been taken by any Governmental Authority restraining, preventing or imposing materially adverse conditions upon the Transaction or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

     5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms.

     5.05 Financial Statements; No Material Adverse Effect. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries dated September 30, 2006, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness.

     (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

     (d) The consolidated pro forma balance sheet of the Borrower and its Subsidiaries as at June 30, 2006, and the related consolidated pro forma statements of income and cash flows of the Borrower and its Subsidiaries for the twelve months then ended, certified by the chief

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financial officer or treasurer of the Borrower, copies of which have been furnished to each Lender, fairly present the consolidated pro forma financial condition of the Borrower and its Subsidiaries as at such date and the consolidated pro forma results of operations of the Borrower and its Subsidiaries for the period ended on such date, in each case giving effect to the Transaction, all in accordance with GAAP (except for the absence of footnotes and subject to year-end audit adjustments).

     (e) The consolidated forecasted balance sheets, statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Article IV or Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower’s reasonable estimate of its future financial condition and performance.

     5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement, any other Loan Document, any Related Document or the consummation of the Transaction, or (b) except as specifically disclosed in Schedule 5.06 (the “Disclosed Litigation”), either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and there has been no change in the status, or financial effect on any Loan Party or any Subsidiary thereof, of the matters described in Schedule 5.06 that could reasonably be expected to have a Material Adverse Effect.

     5.07 No Default. Neither any Loan Party nor any Subsidiary thereof is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

     5.08 Ownership of Property; Liens. (a) Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (b) The property of each Loan Party and each of its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

     5.09 Environmental Compliance. (a) The Loan Parties and their respective Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.09, such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (b) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate,

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reasonably be expected to have a Material Adverse Effect, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under 42 USC § 9605(a)(8)(B) or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries in quantities or in a manner as to create Environmental Liability.

          (c) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law that is reasonably expected to result in material Environmental Liability to any Loan Party or any of its Subsidiaries; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material Environmental Liability to any Loan Party or any of its Subsidiaries.

     5.10 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.

     5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.

     5.12 ERISA Compliance. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws except for such events of noncompliance which could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

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     (c) Except to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

     5.13 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are (in the case of corporate securities) fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except those permitted under the Loan Documents or permitted by Section 7.01. As of the Closing Date, no Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. Set forth on Part (c) of Schedule 5.13 is a complete and accurate list of all Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its incorporation, the address of its principal place of business and its U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification number, its unique identification number issued to it by the jurisdiction of its incorporation. As of the Closing Date, the copy of the charter of each Loan Party and each amendment thereto provided pursuant to Article IV(iv) is a true and correct copy of each such document, each of which is valid and in full force and effect.

     5.14 Margin Regulations; Investment Company Act. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

     5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished in writing by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished) contains as of the date so furnished any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial

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information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     5.16 Compliance with Laws. Each Loan Party and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     5.17 Solvency. Each Loan Party is, individually and together with its Subsidiaries on a Consolidated basis, Solvent.

     5.18 Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are 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) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.19 Labor Matters.

          There are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Subsidiaries as of the Closing Date and neither the Borrower nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

ARTICLE VI.

AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

     6.01 Financial Statements. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of Section 6.02:

     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of a Registered Public Accounting Firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like

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qualification or exception or any qualification or exception as to the scope of such audit or with respect to the absence of any material misstatement and (ii) commencing at such time as the Borrower is required to prepare the same for SEC reporting purposes, an opinion of such Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of the SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which the Required Lenders do not object, and such consolidating statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries;

     (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and

     (c) as soon as available, but in any event within 90 days after the end of each fiscal year (commencing April 1, 2007) of the Borrower, an annual business plan and budget of the Borrower and its Subsidiaries on a Consolidated basis, including forecasts prepared by management of the Borrower, in form satisfactory to the Administrative Agent and the Required Lenders, of consolidated balance sheets and statements of income or operations of the Borrower and its Subsidiaries on a monthly basis for the immediately following fiscal year.

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under clause (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in clauses (a) and (b) above at the times specified therein.

     6.02 Certificates; Other Information. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of this Section 6.02:

     (a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal quarter ended December 31, 2006), a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower;

     (b) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of

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directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them;

     (c) promptly after the same are available, copies of all annual, regular, periodic and special reports, registration statements and proxy statements which the Borrower may file or be required to file with the SEC under Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (d) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

     (e) [reserved];

     (f) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof;

     (g) not later than five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of all notices, requests and other documents (including amendments, waivers and other modifications) so received under or pursuant to any Related Document or instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and, from time to time upon request by the Administrative Agent, such information and reports regarding the Related Documents and such instruments, indentures and loan and credit and similar agreements as the Administrative Agent may reasonably request;

     (h) promptly after the assertion or occurrence thereof, notice of any action or proceeding against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect;

     (i) [reserved];

     (j) as soon as available, but in any event within 30 days after the Closing Date, a duly completed Compliance Certificate (on a pro forma basis) as of the last day of the fiscal quarter of the Borrower ended on September 30, 2006, signed by a Responsible Officer of the Borrower; and

     (k) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan

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Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

     Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

     The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) either by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) or by delivery or electronic communication to the applicable Lenders and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities except as contemplated below) (each, a “Public-Side Lender”). The Borrower hereby agrees that so long as the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (x) all Borrower Materials that are to be posted on the Platform shall be clearly and conspicuously marked “PUBLIC-SIDE” which, at a minimum, shall mean that the words “PUBLIC-SIDE” shall appear prominently on the first page thereof; (y) by marking Borrower Materials “PUBLIC-SIDE,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that (A) prior to the creation of a Public Market, Lenders shall treat such Borrower Materials as containing material non-public information with respect to the Borrower and its Subsidiaries (“MNPI”), and the Borrower shall be deemed to have represented to the Lenders that it expects such Borrower Materials will cease to be MNPI at the time of creation of a Public Market and (B) to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); and (z) any Borrower Materials that are not marked

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“PUBLIC-SIDE” as contemplated above shall be treated as containing MNPI, shall not be posted on the Platform and shall be available to Lenders only upon request therefor (which request may apply generally to all such Borrower Materials). Any such request shall constitute a confirmation from the applicable Lender that it has compliance procedures for dealing with such MNPI, and that it will use and maintain such information only in compliance with those procedures, its contractual obligations and applicable law, including federal and state securities laws.

     Each Public-Side Lender shall designate individuals or advisors authorized to act on behalf of the Public-Side Lender to receive Borrower Materials not designated as “PUBLIC-SIDE” pursuant to the immediately preceding paragraph, including any notices pursuant to Section 6.03.

     6.03 Notices. Promptly notify the Administrative Agent and each Lender:

     (a) of the occurrence of any Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws;

     (c) of the occurrence of any ERISA Event;

     (d) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary;

     (e) of the determination by the Registered Public Accounting Firm providing the opinion required (but only if required) under Section 6.01(a)(ii) (in connection with its preparation of such opinion) or the Borrower’s determination at any time of the occurrence or existence of any Internal Control Event; and

     (f) of the (i) occurrence of any Disposition of property or assets for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.03(b)(i), and (ii) incurrence or issuance of any Indebtedness or Equity Interests for which the Borrower is required to make a mandatory prepayment pursuant to Section 2.03(b)(ii).

     Each notice pursuant to this Section 6.03 (other than Section 6.03(f)) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

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     6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, except, in the case of (a) or (b), for such amounts that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

     6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     6.07 Maintenance of Insurance. Maintain (at its own expense) insurance with financially sound and reputable insurance companies, as well as insurance in such amounts, with such limitations or deductibles, against such risks, and in such form as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations.

     6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

     6.09 Books and Records. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

     6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to

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discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

     6.11 Use of Proceeds. The Borrower shall apply the proceeds of the Credit Extensions to (i) partially finance the Acquisition, (ii) refinance the Borrower’s existing senior secured revolving credit facility under the Borrower Existing Credit Agreement, (iii) refinance the Target’s existing credit facilities under the Target Existing Credit Agreements, (iv) pay certain fees and expenses incurred in connection with the Acquisition and entering into this Agreement, (v) provide working capital for the Borrower and its Subsidiaries including the issuance of letters of credit, capital expenditures, and other lawful corporate purposes, and (vi) finance permitted acquisitions by the Borrower and its Subsidiaries of oil and gas properties and other assets related to the exploration, production and development of oil and gas properties.

     6.12 Covenant to Guarantee Obligations. Upon the formation or acquisition of any new direct or indirect Subsidiary (excluding any CFC or any Subsidiary that is held directly or indirectly by a CFC) by any Loan Party, then the Borrower shall, at the Borrower’s expense:

          (i) within 20 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), cause such Subsidiary, and cause each direct and indirect parent (except, if applicable, Lariat, L.L.C., Cholla Pipeline, L.P. or Sagebrush Pipeline, LLC) of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ obligations under the Loan Documents, and

          (ii) within 60 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clause (i) above, and as to such other matters as the Administrative Agent may reasonably request.

     6.13 Compliance with Environmental Laws. Comply, and cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew all material Environmental Permits necessary for its current operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance in all material respects with the requirements of all applicable Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is not required by applicable Environmental Laws or being contested in good faith and by

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proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

     6.14 [Reserved]

     6.15 Use of Proceeds of the Permanent Securities.

     The Borrower will use the net proceeds received from the sale of the Permanent Securities to repay the Loans.

     6.16 Exchange Notes.

     The Borrower will, as promptly as practicable on or after the Initial Maturity Date, (i) select a bank or trust company reasonably acceptable to the Required Lenders to act as Exchange Note Trustee, (ii) enter into the Exchange Note Indenture, and (iii) cause counsel to the Borrower to deliver to the Administrative Agent an executed legal opinion in form and substance customary for a transaction of that type to be mutually agreed upon by the Borrower and the Administrative Agent (including, without limitation, with respect to due authorization, execution and delivery; validity; and enforceability of the documents referred to in clause (ii) above.

     (b) The Borrower will, within 15 Business Days following the written request (the “Exchange Request”) of the holders of any Loans at any time after the Initial Maturity Date (provided that after giving effect thereto, not less than $100,000,000 aggregate principal amount of Exchange Notes would be outstanding).

          (i) execute and deliver, cause each other Loan Party to execute and deliver, and cause the Exchange Note Trustee to execute and deliver, the Exchange Note Indenture if such Exchange Note Indenture has not previously been executed and delivered; and

          (ii) execute and deliver to such holder or beneficial owner in accordance with the Exchange Note Indenture an Exchange Note bearing interest as set forth therein (which, at the election of such holder or beneficial owner, may be fixed at a rate not higher than the rate then applicable to such Loan) in exchange for such Loan dated the date of the issuance of such Exchange Note, payable to the order of such holder or owner, as the case may be, in the same principal amount as such Loan (or portion thereof) being exchanged.

               The Exchange Request shall specify the principal amount of the Loans to be exchanged pursuant to this Section which shall be at least $5,000,000 and integral multiples of $1,000,000 in excess thereof or the entire remaining aggregate principal amount of the Loans of such Lender. Such Lender may elect in its Exchange Request that the rate of interest applicable to the Exchange Notes to be issued to it be fixed at the rate applicable to the Extended Loans at the time of issuance of such Exchange Notes, in which event such Exchange Notes shall bear interest at such fixed rate and, notwithstanding the provisions of Section 2.03(a), such Exchange Notes will not be subject to optional redemption or prepayment until the fourth anniversary of the Closing Date and will thereafter be optionally redeemable at par plus accrued interest plus a premium equal to one half of the fixed interest rate applicable thereto, declining ratably to par on the date that is one year prior to the Final Maturity Date. Loans delivered to the Borrower under this Section in exchange for Exchange Notes shall be canceled by the Borrower, and the

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corresponding amount of the Loan deemed repaid and the Exchange Notes shall be governed by and construed in accordance with the terms of the Exchange Note Indenture.

               The Exchange Note Trustee shall at all times be a corporation organized and doing business under the laws of the United States or the State of New York, in good standing and having its principal offices in the Borough of Manhattan, in The City of New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has a combined capital and surplus of not less than $500,000,000.

     6.17 Change of Control.

     If a Change of Control occurs, each Lender will have the right to require the Borrower to prepay all of such Lender’s Loans at a purchase price in cash equal to 101% of the principal amount of such Lender’s Loans, plus accrued and unpaid interest to the date of prepayment.

     No later than the date that is 60 days after any Change of Control, the Borrower will mail a notice (the “Change of Control Offer”) to each Lender, with a copy to the Administrative Agent:

               (1) stating that a Change of Control has occurred or may occur and that such Lender has the right to require the Borrower to prepay such Lender’s Loans at a purchase price in cash equal to 101% of the principal amount plus accrued and unpaid interest to, but not including, the date of prepayment (subject to the right of Lenders of record on a record date to receive interest on the relevant Interest Payment Date) (the “Change of Control Payment”);

               (2) stating the prepayment date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

               (3) describing the circumstances and relevant facts regarding the transaction or transactions that constitute the Change of Control;

               (4) describing the procedures determined by the Borrower, consistent with this Agreement, that a Lender must follow in order to have its Loans prepaid; and

               (5) if such notice is mailed prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control.

               On the Change of Control Payment Date, if the Change of Control shall have occurred, the Borrower will, to the extent lawful pay to the Administrative Agent for application to the repayment of all Loans properly tendered pursuant to the Change of Control Offer an amount equal to the Change of Control Payment in respect of all Loans so tendered.

               The Borrower will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of

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Control Offer made by the Borrower and purchases all Loans validly tendered and not withdrawn under such Change of Control Offer.

     6.18 Registration Rights.

     Within 365 days after the Closing Date the Borrower shall file a shelf registration statement with the Securities and Exchange Commission and the Borrower shall use its best efforts to cause such shelf registration statement to be declared effective by the Initial Maturity Date and keep such shelf registration statement effective, with respect to resales of the Exchange Notes, for as long as it is required by the holders to resell the Exchange Notes. Upon failure to comply with the foregoing requirements (a “Registration Default”), the Borrower shall pay liquidated damages to each holder of Exchange Notes with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to one-half of one percent (0.50%) per annum on the principal amount of Exchange Notes held by such holder. The amount of the liquidated damages will increase by an additional one-half of one percent (0.50%) per annum on the principal amount of Exchange Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages for all Registration Defaults of 1.5% per annum.

ARTICLE VII.

NEGATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:

     7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, or sign or file or suffer to exist under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or assign any accounts or other right to receive income, other than the following:

     (a) Liens pursuant to the Senior Credit Facility and any refinancing thereof permitted by Section 7.03(b);

     (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased except as contemplated by Section 7.03(c), (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(c);

     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

     (d) operators’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of

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more than 90 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

     (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

     (f) Liens to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

     (g) (i) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person and (ii) Immaterial Title Deficiencies;

     (h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);

     (i) Liens on pipelines and pipeline facilities that arise by operation of law or other like Liens arising by operation of law in the ordinary course of business and incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that do not constitute Indebtedness and that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

     (j) customary contractual Liens under operating lease agreements or which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out and farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for obligations that do not constitute Indebtedness and that are not delinquent or that are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the property covered by such Lien for the purposes for which such property is held by the Borrower or any Subsidiary or materially impair the value of such property subject thereto;

     (k) Permitted Encumbrances (as defined in the Senior Credit Facility);

     (l) Liens existing on assets at the time of acquisition thereof, or Liens existing on assets of an Person at the time such Person became a Subsidiary, which in each case were not created in contemplation thereof;

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     (m) UCC financing statements filed in connection with an operating lease under which the Borrower or a Subsidiary is the lessee;

     (n) Liens on assets of Lariat securing obligations of Lariat;

     (o) Liens securing Indebtedness permitted under Section 7.03(f); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; and

     (p) Liens created by the Citi Payoff Documents securing reimbursement obligations in respect of the Citi L/Cs; provided that the aggregate amount of cash collateral pledged thereunder shall not exceed $20,000,000.

     7.02 Investments. Make any Investments, except:

     (a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalents;

     (b) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $500,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

     (c) Investments of the Borrower in any now existing or hereafter acquired wholly-owned Subsidiary and Investments of any Subsidiary in the Borrower or in another now existing or hereafter acquired wholly-owned Subsidiary; provided, however, that (i) in the case of any Investments in Lariat, the aggregate amount of such Investment shall not exceed (x) $1,000,000 less (y) the aggregate amount of Restricted Payments made to Lariat pursuant to Section 7.06(a) and (ii) in the case of an Investment constituting the acquisition from a third party of a Person which thereby becomes a wholly-owned Subsidiary, such Investment is permitted pursuant to another clause of this Section 7.02;

     (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

     (e) Investments in Oil and Gas Properties (or in Persons substantially all of whose assets consist of Oil and Gas Properties and which become wholly-owned Subsidiaries pursuant to such Investment);

     (f) Guarantees permitted by Section 7.03;

     (g) Investments received in connection with bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

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     (h) Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each a “venture”) entered into by the Borrower or a Subsidiary with others in the ordinary course of business; provided that (i) any such venture is engaged exclusively in oil and gas exploration, development, production, processing and related activities, including transportation, (ii) the interest in such venture is acquired in the ordinary course of business and on fair and reasonable terms and (iii) the aggregate net amount of such Investments after the date hereof does not exceed $15,000,000;

     (i) Investments in SageBrush Pipeline LLC in an aggregate amount not exceeding $7,500,000; and

     (j) other Investments not exceeding $6,000,000 in the aggregate in any fiscal year of the Borrower.

     7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

     (a) Indebtedness under the Loan Documents, and any refinancing thereof, provided that such refinancing is (i) unsecured, (ii) requires no scheduled amortization prior to the 6^th anniversary of the Closing Date and (iii) is otherwise on market terms and conditions;

     (b) Indebtedness under the Senior Credit Facility, and any refinancing thereof, provided that the aggregate principal amount thereof may at no time exceed the lesser of (i) $750,000,000 and (ii) the amount of the Borrowing Base as determined in accordance with the provisions of the Senior Credit Facility;

     (c) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and the direct or any contingent obligor with respect thereto is not changed, as a result of or in connection with such refinancing, refunding, renewal or extension and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate;

     (d) Guarantees of the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Guarantor;

     (e) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably

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anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party (other than customary netting arrangements);

     (f) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(o); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed 17,500,000;

     (g) Indebtedness of the Borrower or a Subsidiary owing to the Borrower or a wholly-owned Subsidiary (other than Lariat);

     (h) Indebtedness incurred by Lariat;

     (i) Indebtedness in respect of the Citi L/Cs in an aggregate amount not exceeding $20,000,000;

     (j) other unsecured Indebtedness in an aggregate principal amount not to exceed $12,000,000 at any time outstanding; and

     (k) Indebtedness in respect of surety bonds obtained by the Borrower or a Subsidiary in the ordinary course of business and supporting other obligations undertaken by the Borrower or a Subsidiary in the ordinary course of business which other obligations do not constitute Indebtedness.

     7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

     (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person;

     (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a wholly-owned Subsidiary, then the transferee must either be the Borrower or a wholly-owned Subsidiary;

     (c) Dispositions permitted by Section 7.05(g); and

     (d) the Borrower and its Subsidiaries may consummate the Acquisition.

     7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:

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     (a) Dispositions of obsolete or worn out property or assets, whether now owned or hereafter acquired, in the ordinary course of business;

     (b) Dispositions of inventory (including Hydrocarbons sold after severance) in the ordinary course of business;

     (c) Dispositions of equipment or real property or other asset (other than (x) Oil and Gas Properties or (y) Investments in Subsidiaries) to the extent that (i) such equipment, property or other asset is exchanged for credit against the purchase price of similar replacement equipment, property or other asset or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement equipment, property, or other asset;

     (d) Dispositions of property or assets by any Subsidiary to the Borrower or to a wholly-owned Subsidiary or by the Borrower to any wholly-owned Subsidiary; provided that if the transferor of such property or assets is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor;

     (e) Dispositions permitted by Section 7.04(a), (b) or (d);

     (f) a Disposition for fair value of Oil and Gas Properties in the Piceance Basin;

     (g) Dispositions (including Casualty Events) of Oil and Gas Properties which are sold or otherwise transferred for fair consideration to Persons who are not Affiliates of Borrower and (2) farmouts of undeveloped acreage and assignments in connection with such farmouts or the abandonment, farm-out, the exchange, provided that no Event of Default exists at the time of any such sale (other than Defaults that will be cured upon the application of the proceeds of such sale or other transfer); and

     (h) Dispositions of interest in Oil and Gas Properties in respect of Immaterial Title Deficiencies in order to discharge such Immaterial Title Deficiencies or an obligation giving rise thereto.

     7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

     (a) each Subsidiary may make Restricted Payments to the Borrower, the Guarantors and any other Person that owns an Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made; provided, however, that in the case of any Restricted Payments to Lariat Services, Inc., the aggregate amount of such Restricted Payments shall not exceed (i) $1,000,000 less (ii) the aggregate amount of Investment in Lariat made pursuant to Section 7.02(c);

     (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

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     (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;

     (d) (i) so long as no Event of Default exists, the Borrower may pay regular cash dividends on the Preferred Stock and make cash payments pursuant to Section 6(f) of the Certificate of Designations for the Preferred Stock; (ii) so long as no Default exists, the Borrower may make cash payments pursuant to Section 7(a) or 9(e) of the Certificate of Designations for the Preferred Stock; and (iii) the Borrower may make payment-in-kind dividends on the Preferred Stock and issue its common stock upon conversion of the Preferred Stock; and

     (e) the Borrower and each Subsidiary may repurchase Equity Interests held by an employee upon termination of employment; provided that the aggregate amount of such Restricted Payments shall not exceed $ 500,000.

     7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto.

     7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (i) transactions between or among the Borrower and any of its wholly-owned Subsidiaries or between and among any wholly-owned Subsidiaries or (ii) payment of customary cash and non-cash compensation, including stock option and similar employee benefit plans, to directors and officers on an arm’s length basis.

     7.09 Burdensome Agreements. After the date of this Agreement, enter into any Contractual Obligation (other than (x) this Agreement or any other Loan Document, (y) the Senior Credit Facility and (z) the documentation governing any permitted refinancing hereof and thereof) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person to secure any of the Loan Documents; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(f) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness or property subject to a Lien permitted hereunder which secures such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person; or amend any Contractual Obligation existing on the date of this Agreement so as to impose or make more restrictive such a limitation.

     7.10 Use of Proceeds. Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within

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the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

     7.11 Financial Covenants.

     (a)  Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 2.0:1.0.

     (b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio at any time to be greater than 4.5:1.0.

     (c) Consolidated Current Ratio. Permit the Consolidated Current Ratio at any time to be less than 0.9:1.0.

     7.12 Hedge Transactions.

     Enter into any Oil and Gas Hedge Transactions which would cause the notional volume of Hydrocarbons for each of crude oil and natural gas, calculated separately, with respect to which a settlement payment is calculated under such Oil and Gas Hedge Transactions (other than basis swaps, floors and puts on volumes hedged pursuant to Swap Contracts) to exceed eighty five percent (85%) of Borrower’s or such Subsidiary’s reasonably anticipated production from Proved Reserves during the period from the immediately preceding settlement date (or the commencement of such Hedge Transaction if there is no prior settlement date) to such settlement date.

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

     8.01 Events of Default. Any of the following shall constitute an Event of Default:

     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within three days after the same becomes due, any interest on any Loan, or any fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a), 6.05(a), 6.11 or 6.12 or Article VII; or

     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

     (d) Representations and Warranties. Any representation, warranty, or certification made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any

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other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

     (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) and the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or

     (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

     (h) Judgments. There is entered against the Borrower or any Subsidiary (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are

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commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or

     (j) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any material provision of any Loan Document; or any Loan Party denies that it has any material or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any material provision of any Loan Document.

     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of Required Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Loans to be terminated, whereupon such commitments and obligation shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and

     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.

     8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

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     First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

     Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders (including fees and time charges for attorneys who may be employees of any Lender) and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

ARTICLE IX.
ADMINISTRATIVE AGENT

     9.01Appointment and Authority.

     Each of the Lenders hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except to the extent Sections 9.01(b) and 9.06 expressly contemplate rights of others, the provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a third party beneficiary of any of such provisions.

     9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

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     9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

          (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

          (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

          (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower or a Lender.

     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

     9.04 Reliance by Administrative Agent.

     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise

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authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender, unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

     9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

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     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Arrangers shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except (i) in its capacity, as applicable, as the Administrative Agent or a Lender hereunder or (ii) as expressly provided herein or therein.

     9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

          (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.06 and 10.04) allowed in such judicial proceeding; and

          (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.06 and 10.04.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

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9.10 Guaranty Matters. The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

ARTICLE X.
MISCELLANEOUS

     10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

     (a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

     (b) postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

     (c) reduce the principal of, or the rate of interest specified herein on, any Loan or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

     (d) change Section 2.10 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

     (e) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Lender; or

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     (f) release all or substantially all of the value of the Guaranty without the written consent of each Lender.

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

     10.02 Notices; Effectiveness; Electronic Communication.

     (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

          (i) if to the Borrower or the Administrative Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

          (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

     (b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such

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notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

     (d) Change of Address, Etc. Each of the Borrower and the Administrative Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, and the Administrative Agent. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

     (e) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

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     10.03 No Waiver; Cumulative Remedies.

     No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     10.04 Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent or any Lender in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof) and each Lender and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that

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such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s ratable share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.09(d).

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

     (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required

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(including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

     10.06 Successors and Assigns.

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

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

          (i) Minimum Amounts.

          (A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment or the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

          (B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with

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respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless the Administrativ Agent otherwise consents (each such consent not to be) unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met..

          (ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned;

          (iii) Required Consents. No consent shall be required for any assignment except (x) to the extent required by subsection (b)(i)(B) of this Section and (y) subsequent to the Syndication Completion Date, the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender.

          (iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount, if any, required as set forth in Schedule 10.06; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

          (v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

          (vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

          (vii) No Assignment During Syndication. Except pursuant to transactions arranged by the Bridge Lead Arranger, no Lender may sell or assign (other than to an Affiliate) any portion of its interest in the Initial Loans until the Syndication Completion Date

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning

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Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent (except as set forth below), sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) prior to the Syndication Completion Date, no such participation may be granted by any Lender except to an Affiliate of such Lender.

     Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.03 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the

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participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

     (h) Notice to Lead Arranger. The Lead Arranger shall be notified of any assignment or participation (except to an Affiliate of the transferor Lender) until the 180^th day after the Closing Date.

     10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

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     For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as nonpublic and confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to confidential information of a similar nature.

     Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

     10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

     10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

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     10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and, except as otherwise expressly provided in the Commitment Letter, supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Article IV, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Loans, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

     10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     10.13 Replacement of Lenders. If (i) any Lender requests compensation under Section 3.04 or (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or (iii) any Lender is unwilling to approve an amendment hereto which has been approved by Super Majority Lenders but requires approval of such Lender to be effective, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

77

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

     (d) in the case of an assignment resulting from clause (iv) above, such assignment will result in effectiveness of such increase or amendment; and

     (e) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

     10.14 Governing Law; Jurisdiction; Etc.

     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     (b) SUBMISSION TO JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) WAIVER OF VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO

78

THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     10.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent and the Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Administrative Agent and the Arrangers is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Administrative Agent nor any Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent or any Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and neither the Administrative Agent nor any Arranger has any obligation to the Borrower or any of its Affiliates with respect to the

79

transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent and the Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent nor any Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Administrative Agent and the Arrangers have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent and any Arranger with respect to any breach or alleged breach of agency or fiduciary duty.

10.17 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

80

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

RIATA ENERGY, INC.
(d/b/a SandRidge Energy, Inc.)
By:	/s/ Matthew McCann
Name:	Matthew McCann
Title:	Vice President, Legal

BANK OF AMERICA, N.A., as
Administrative Agent
By:	/s/ Jeffrey J. McLane
Name:	Jeffrey J. McLane
Title:	Principal
BANC OF AMERICA BRIDGE LLC, as a
Lender
By:	/s/ Jeffrey J. McLane
Name:	Jeffrey J. McLane
Title:	Principal
BANC OF AMERICA SECURITIES LLC, as
Lead Arranger and Bookrunner
By:	/s/ Jeffrey J. McLane
Name:	Jeffrey J. McLane
Title:	Principal

CREDIT SUISSE SECURITIES (USA) LLC, as
Lead Arranger and Bookrunner
By:	/s/ Timothy Perry
Name:	Timothy Perry
Title:	Managing Director
CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as a Lender
By:	/s/ SoVonna Day Goins
Name:	SoVonna Day Goins
Title:	Director
By:	/s/ Adam Forchheimer
Name:	Adam Forchheimer
Title:	Vice President

GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lead Arranger, Bookrunner and a Lender
By:	/s/ Bruce H. Mendelsohn
Name:	Bruce H. Mendelsohn
Title:	Authorized Signatory

LEHMAN BROTHERS INC., as Lead Arranger
and Bookrunner
By:	/s/ Frank P. Turner
Name:	Frank P. Turner
Title:	Vice President
LEHMAN COMMERCIAL PAPER INC., as a Lender
By:	/s/ Frank P. Turner
Name:	Frank P. Turner
Title:	Vice President

SCHEDULE 2.01
COMMITMENTS

Lender	Commitment
Banc of America Bridge LLC	$	212,500,000
Credit Suisse, Cayman Islands Branch	$	212,500,000
Goldman Sachs Credit Partners L.P.	$	212,500,000
Lehman Commercial Paper Inc.	$	212,500,000
Total	$	850,000,000

SCHEDULE 5.03

GOVERNMENTAL AUTHORIZATIONS

None.

SCHEDULE 5.05

SUPPLEMENT TO INTERIM FINANCIAL STATEMENTS

(Continued on next page)

Supplement to Interim Financial Statements: Existing Indebtedness

	6/30/2006		9/30/2006		11/13/2006		Collateral
SYMBOL ENERGY
LARCO		2,287,129.15		2,287,129.15		2,287,129.15	NA
SAGEBRUSH
BANK OF AMERICA		4,000,000.00		4,000,000.00		4,000,000.00	All Bank of America cash accounts
ROC		700,000.00		1,325,000.00		1,325,000.00	NA
PREMIUM ASSIGNMENT		10,359.97		—			NA
		4,710,359.97		5,325,000.00		5,325,000.00
ALSATE
N/P REI		7,970,907.91		7,970,907.91		7,970,907.91	NA
PREMIUM ASSIGNMENT		322,860.95		304,162.45		229,672.13	Unsecured
		8,293,768.86		8,275,070.36		8,200,580.04
HONDO HEAVY HAUL
N/P JOHN DEERE		—		—		168,012.51	John Deere 724J Loader with 9' Forks
N/P PACCAR FINANCIAL		384,994.98		358,536.00		351,780.61	Quantity of 6 2003 Peterbilt 379-127 Vehicles
		384,994.98		358,536.00		519,793.12
LARIAT
MERRILL LYNCH #1		15,672,564.49		14,778,781.18		14,473,910.39	Rig #1 - Rig #7 and Ancillary Equipment
MERRILL LYNCH #2		2,002,641.96		1,856,607.25		1,818,373.93	Rig #13 and All Associated Equipment
MERRILL LYNCH #3		4,105,940.24		3,890,110.21		3,815,375.61	Rig #12 and All Associated Equipment
MERRILL LYNCH #4		2,109,383.64		2,000,975.86		1,963,550.55	Rig #14 and All Associated Equipment
MERRILL LYNCH #5		914,242.41		869,762.16		854,396.64	Service/Workover Rigs
MERRILL LYNCH #6		1,589,597.17		1,512,265.89		1,485,551.88	Rig #15 and All Associated Equipment
MERRILL LYNCH #7		1,837,650.55		1,749,080.20		1,718,787.04	Rig #16 and All Associated Equipment

	6/30/2006		9/30/2006		11/13/2006		Collateral
MERRILL LYNCH #8		2,318,074.35		2,207,733.29		2,169,571.35	Rig #19 and All Associated Equipment
MERRILL LYNCH #9		812,153.10		774,503.80		761,471.46	Misc Trucks & Equipment
MERRILL LYNCH #10		8,134,304.10		5,766,007.12		5,766,007.12	Rig #22 and 3 Pulling Units
MERRILL LYNCH #11		5,924,100.00		7,918,474.04		7,807,394.01	Rig #24 and All Associated Equipment
MERRILL LYNCH #12		—		7,997,535.00		7,916,205.44	Rig #26
MERRILL LYNCH #13		—		888,615.00		888,615.00	Pulling Units 11, 12, 13, & 17
MERRILL LYNCH #14		—		—		6,220,305.00	Rig #28
PREMIUM ASSIGNMENT		441,536.00		254,692.21		128,148.37	Unsecured
DAIMLER CHRYSLER #7493		1,288.60		—		0.00	NA
DAIMLER CHRYSLER #11970		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
DAIMLER CHRYSLER #11974		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #83592		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #83593		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #81856		38,941.00		35,915.54		33,867.81	2007 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #66004		83,400.00		77,119.75		72,869.43	2007 Western Star 4900 Tractor
N/P DIAMLERCHRYSLER #81858		40,320.19		37,294.73		35,246.11	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81859				38,521.62		36,474.56	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81860				38,521.62		36,474.46	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81861				39,535.67		37,501.23	2007 Sterling Acterra Tractor
N/P JOHN DEERE #2582		95,019.00		77,576.97		65,853.97	2005 330CLC Excavator
N/P JOHN DEERE CREDIT #9496		42,503.97		39,359.77		37,226.34	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6211		76,246.09		70,605.85		66,778.80	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #2526		39,847.85		36,900.15		34,900.04	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6277		70,985.96		65,734.84		62,171.82	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #64644				61,286.53		57,754.11	544H Loader
N/P JOHN DEERE CREDIT #79513		78,447.04		72,458.80		68,395.35	544H Loader

	6/30/2006		9/30/2006		11/13/2006		Collateral
N/P JOHN DEERE CREDIT #79321		58,765.00		54,417.91		51,468.28	544H Loader
N/P JOHN DEERE CREDIT #87862						72,076.66	544H Loader
JOHN DEERE CREDIT #6762		17,207.00		14,048.33		11,925.55	2005 310SG Wheel Loader Backhoe
N/P JDC #3291		6,357.00		1,600.45		0.00	NA
N/P JDC #3935		118,732.00		102,352.48		91,272.96	724J Loader
CIT GROUP		5,504.00
PACCAR #24856 & #24870				155,126.70		149,818.25	Quantity of 2 2004 Peterbilts
PACCAR		147,882.47		114,592.70		92,124.20	Kenworths
PACCAR #5780267						296,538.19	Quantity of 2 2007 Peterbilts and Quantity of 2 2004 Peterbilts
PACCAR #5783865						152,716.41	Quantity of 2 2004 Peterbilts
GMAC #9231		3,393.16		846.15
GMAC #9210		1,942.00		—			NA
		47,018,494.77		53,808,158.87		59,546,586.14
REI
BANK OF AMERICA		36,435,900.00		102,403,656.50		117,452,113.25	Oil & Gas Properties
LARCO
RIATA ENERGY		5,635,243.89		5,635,243.89		5,635,243.89	NA
RIAGRA
N/P REI		8,983,980.36		8,983,980.36		8,983,980.36	NA
JOHN DEERE		—		—		0.00	NA
		8,983,980.36		8,983,980.36		8,983,980.36
ROC
N/P REI		62,333.53		62,333.53		62,333.53	NA
PREMIUM ASSIGNMENT		6,108.00		—		0.00	NA
		68,441.53		62,333.53		62,333.53
PSEC
N/P REI		31,813,722.36		31,813,722.36		31,813,722.36	NA

	6/30/2006		9/30/2006		11/13/2006		Collateral
PREMIUM ASSIGNMENT		71,336.64		38,566.48		30,967.38	Unsecured
SUBORDINATED DEBT-REI		6,540,000.00		6,540,000.00		6,540,000.00	NA
SUBORDINATED DEBT-OUTSIDE		—
		38,425,059.00		38,392,288.84		38,384,689.74
PSPC
N/P REI		5,902,097.77		5,902,097.77		5,902,097.77	NA
HONDO
PACCAR		9,640.31		—		0.00	NA
TOTAL		158,155,110.59		231,433,495.27		252,299,546.99
LESS INTER-CO NOTES		69,895,414.97		70,520,414.97		70,520,414.97
TOTAL		88,259,695.62		160,913,080.30		181,779,132.02

SCHEDULE 5.06

LITIGATION

     ConocoPhillips Company, (Successor by merger to Conoco, Inc.), Plaintiff, vs. Riata Energy, Inc., Wes-Tex Drilling Company, L.P., Manti Resources, Inc., and Manti Longfellow, Ltd., Defendants; No. 9846; In the 112^th District Court in and for Pecos County, Tx

     Riata Energy, Inc. and Riata Piceance, LLC, Plaintiffs, V. Elliott Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P., Defendants.; No. 04-11461-E; In the 101^st Judicial District Court in and for Dallas County, Tx

     Harvey Y. Yates Company, Plaintiff, v Riata Energy, Inc. Defendant; No. 10376; In the 112^TH District Court in and for Pecos County, Tx

SCHEDULE 5.09

ENVIRONMENTAL MATTERS

None.

SCHEDULE 5.13

SUBSIDIARIES,
OTHER EQUITY INVESTMENTS
AND LOAN PARTY INFORMATION

(Continued on next page)

Riata Energy, Inc. dba SandRidge Energy, Inc. SCHEDULE 5.13

PART A AND PART B — all Subsidiaries and Equity Interests of Loan Parties

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
REI	Riata Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0002820
SUBSIDIARY ENTITIES
	Algerita Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1400800	100%REI
AEI	Alsate Management and Investment Co	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541245	100%REI
	Cup Of The Day #1, LLC	701 S. Tyler, Ste 102	Amarillo, TX 79201	13-4301747	100%AEI
CSLLC	Chaparral Supply, LLC	P. O. Box 1417	Ft. Stockton, Texas 79735	26-0036758	100%AEI
IEL	Integra Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2887527	85%AEI
	Cholla Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	01-0557493	100%IEL
CHOLP	Cholla Pipeline, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	26-0025092	36%IEL, 17%ROC
TPL	Transpecos Logging, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2897434	100%AEI
	Black Bayou Exploration, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-4790561	100%REI
LSI	Lariat Services, Inc.	2402 West Wall	Midland, TX 79701	75-2500702	100%REI
LARCO	Lariat Compression Company	5432 N. Highway 1053	Ft. Stockton, TX 79735	75-2545523	100%LSI
SYMENE	Symbol Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2882968	100%LARCO
HONDO	Hondo Heavy Haul	13416 W. 1-20 East	Odessa, TX 79765	20-3568524	100%LSI
	Larclay, GP, LLC	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4727861	50%LSI
	Larclay, L.P.	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4728095	50%LSI
MCRLLC	Midcontinent Resources, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0096928	100%REI
PSEML	PetroSource Energy Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1237622	100%REI
PSEC	PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2629471	99%REI, 1% PSEM
PSCO2	PSCO2, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0547903	99%PSEC, 1% PSEML
PSPC	PetroSource Production Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1918006	99%PSEC, 1% PSEML
	PSE Holdings, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2950920	100%REI
PSEM	PSE Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2622462	100%REI
RLC	Riagra Land & Cattle	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2569335	100%REI
RDI	Riata Drilling Company, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2563168	100%REI
RIAN	Riata Energy Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0333569	100%REI
REIPIC	Riata Piceance, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0023468	100%REI
	Riata Wolfcamp Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2214412	100%REI
ROC	ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541148	100%REI
SBP	Sagebrush Pipeline, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1550515	70%ROC
SMM	Sierra Madera Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	43-1969581	100%REI
SMCO2	Sierra Madera CO2 Pipeline, Ltd	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0881558	99%REI, 1% SMM

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
SandRidge Holdings, Inc. Acquisition		1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-5878401	100% REI
NEG	NEG Oil & Gas, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	03-0573934	100% Sandridge
SUBSIDIARY ENTITIES
NEGH	NEG Holding, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2958833	100%NEG
NEGO	NEG Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776535	100%NEGH
NGXGP	NGX GP of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776542	100%NEGO
NGXLP	NGX LP Of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776545	100%NEGO
NGXELP	NGX Energy Limited Partnership	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776546	99%NGXLP, 1%NGXGP
SHANA	Shana National LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776549	100%NEGO
MIDR	Mid River, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776548	100%NEG
OFFGP	Offshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776539	100%NEG
OFFLP	Offshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776538	100%NEG
NOFFSH	National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	11-3758786	99%OFFLP, 1%OFFGP
ONGP	Onshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0833283	100%NEG
ONLP	Onshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776536	100%NEG
NONSH	National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0953489	99%ONLP, 1%ONGP
GBPIPE	Galveston Bay Pipeline Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0595703	100%NONSH
GBPROC	Galveston Bay Processing Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0570422	100%NONSH

PART C — LOAN PARTIES INFORMATION

Company Name	Address	City/State/Zip	Jurisdiction	FEIN Number
Alsate Investment and Management Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541245
Integra Energy, L.L.C.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2887527
Lariat Compression Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2545523
NEG Oil & Gas LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	03-0573934
NEG Operating LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	87-0776535
National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	11-3758786
National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	47-0953489
PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-2629471
PetroSource Production Company, L.P.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-1918006
Riata Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	76-0002820
ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541148
Sandridge Holdings, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	20-5878401

SCHEDULE 7.01

EXISTING LIENS

Liens granted to Bank of America, N.A. on the plant and pipeline owned by SageBrush Pipeline, LLC pursuant to $4,000,000 Note (the “Note”) issued by SageBrush Pipeline, LLC as Borrower to Bank of America, N.A. as lender with a maturity of January 31, 2007.

SCHEDULE 7.03

EXISTING INDEBTEDNESS

(Continued on next page)

	6/30/2006		9/30/2006		11/13/2006		Collateral
SYMBOL ENERGY
LARCO		2,287,129.15		2,287,129.15		2,287,129.15	NA
SAGEBRUSH
BANK OF AMERICA		4,000,000.00		4,000,000.00		4,000,000.00	All Bank of America cash accounts
ROC		700,000.00		1,325,000.00		1,325,000.00	NA
PREMIUM ASSIGNMENT		10,359.97		—			NA
		4,710,359.97		5,325,000.00		5,325,000.00
ALSATE
N/P REI		7,970,907.91		7,970,907.91		7,970,907.91	NA
PREMIUM ASSIGNMENT		322,860.95		304,162.45		229,672.13	Unsecured
		8,293,768.86		8,275,070.36		8,200,580.04
HONDO HEAVY HAUL
N/P JOHN DEERE		—		—		168,012.51	John Deere 724J Loader with 9’ Forks
N/P PACCAR FINANCIAL		384,994.98		358,536.00		351,780.61	Quantity of 6 2003 Peterbilt 379-127 Vehicles
		384,994.98		358,536.00		519,793.12
LARIAT
MERRILL LYNCH #1		15,672,564.49		14,778,781.18		14,473,910.39	Rig #1 - Rig #7 and Ancillary Equipment
MERRILL LYNCH #2		2,002,641.96		1,856,607.25		1,818,373.93	Rig #13 and All Associated Equipment
MERRILL LYNCH #3		4,105,940.24		3,890,110.21		3,815,375.61	Rig #12 and All Associated Equipment
MERRILL LYNCH #4		2,109,383.64		2,000,975.86		1,963,550.55	Rig #14 and All Associated Equipment
MERRILL LYNCH #5		914,242.41		869,762.16		854,396.64	Service/Workover Rigs
MERRILL LYNCH #6		1,589,597.17		1,512,265.89		1,485,551.88	Rig #15 and All Associated Equipment
MERRILL LYNCH #7		1,837,650.55		1,749,080.20		1,718,787.04	Rig #16 and All Associated Equipment
MERRILL LYNCH #8		2,318,074.35		2,207,733.29		2,169,571.35	Rig #19 and All Associated Equipment

	6/30/2006		9/30/2006		11/13/2006		Collateral
MERRILL LYNCH #9		812,153.10		774,503.80		761,471.46	Misc Trucks & Equipment
MERRILL LYNCH #10		8,134,304.10		5,766,007.12		5,766,007.12	Rig #22 and 3 Pulling Units
MERRILL LYNCH #11		5,924,100.00		7,918,474.04		7,807,394.01	Rig #24 and All Associated Equipment
MERRILL LYNCH #12		—		7,997,535.00		7,916,205.44	Rig #26
MERRILL LYNCH #13		—		888,615.00		888,615.00	Pulling Units 11, 12, 13, & 17
MERRILL LYNCH #14		—		—		6,220,305.00	Rig #28
PREMIUM ASSIGNMENT		441,536.00		254,692.21		128,148.37	Unsecured
DAIMLER CHRYSLER #7493		1,288.60		—		0.00	NA
DAIMLER CHRYSLER #11970		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
DAIMLER CHRYSLER #11974		26,034.00		22,765.18		20,565.14	2005 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #83592		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #83593		88,728.22		81,834.37		77,168.77	2007 Western Star 4900 Tractor
N/P DIAMLER CHRYSLER #81856		38,941.00		35,915.54		33,867.81	2007 Sterling Acterra Tractor
N/P DIAMLER CHRYSLER #66004		83,400.00		77,119.75		72,869.43	2007 Western Star 4900 Tractor
N/P DIAMLERCHRYSLER #81858		40,320.19		37,294.73		35,246.11	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81859				38,521.62		36,474.56	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81860				38,521.62		36,474.46	2007 Sterling Acterra Tractor
N/P DIAMLERCHRYSLER #81861				39,535.67		37,501.23	2007 Sterling Acterra Tractor
N/P JOHN DEERE #2582		95,019.00		77,576.97		65,853.97	2005 330CLC Excavator
N/P JOHN DEERE CREDIT #9496		42,503.97		39,359.77		37,226.34	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6211		76,246.09		70,605.85		66,778.80	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #2526		39,847.85		36,900.15		34,900.04	850C Long Track Crawler Dozer
N/P JOHN DEERE CREDIT #6277		70,985.96		65,734.84		62,171.82	1050C Crawler Dozer
N/P JOHN DEERE CREDIT #64644				61,286.53		57,754.11	544H Loader
N/P JOHN DEERE CREDIT #79513		78,447.04		72,458.80		68,395.35	544H Loader
N/P JOHN DEERE CREDIT #79321		58,765.00		54,417.91		51,468.28	544H Loader
N/P JOHN DEERE CREDIT #87862						72,076.66	544H Loader

	6/30/2006		9/30/2006		11/13/2006		Collateral
JOHN DEERE CREDIT #6762		17,207.00		14,048.33		11,925.55	2005 310SG Wheel Loader Backhoe
N/P JDC #3291		6,357.00		1,600.45		0.00	NA
N/P JDC #3935		118,732.00		102,352.48		91,272.96	724J Loader
CIT GROUP		5,504.00
PACCAR #24856 & #24870				155,126.70		149,818.25	Quantity of 2 2004 Peterbilts
PACCAR		147,882.47		114,592.70		92,124.20	Kenworths
PACCAR #5780267						296,538.19	Quantity of 2 2007 Peterbilts and Quantity of 2 2004 Peterbilts
PACCAR #5783865						152,716.41	Quantity of 2 2004 Peterbilts
GMAC #9231		3,393.16		846.15
GMAC #9210		1,942.00		—			NA
		47,018,494.77		53,808,158.87		59,546,586.14
REI
BANK OF AMERICA		36,435,900.00		102,403,656.50		117,452,113.25	Oil & Gas Properties
LARCO
RIATA ENERGY		5,635,243.89		5,635,243.89		5,635,243.89	NA
RIAGRA
N/P REI		8,983,980.36		8,983,980.36		8,983,980.36	NA
JOHN DEERE		—		—		0.00	NA
		8,983,980.36		8,983,980.36		8,983,980.36
ROC
N/P REI		62,333.53		62,333.53		62,333.53	NA
PREMIUM ASSIGNMENT		6,108.00		—		0.00	NA
		68,441.53		62,333.53		62,333.53
PSEC
N/P REI		31,813,722.36		31,813,722.36		31,813,722.36	NA
PREMIUM ASSIGNMENT		71,336.64		38,566.48		30,967.38	Unsecured
SUBORDINATED DEBT-REI		6,540,000.00		6,540,000.00		6,540,000.00	NA

	6/30/2006		9/30/2006		11/13/2006		Collateral
SUBORDINATED DEBT-OUTSIDE		—
		38,425,059.00		38,392,288.84		38,384,689.74
PSPC
N/P REI		5,902,097.77		5,902,097.77		5,902,097.77	NA
HONDO
PACCAR		9,640.31		—		0.00	NA
TOTAL		158,155,110.59		231,433,495.27		252,299,546.99
LESS INTER-CO NOTES		69,895,414.97		70,520,414.97		70,520,414.97
TOTAL		88,259,695.62		160,913,080.30		181,779,132.02

SCHEDULE 10.02

ADMINISTRATIVE AGENT’S OFFICE;
CERTAIN ADDRESSES FOR NOTICES

BORROWER:

Riata Energy, Inc. (d/b/a Sandridge Energy, Inc.)

1601 Northwest Expressway, Suite 1600

Oklahoma City, OK 73118

Attention: Matt McCann

Telephone: (405) 753-5600

Telecopier: (405) 753-5988

Electronic Mail: mmccann@sdrge.com

Website Address:      www.sandridgeenergy.com

U.S. Taxpayer Identification Number: 76-0002820

ADMINISTRATIVE AGENT:

Administrative Agent’s Office
(for payments and Requests for Credit Extensions):
Bank of America, N.A.
One Independence Center
101 North Tryon Street
Mail Code: NC1-001-04-39
Charlotte, NC 28255-001
Attention: Melissa Mullis
Telephone: (704) 386-9372
Telecopier: (704) 286-2445
Account No.: 1366212250600
Ref: SandRidge Energy, Inc.
ABA# 026009593

Other Notices as Administrative Agent:
Bank of America, N.A.
Agency Management
231 South LaSalle Street
Mail Code: IL1-231-08-30
Chicago, IL 60697
Attention: Suzanne M. Paul
Telephone: (312) 923-1640
Telecopier: (877) 206-8435
Electronic Mail: suzanne.m.paul@bankofamerica.com

SCHEDULE 10.06

PROCESSING AND RECORDATION FEES

     The Administrative Agent will charge a processing and recordation fee (an “Assignment Fee”) in the amount of $2,500 for each assignment; provided, however, that in the event of two or more concurrent assignments to members of the same Assignee Group (which may be effected by a suballocation of an assigned amount among members of such Assignee Group) or two or more concurrent assignments by members of the same Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group), the Assignment Fee will be $2,500 plus the amount set forth below:

Transaction	Assignment Fee
First four concurrent assignments or suballocations to members of an Assignee Group (or from members of an Assignee Group, as applicable)		-0-
Each additional concurrent assignment or suballocation to a member of such Assignee Group (or from a member of such Assignee Group, as applicable)	$	500

EXHIBIT A

FORM OF LOAN NOTICE

Date:                                         ,                     

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Bridge Loan Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

     The undersigned hereby requests (select one):

     o A Borrowing of Initial Loans                      o A conversion or continuation of Loans

1.	On		(a Business Day).
2.	In the amount of $.
3.	Comprised of .
		[Type of Loan requested]
4.	For Eurodollar Rate Loans: with an Interest Period of                      months.

     The Borrowing, if any, requested herein complies with the provisos to the first sentence of Section 2.01 of the Agreement.

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Loan Notice

A-1

EXHIBIT B

FORM OF NOTE

     FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to                                          or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan owed by the Borrower to the Lender under that certain Bridge Loan Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

     The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

     This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Note is also entitled to the benefits of the Guaranty. Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans owing to the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

     The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

Form of Note

B-1

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

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Note

B-2

LOANS AND PAYMENTS WITH RESPECT THERETO

				Amount of
				Principal or	Outstanding
			End of	Interest	Principal
	Type of	Amount of	Interest	Paid This	Balance	Notation
Date	Loan	Loan	Period	Date	This Date	Made By

Form of Note

B-3

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                     ,

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of November 21, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                             of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

     1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

     1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

     2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

     3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

[select one:]

Form of Compliance Certificate

C-1

     [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

—or—

     [the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

     4. The representations and warranties of the Borrower contained in Article V of the Agreement, and any representations and warranties of any Loan Party that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered.

     5. The financial covenant analyses and information set forth on Schedules 2 and 3 attached hereto are true and accurate on and as of the date of this Certificate.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                                          ,                     

RIATA ENERGY, INC.

(d/b/a SandRidge Energy, Inc.)

By:

Name:

Title:

Form of Compliance Certificate

C-2

For the Quarter/Year ended                                         (“Statement Date”)

SCHEDULE 2
to the Compliance Certificate
($ in 000’s)

I.	Section 7.11 (a) – Consolidated Fixed Charge Coverage Ratio.
	A.	Consolidated EBITDAX for four consecutive fiscal quarters
		ending on above date (“Subject Period”) (from Schedule 3)	$
	B.	Consolidated Fixed Charges for Subject Period:	$
	C.	Consolidated Fixed Charge Coverage Ratio (Line I.A ¸
		Line I.B):			to 1
	D.	Minimum Required Consolidated Fixed Charge
		Coverage Ratio		2.0 to 1
II.	Section 7.11 (b) – Consolidated Leverage Ratio.
	A.	Consolidated Funded Indebtedness at Statement Date:	$
	B.	Consolidated EBITDAX for Subject Period (Line I.A.):	$
	C.	Consolidated Leverage Ratio (Line II.A ¸ Line II.B):			to 1
	D.	Maximum Permitted Consolidated Leverage Ratio		4.5 to 1
III.	Section 7.11 (c) – Consolidated Current Ratio.
	A.	Consolidated Current Assets at Statement Date:	$
	B.	Consolidated Current Liabilities at Statement Date:	$
	C.	Consolidated Current Ratio (Line III.A ¸ Line III.B):			to 1
	D.	Minimum Required Consolidated Current Ratio:		0.9 to 1

Form of Compliance Certificate

C-3

For the Quarter/Year ended                     (“Statement Date ”)

SCHEDULE 3
to the Compliance Certificate
($ in 000’s)

Consolidated EBITDAX
(in accordance with the definition of Consolidated EBITDAX
as set forth in the Agreement)

					Twelve
Consolidated	Quarter	Quarter	Quarter	Quarter	Months
EBITDA	Ended	Ended	Ended	Ended	Ended
Consolidated Net Income
+ income or franchise taxes
+ interest expense
+ depreciation expense
+ amortization expense
+ exploration expense
+ non-cash loss on change in fair value of derivative instruments
+ other non-cash expenses
- non-cash gain on change in fair value of derivative instruments
- income tax credits

Form of Compliance Certificate

C-4

					Twelve
Consolidated	Quarter	Quarter	Quarter	Quarter	Months
EBITDA	Ended	Ended	Ended	Ended	Ended
- interest income
- other non-cash income
= Consolidated EBITDAX

Form of Compliance Certificate

C-4

EXHIBIT D

ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (this “Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]¹ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]² Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]³ hereunder are several and not joint.]⁴ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as

1	For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
2	For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
3	Select as appropriate.
4	Include bracketed language if there are either multiple Assignors or multiple Assignees.

Form of Assignment and Assumption

D-1

[ the][an] “Assigned Interest”).Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.	Assignor[s]:
2.	Assignee[s]:
	[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]
3.	Borrower(s):
4.	Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit
	Agreement
5.	Credit Agreement: [Bridge Loan Agreement, dated as of [________, ______], among
	[_________________], the Lenders from time to time party thereto, and Bank of America, N.A.,
	as Administrative Agent.
6.	Assigned Interest[s]:5

			Aggregate	Amount of	Percentage
			Amount of	Commitment	Assigned of
		Facility	Commitment/Loans	/Loans	Commitment/		CUSIP
Assignor[s]6	Assignee[s]7	Assigned8	for all Lenders9	Assigned	Loans10		Number
			$	$		%
			$	$		%
			$	$		%

[7. Trade Date: __________________]¹¹

5	The reference to “Loans” in the table should be used only if the Credit Agreement provides for Term Loans.
6	List each Assignor, as appropriate.
7	List each Assignee, as appropriate.
8	Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Revolving Credit Commitment”, “Term Loan Commitment”, etc.).
9	Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.
10	Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
11	To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

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

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

ASSIGNOR [NAME OF ASSIGNOR]
By:
	Title:

ASSIGNEE [NAME OF ASSIGNEE]
By:
	Title:

[Consented to and]¹² Accepted:

BANK OF AMERICA, N.A., as
 Administrative Agent

By:
	Title:

Consented to:¹³

RIATA ENERGY, INC.
(d/b/a SandRidge Energy, Inc.)

By:
	Title:

12	To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
13	To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
[                              ] ¹⁴

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

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

          1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b)(iii) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section ___thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into

¹⁴ Describe Credit Agreement at option of Administrative Agent.

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this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

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

          3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York [confirm that choice of law provision parallels the Credit Agreement].

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EXHIBIT E

EXECUTION COPY

GUARANTY

dated as of November 21, 2006

from

THE GUARANTORS NAMED HEREIN

and

THE ADDITIONAL GUARANTORS REFERRED TO HEREIN

in favor of

THE GUARANTEED PARTIES REFERRED HEREIN

TABLE OF CONTENTS

Section	Page
Section 1. Guaranty; Limitation of Liability		1
Section 2. Guaranty Absolute		2
Section 3. Waivers and Acknowledgments		3
Section 4. Subrogation		4
Section 5. Payments Free and Clear of Taxes, Etc		5
Section 6. Representations and Warranties		7
Section 7. Covenants		7
Section 8. Amendments, Guaranty Supplements, Etc		7
Section 9. Notices, Etc		8
Section 10. No Waiver; Remedies		8
Section 11. Right of Set-off		8
Section 12. Subordination		9
Section 13. Continuing Guaranty; Assignments under the Bridge Loan Agreement		10
Section 14. Execution in Counterparts		10
Section 15. Terms Generally; References and Titles		10
Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc		11
Exhibit A — Guaranty Supplement

GUARANTY

          GUARANTY dated as of November 21, 2006 made by the Persons listed on the signature pages hereof and the Additional Guarantors (as defined in Section 8(b)) (such Persons so listed and the Additional Guarantors being, collectively, the “Guarantors” and, individually, each a “Guarantor”) in favor of the Guaranteed Parties (as defined below).

          PRELIMINARY STATEMENT. Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.), a Texas Corporation (the “Borrower”), is party to a Bridge Loan Agreement dated as of November 21, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Bridge Loan Agreement”; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with certain Lenders party thereto, Bank of America, N.A., as Administrative Agent (the “Administrative Agent”) and Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P. and Lehman Brothers Inc. as Lead Arrangers and Bookrunners. Each Guarantor may receive, directly or indirectly, a portion of the proceeds of the Loans under the Bridge Loan Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Bridge Loan Agreement. It is a condition precedent to the making of Loans by the Guaranteed Parties under the Bridge Loan Agreement that each Guarantor shall have executed and delivered this Guaranty. The Lenders and the Administrative Agent are herein called the “Guaranteed Parties”.

          NOW, THEREFORE, in consideration of the premises and in order to induce the Guaranteed Parties to enter into, and to make Loans under, the Bridge Loan Agreement, each Guarantor, jointly and severally with each other Guarantor, agrees as follows:

          Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) Each Guarantor and by its acceptance of this Guaranty the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal

or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the Guarantors irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means law with respect to any proceeding of the type referred to in Section 8.01(f) of the Bridge Loan Agreement or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty or any other guaranty, then, subject to Section 4, each Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents.

          Section 2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of any other Loan Party arising under the Loan Documents or otherwise with respect to any Loan, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

     (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

     (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

     (c) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

     (d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other obligations of any Loan Party arising under the Loan Documents

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or otherwise with respect to any Loan or any other assets of any Loan Party or any of its Subsidiaries;

     (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

     (f) any failure of any Guaranteed Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to such Guaranteed Party;

     (g) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

     (h) any other circumstance (including any statute of limitations) or any existence of or reliance on any representation by any Guaranteed Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Guaranteed Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had been due but not made at such time.

          Section 3. Waivers and Acknowledgments. (a) Each Guarantor unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Guaranteed Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any Collateral.

          (b) Each Guarantor unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

          (c) Each Guarantor unconditionally and irrevocably waives:

     (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Guaranteed Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person or any Collateral, and

3

     (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

          (d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage or other security agreement by non-judicial sale, and each Guarantor hereby waives any defense to the recovery by the Administrative Agent and the other Guaranteed Parties against such Guarantor of any deficiency after such non-judicial sale and any defense or benefits that may be afforded by applicable law.

          (e) Each Guarantor unconditionally and irrevocably waives any duty on the part of any Guaranteed Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party or any of its Subsidiaries now or hereafter known by such Guaranteed Party.

          (f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits and it has determined that this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of such Guarantor.

          Section 4. Subrogation.  Each Guarantor unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty or any other Loan Document, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Guaranteed Party against the Borrower, any other Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of:

     (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and

     (b) the irrevocable termination or expiration in whole of all Commitments,

such amount shall be received and held in trust for the benefit of the Guaranteed Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all

4

other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If:

     (i) any Guarantor shall make payment to any Guaranteed Party of all or any part of the Guaranteed Obligations,

     (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and

     (iii) all Commitments shall have been irrevocably terminated or shall have irrevocably expired in whole,

the Guaranteed Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment or other condition made by such Guarantor pursuant to this Guaranty.

          Section 5. Payments Free and Clear of Taxes, Etc.

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

          (b) Without limiting the provisions of subsection (a) above, each Guarantor shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

          (c) Each Guarantor shall indemnify each Guaranteed Party, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes which (i) arise from any payment made hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and (ii) are paid by such Guaranteed Party, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority but net of any foreign tax credit or the benefit of any deduction or other tax benefit determined in good faith by such Guaranteed Party to be attributable to the imposition of such Indemnified Tax. A certificate as to the amount of such payment or liability delivered in good faith to a Guarantor by a Guaranteed Party (with a copy to the Administrative Agent), or by

5

the Administrative Agent on its own behalf or on behalf of a Guaranteed Party, shall be conclusive absent manifest error.

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

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Guarantor is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to such Guarantor (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by a Guarantor or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by a Guarantor or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by such Guarantor or the Administrative Agent as will enable such Guarantor or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

          (f) Without limiting the generality of the foregoing, in the event that a Guarantor is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under the Bridge Loan Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed

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together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

          (g) If any Guaranteed Party determines that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Guarantor or with respect to which a Guarantor has paid additional amounts pursuant to this Section, it shall pay to such Guarantor an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Guarantor under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Guaranteed Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that such Guarantor, upon the request of such Guaranteed Party, agrees to repay the amount paid over to such Guarantor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Guaranteed Party in the event Guaranteed Party is required to repay such refund to such Governmental Authority. This Guaranty shall not be construed to require any Guaranteed Party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Guarantor or any other Person, and each Guaranteed Party shall make its determination under this subsection in its sole discretion.

          Section 6. Representations and Warranties. Each Guarantor makes each representation and warranty made in the Loan Documents by the Borrower with respect to such Guarantor and each Guarantor hereby further represents and warrants as follows:

     (a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

     (b) Such Guarantor has, independently and without reliance upon any Guaranteed Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and such Guarantor has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party.

          Section 7. Covenants. So long as any part of the Guaranteed Obligations shall remain unpaid or any Guaranteed Party shall have any Commitment, each Guarantor will perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan Documents on its or their part to be performed or observed or that the Borrower has agreed to cause such Guarantor or such Subsidiaries to perform or observe.

          Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor herefrom shall in any event be effective unless the same shall be entered into in accordance with Section 10.01 of the Bridge Loan Agreement.

7

          (b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Subsidiary Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement and all other Guaranty Supplements.

          Section 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied, or delivered to it, if to any Guarantor, addressed to it in care of the Borrower at the Borrower’s address in accordance with Section 10.02 of the Bridge Loan Agreement, if to the Administrative Agent or any other Guaranteed Party, at its address in accordance with Section 10.02 of the Bridge Loan Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively. Delivery of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart thereof.

          Section 10. No Waiver; Remedies. No failure on the part of any Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

          Section 11. Right of Set-off. To secure the repayment of the Guaranteed Obligations, each Guarantor grants to each Guaranteed Party, and each of their respective Affiliates, a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Guaranteed Party, at common Law, under the Loan Documents or otherwise, and each of which shall be upon and against:

     (a) any and all moneys, securities or other property (and the proceeds therefrom) of such Guarantor now or hereafter held or received by or in transit to any Guaranteed Party, from or for the account of such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise,

     (b) any and all deposits (general or special, time or demand, provisional or final) of such Guarantor with any Guaranteed Party, or any of their respective Affiliates and

     (c) any other credits and claims of Borrower at any time existing against any Guaranteed Party, including claims under certificates of deposit. At any time and from

8

time to time after the occurrence of any Event of Default, each Guaranteed Party is authorized to foreclose upon, or to offset against the Guaranteed Obligations then due and payable (in either case without notice to such Guarantor), any and all items hereinabove referred to; irrespective of whether or not such Guaranteed Party shall have made any demand under this Guaranty, any other Loan Document and although such obligations of such Guarantor may be contingent or unmatured or are owed to a branch or office of such Guaranteed Party different from the branch or office holding such items.

The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other..

          Section 12. Subordination. Each Guarantor subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 12:

     (a) Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

     (b) In any proceeding under any Bankruptcy Law relating to any other Loan Party, the Guaranteed Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations.

     (c) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Guaranteed Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

     (d) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion:

9

     (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and

     (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

          Section 13. Continuing Guaranty; Assignments under the Bridge Loan Agreement. This Guaranty is a continuing guaranty and shall:

     (a) remain in full force and effect until it is released in accordance with the Bridge Loan Agreement,

     (b) be binding upon the Guarantor, its successors and assigns and

     (c) inure to the benefit of and be enforceable by the Guaranteed Parties and their permitted successors, transferees and assigns.

Without limiting the generality of clause (c) of the immediately preceding sentence, any Guaranteed Party may assign or otherwise transfer all or any portion of its rights and obligations under the Bridge Loan Agreement (including all or any portion of its Commitments, the Loans owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Guaranteed Party herein or otherwise, as and to the extent provided in Section 10.06 of the Bridge Loan Agreement. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Guaranteed Parties.

          Section 14. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

          Section 15. Terms Generally; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context requires otherwise:

     (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

10

     (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns;

     (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Guaranty in its entirety and not to any particular provision hereof;

     (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Guaranty;

     (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time; and

     (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

References to any document, instrument, or agreement shall include:

     (i) all exhibits, schedules, and other attachments thereto, and

     (ii) 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 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. 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.

          Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     (b) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL

11

CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT AGAINST ANY GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) EACH GUARANTOR IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9. NOTHING IN THIS GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     (e) EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. EACH GUARANTOR (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

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          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first-above written.

NEG OIL & GAS LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL ONSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NATIONAL OFFSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
ROC GAS COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
LARIAT COMPRESSION COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

ALSATE MANAGEMENT AND INVESTMENT COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
INTEGRA ENERGY, L.L.C.
By:	Alsate Management and Investment Company, managing member
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
PETROSOURCE ENERGY COMPANY, LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
PETROSOURCE PRODUCTION COMPANY, L.P.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer
NEG OPERATING LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

SANDRIDGE HOLDINGS, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chairman and Chief Executive Officer

Exhibit A
To The
Guaranty

FORM OF GUARANTY SUPPLEMENT

                         ,           

BANK OF AMERICA, N.A., as Administrative Agent
9 West 57^th Street
New York, New York 10019

Bridge Loan Agreement dated as of November 21, 2006 among
Riata Energy, Inc. (d/b/a SandRidge Energy, Inc.) (the “Borrower”),
the Guaranteed Parties party to the Bridge Loan Agreement Agreement,
Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC, Credit
Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P. and Lehman Brothers Inc. as
Lead Arrangers and Bookrunners

Ladies and Gentlemen:

          Reference is made to the above-captioned Bridge Loan Agreement and to the Guaranty referred to therein (such Guaranty, as in effect on the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, together with this Guaranty Supplement, being the “Guaranty”). Capitalized terms defined in the Guaranty or in the Bridge Loan Agreement and not otherwise defined herein are used herein as therein defined.

          Section 1. Guaranty; Limitation of Liability. (a) The undersigned absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) The undersigned, and by their acceptance of this Guaranty Supplement, the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty

A-1

Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder. To effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the undersigned hereby irrevocably agree that the Obligations of the undersigned under this Guaranty Supplement and the Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of the undersigned under this Guaranty Supplement and the Guaranty not constituting a fraudulent transfer or conveyance.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty Supplement, the Guaranty or any other guaranty, then, subject to Section 4, the undersigned will contribute, to the maximum extent permitted by applicable law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents.

          Section 2. Obligations Under the Guaranty. The undersigned hereby agrees, as of the date first-above written, to be bound as a Guarantor by all of the terms and conditions of the Guaranty to the same extent as each of the other Guarantors thereunder. The undersigned further agrees, as of the date first above written, that each reference in the Subsidiary Guaranty to an “Additional Guarantor” or a “Guarantor” shall also mean and be a reference to the undersigned, and each reference in any other Loan Document to a “Guarantor” or a “Loan Party” shall also mean and be a reference to the undersigned.

          Section 3. Representations and Warranties. As of the date first-above written, the undersigned makes each representation and warranty set forth in Section 6 of the Guaranty to the same extent as each other Guarantor.

          Section 4. Delivery by Telecopier. Delivery of an executed counterpart of a signature page to this Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty Supplement.

          Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     (b) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. THE UNDERSIGNED AGREES THAT A FINAL

A-2

JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT AGAINST THE UNDERSIGNED OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) THE UNDERSIGNED IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9 OF THE GUARANTY. NOTHING IN THIS GUARANTY SUPPLEMENT OR THE GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     (e) THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY ORANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. THE UNDERSIGNED (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

A-3

Very truly yours, [NAME OF ADDITIONAL GUARANTOR]
By
	Title:

A-4

EXHIBIT F

OPINION OF COUNSEL TO THE LOAN PARTIES

EX-10.8

Exhibit 10.8

CREDIT AGREEMENT

Dated as of March 22, 2007

among

SANDRIDGE ENERGY, INC.
as the Borrower,

BANK OF AMERICA, N.A.,

as Administrative Agent

and

The Other Lenders Party Hereto

BANC OF AMERICA SECURITIES LLC
Lead Arranger

DEUTSCHE BANK SECURITIES INC.
GOLDMAN SACHS CREDIT PARTNERS L.P.
LEHMAN BROTHERS INC.
Co-Arrangers

TABLE OF CONTENTS

Section		Page
ARTICLE I.	DEFINITIONS AND ACCOUNTING TERMS		1
1.01	Defined Terms		1
1.02	Other Interpretive Provisions		36
1.03	Accounting Terms		37
1.04	Petroleum Terms		37
1.05	Rounding		37
1.06	Times of Day		37
ARTICLE II.	THE COMMITMENTS AND LOANS		37
2.01	Loans		37
2.02	Borrowings, Conversions and Continuations of Loans		38
2.03	Prepayments		39
2.04	Repayment of Loans		40
2.05	Interest		40
2.06	Fees		41
2.07	Computation of Interest and Fees		42
2.08	Evidence of Debt		42
2.09	Payments Generally; Administrative Agent’s Clawback		42
2.10	Sharing of Payments by Lenders		44
ARTICLE III.	TAXES, YIELD PROTECTION AND ILLEGALITY		44
3.01	Taxes		44
3.02	Illegality		46
3.03	Inability to Determine Rates		47
3.04	Increased Costs; Reserves on Eurodollar Rate Loans		47
3.05	Compensation for Losses		48
3.06	Mitigation Obligations; Replacement of Lenders		49
3.07	Survival		49
ARTICLE IV.	CONDITIONS PRECEDENT TO LOANS		50
ARTICLE V.	REPRESENTATIONS AND WARRANTIES		52
5.01	Existence, Qualification and Power		52
5.02	Authorization; No Contravention		52
5.03	Governmental Authorization; Other Consents		52
5.04	Binding Effect		53
5.05	Financial Statements; No Material Adverse Effect		53
5.06	Litigation		53
5.07	No Default		54
5.08	Ownership of Property; Liens		54
5.09	Environmental Compliance		54
5.10	Insurance		55
5.11	Taxes		55
5.12	ERISA Compliance		55
5.13	Subsidiaries; Equity Interests; Loan Parties		55
5.14	Margin Regulations; Investment Company Act		56
5.15	Disclosure		56
5.16	Compliance with Laws		56

i

Section		Page
5.17	Solvency		56
5.18	Casualty, Etc.		56
5.19	Labor Matters		57
ARTICLE VI.	AFFIRMATIVE COVENANTS		57
6.01	Financial Statements		57
6.02	Certificates; Other Information		58
6.03	Notices		60
6.04	Payment of Obligations		61
6.05	Preservation of Existence, Etc.		61
6.06	Maintenance of Properties		61
6.07	Maintenance of Insurance		61
6.08	Compliance with Laws		62
6.09	Books and Records		62
6.10	Inspection Rights		62
6.11	Use of Proceeds		62
6.12	Covenant to Guarantee Obligations		62
6.13	Compliance with Environmental Laws		62
6.14	[Reserved]		63
6.15	Exchange Notes		63
6.16	Change of Control		64
ARTICLE VII.	NEGATIVE COVENANTS		65
7.01	Liens		65
7.02	Indebtedness		65
7.03	Consolidation, Merger and Sale of Assets		69
7.04	Asset Sales		71
7.05	Restricted Payments		72
7.06	Change in Nature of Business		76
7.07	Transactions with Affiliates		76
7.08	Burdensome Agreements		77
7.09	Designation of Unrestricted Subsidiaries		79
7.10	Payments for Consent		81
7.11	Sale Leaseback Transactions		81
ARTICLE VIII.	EVENTS OF DEFAULT AND REMEDIES		82
8.01	Events of Default		82
8.02	Remedies Upon Event of Default		83
8.03	Application of Funds		84
ARTICLE IX.	ADMINISTRATIVE AGENT		84
9.01	Appointment and Authority		84
9.02	Rights as a Lender		84
9.03	Exculpatory Provisions		85
9.04	Reliance by Administrative Agent		86
9.05	Delegation of Duties		86
9.06	Resignation of Administrative Agent		86
9.07	Non-Reliance on Administrative Agent and Other Lenders		87
9.08	No Other Duties, Etc.		87
9.09	Administrative Agent May File Proofs of Claim		87
9.10	Guaranty Matters		88
ARTICLE X.	MISCELLANEOUS		88

ii

Section		Page
10.01	Amendments, Etc.		88
10.02	Notices; Effectiveness; Electronic Communication		89
10.03	No Waiver; Cumulative Remedies		91
10.04	Expenses; Indemnity; Damage Waiver		91
10.05	Payments Set Aside		93
10.06	Successors and Assigns		93
10.07	Treatment of Certain Information; Confidentiality		97
10.08	Right of Setoff		98
10.09	Interest Rate Limitation		98
10.10	Counterparts; Integration; Effectiveness		98
10.11	Survival of Representations and Warranties		98
10.12	Severability		99
10.13	Replacement of Lenders		99
10.14	Governing Law; Jurisdiction; Etc.		100
10.15	Waiver of Jury Trial		100
10.16	No Advisory or Fiduciary Responsibility		101
10.17	USA PATRIOT Act Notice		102

iii

SCHEDULES
2.01	Commitments and Applicable Percentages
5.03	Governmental Authorizations
5.05	Supplement to Interim Financial Statements
5.06	Litigation
5.09	Environmental Matters
5.13	Subsidiaries; Other Equity Investments and Loan Parties
10.02	Administrative Agent’s Office; Certain Addresses for Notices
10.06	Processing and Recordation Fees
EXHIBITS
	Form of
A	Loan Notice
B	Compliance Certificate
C	Assignment and Assumption
D	Guaranty
E	Opinion of Counsel to the Loan Parties

iv

CREDIT AGREEMENT

     This CREDIT AGREEMENT (“Agreement”) is entered into as of March 22, 2007 among SANDRIDGE ENERGY, INC., a Delaware corporation (the “Borrower”), each LENDER from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, and BANC OF AMERICA SECURITIES LLC, as Lead Arranger, DEUTSCHE BANK SECURITIES INC., GOLDMAN SACHS CREDIT PARTNERS L.P. and LEHMAN BROTHERS INC., as Co-Arrangers (collectively, the “Co-Arrangers” and individually, a “Co-Arranger”).

     In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

     “Acquired Debt” means Indebtedness of a Person (1) existing at the time such Person becomes a Restricted Subsidiary or (2) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be. Acquired Debt shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary, as the case may be.

     “Additional Assets” means (i) any assets or property (other than cash, Cash Equivalents or securities) used in the Oil and Gas Business or any business ancillary thereto, (ii) Investments in any other Person engaged in the Oil and Gas Business or any business ancillary thereto (including the acquisition from third parties of Capital Stock of such Person) as a result of which such other Person becomes a Restricted Subsidiary, (iii) the acquisition from third parties of Capital Stock of a Restricted Subsidiary or (iv) Permitted Business Investments.

     “Adjusted Consolidated Net Tangible Assets” means (without duplication), as of the date of determination, the remainder of:

     (i) the sum of

     (a) discounted future net revenues from proved oil and gas reserves of the Borrower and its Restricted Subsidiaries calculated in accordance with SEC guidelines before any state, federal or foreign income taxes, as estimated in a reserve report prepared as of the end of the Borrower’s most recently completed fiscal year, which reserve report is prepared or reviewed by independent petroleum engineers as to reserves accounting for at least 80% of all such discounted future net revenues and by the Borrower’s petroleum engineers with respect to any other reserves covered by such report, as increased by, as of the date of determination, the estimated discounted future net revenues from (1) estimated proved oil and gas reserves acquired since such year-end, which reserves were

1

not reflected in such year-end reserve report, and (2) estimated increases in proved oil and gas reserves since such year-end due to exploration, development or exploitation activities or due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report), and decreased by, as of the date of determination, the estimated discounted future net revenues from (3) estimated proved oil and gas reserves reflected in such year-end report produced or disposed of since such year-end and (4) estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since such year-end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report); provided that, in the case of each of the determinations made pursuant to clauses (1) through (4), such increases and decreases shall be as estimated by the Borrower’s petroleum engineers, unless there is a Material Change as a result of such acquisitions, dispositions or revisions, in which event the discounted future net revenues utilized for purposes of this clause (i)(a) shall be confirmed in writing an independent petroleum engineer, plus

     (b) the capitalized costs that are attributable to oil and gas properties of the Borrower and its Restricted Subsidiaries to which no proved oil and gas reserves are attributable, based on the Borrower’s books and records as of a date no earlier than the date of the Borrower’s latest annual or quarterly financial statements, plus

     (c) the Net Working Capital on a date no earlier than the date of the Borrower’s latest annual or quarterly financial statements, plus

     (d) the greater of (1) the net book value on a date no earlier than the date of the Borrower’s latest annual or quarterly financial statements and (2) the appraised value, as estimated by independent appraisers, of other tangible assets (including, without duplication, Investments in unconsolidated Restricted Subsidiaries) of the Borrower and its Restricted Subsidiaries, as of the date no earlier than the date of the Borrower’s latest audited financial statements (provided that the Borrower shall not be required to obtain such appraisal of such assets if no such appraisal has been performed),

minus (ii) the sum of

     (a) minority interests, plus

     (b) any net gas balancing liabilities of the Borrower and its Restricted Subsidiaries reflected in the Borrower’s latest audited Consolidated financial statements, plus

     (c) to the extent included in (i)(a) above, the discounted future net revenues, calculated in accordance with SEC guidelines (utilizing the prices utilized in the Borrower’s year-end reserve report), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Borrower and its Restricted

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Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified with respect thereto) plus

     (d) the discounted future net revenues, calculated in accordance with SEC guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (i)(a) above, would be necessary to fully satisfy the payment obligations of the Borrower and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto).

     If the Borrower changes its method of accounting from the full cost method to the successful efforts method or a similar method of accounting, “Adjusted Consolidated Net Tangible Assets” will continue to be calculated as if the Borrower were still using the full cost method of accounting.

     “Administrative Agent” means Bank of America, N.A. in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

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

     “Affiliate” means, with respect to any specified Person: (1) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; (2) any other Person that owns, directly or indirectly, 10% or more of the Voting Stock of such specified Person (or any of such specified Person’s direct or indirect parent’s Voting Stock); or (3) any other Person 10% or more of the Voting Stock of which is beneficially owned or held directly or indirectly by such specified Person. For the purposes of this definition and the representation and warranty set forth in Section 5.14(b), “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Aggregate Commitments” means the Commitments of all the Initial Lenders.

     “Agreement” means this Credit Agreement.

     “Applicable Fixed Rate” has the meaning set forth in Section 2.05(a).

     “Applicable Floating Rate Margin” has the meaning set forth in Section 2.05(b).

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     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

     “Asset Sale” means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger or consolidation, Production Payments and Reserve Sales or a Sale Leaseback Transaction) (collectively, a “transfer”), directly or indirectly, in one or a series of related transactions, of:

     (1) any Capital Stock of any Restricted Subsidiary;

     (2) all or substantially all of the properties and assets of any division or line of business of the Borrower or any Restricted Subsidiary; or

     (3) any other properties, assets or rights of the Borrower or any Restricted Subsidiary other than in the ordinary course of business.

For the purposes of this definition, the term “Asset Sale” shall not include:

     (A) any transfer of properties and assets (including any Capital Stock of a Restricted Subsidiary) that is governed by Section 7.03,

     (B) any transfer of properties and assets that is by the Borrower to any Restricted Subsidiary, or by any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary in accordance with the terms of this Agreement,

     (C) any transfer of properties and assets that would be within the definition of a “Permitted Investment” or a “Restricted Payment” and, in the latter case, would be permitted to be made as a Restricted Payment (and shall be deemed a Restricted Payment) under Section 7.05,

     (D) the transfer of Cash Equivalents, inventory, accounts receivable, surplus or obsolete equipment or other property (excluding the disposition of oil and gas in place and other interests in real property unless made in connection with a Permitted Business Investment),

     (E) the abandonment, assignment (including any assignments made pursuant to the Well Participation Program), lease, sublease or farm-out of oil and gas properties, or the forfeiture or other disposition of such properties, pursuant to operating agreements or other instruments or agreements that, in each case, are entered into in the ordinary course of business in a manner that is customary in the Oil and Gas Business,

     (F) the transfer of Property received in settlement of debts owing to such Person as a result of foreclosure, perfection or enforcement of any Lien or debt, which debts were owing to such Person in the ordinary course of its business,

     (G) any Production Payments and Reserve Sales, provided that any such Production Payments and Reserve Sales (other than incentive compensation programs on

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terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Borrower or a Restricted Subsidiary), shall have been created, incurred, issued, assumed or guaranteed in connection with the acquisition or financing of, and within 90 days after the acquisition of, the Property that is subject thereto,

     (H) the licensing or sublicensing of intellectual property or other general intangibles to the extent that such license does not prohibit the licensor from using the intellectual property and licenses, leases or subleases of other property,

     (I) the creation or incurrence of any Lien,

     (J) the surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind,

     (K) the sale or other disposition (whether or not in the ordinary course of business) of oil and gas properties, provided at the time of such sale or other disposition such properties do not have associated with them any proved reserves or

     (L) any transfer of assets the Fair Market Value of which in the aggregate does not exceed $5,000,000 in any transaction or series of related transactions.

     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

     “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.06(b)) and accepted by the Administrative Agent, in substantially the form of Exhibit C or any other form approved by the Administrative Agent.

     “Attributable Indebtedness” in respect of a Sale Leaseback Transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale Leaseback Transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended).

     “Audited Financial Statements” means the audited Consolidated balance sheet of the Borrower and its Restricted Subsidiaries for the fiscal year ended December 31, 2005, and the related Consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

     “Bank of America” means Bank of America, N.A. and its successors.

     “Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and

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desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

     “Base Rate Loan” means a Floating Rate Loan that bears interest based on the Base Rate.

     “Borrower” has the meaning specified in the introductory paragraph hereto, until a successor Person shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Borrower” shall mean such successor Person.

     “Borrower Materials” has the meaning specified in Section 6.02.

     “Borrowing” means a borrowing consisting of simultaneous Initial Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Initial Lenders pursuant to Section 2.01.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

     “Capital Lease Obligation” of any Person means any obligation of such Person and its Restricted Subsidiaries on a Consolidated basis under any capital lease of (or other agreement conveying the right to use) real or personal property which, in accordance with GAAP, is required to be recorded as a capitalized lease obligation.

     “Capital Stock” of any Person means any and all shares, units, interests, participations, rights in or other equivalents (however designated) of such Person’s capital stock, other equity interests whether now outstanding or issued after the date hereof, partnership interests (whether general or limited), limited liability company interests, any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, including any Preferred Stock, and any rights (other than debt securities convertible into Capital Stock), warrants or options exchangeable for or convertible into such Capital Stock.

     “Cash Equivalents” means

     (1) any evidence of Indebtedness issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof,

     (2) deposits, time deposit accounts, certificates of deposit, money market deposits or acceptances of any financial institution having capital and surplus in excess of $500,000,000 that is a member of the Federal Reserve System and whose senior unsecured debt is rated at least “A-1” by S&P or at least “P-1” by Moody’s,

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     (3) commercial paper with a maturity of 365 days or less issued by a corporation (other than an Affiliate or Subsidiary of the Borrower) organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and rated at least “A-1” by S&P and at least “P-1” by Moody’s,

     (4) repurchase agreements and reverse repurchase agreements relating to Indebtedness of a type described in clause (1) above that are entered into with a financial institution described in clause (2) above and mature within 365 days from the date of acquisition,

     (5) deposits and certificates of deposit with any commercial bank not meeting the qualifications specified in clause (2) above, provided all such deposits do not exceed $1,000,000 in the aggregate at any one time and

     (6) money market funds which invest substantially all of their assets in securities described in the preceding clauses (1) through (4).

     “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

     “Change of Control” means the occurrence of any of the following events:

     (1) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than the Ward Group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the Borrower (measured by voting power rather than the number of shares);

     (2) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Borrower (together with any new directors whose election to such board or whose nomination for election by the stockholders of the Borrower was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of such board of directors then in office;

     (3) the Borrower consolidates with or merges with or into any Person, or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any such Person, or any such Person consolidates with or merges into or with the Borrower, in any such event pursuant to a transaction in which the outstanding Voting

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Stock of the Borrower is converted into or exchanged for cash, securities or other property, other than any such transaction where

     (A) the outstanding Voting Stock of the Borrower is changed into or exchanged for Voting Stock of the surviving Person which is not Disqualified Stock and

     (B) immediately after such transaction, no “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock (measured by voting power rather than the number of shares) of the surviving Person; or

     (4) the Borrower is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions of Section 7.03.

For purposes of this definition, any transfer of an equity interest of an entity that was formed for the purpose of acquiring Voting Stock of the Borrower will be deemed to be a transfer of such portion of such Voting Stock as corresponds to the portion of the equity of such entity that has been so transferred.

     “Change of Control Offer” has the meaning set forth in Section 6.16.

     “Change of Control Payment” has the meaning set forth in Section 6.16.

     “Change of Control Payment Date” has the meaning set forth in Section 6.16.

     “Closing Date” means the date of the Borrowing hereunder, as specified by the Borrower in its Loan Notice.

     “Co-Arranger” and “Co-Arrangers” have the meaning specified in the introductory paragraph hereto.

     “Code” means the Internal Revenue Code of 1986.

     “Commitment” means, as to each Initial Lender, its obligation to make an Initial Loan to the Borrower pursuant to Section 2.01, in the amount set forth opposite such Lender’s name on Schedule 2.01.

     “Compliance Certificate” means a certificate substantially in the form of Exhibit B.

     “Consolidated Fixed Charge Coverage Ratio” of any Person means, for any period, the ratio of

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     (a) without duplication, the sum of Consolidated Net Income, and in each case to the extent deducted in computing such Consolidated Net Income for such period, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash Charges for such period, of such Person and its Restricted Subsidiaries on a Consolidated basis, all determined in accordance with GAAP, less all non-cash items increasing Consolidated Net Income for such period, less (to the extent included in determining Consolidated Net Income) the sum of (a) the amount of deferred revenues that are amortized during the period and are attributable to reserves that are subject to Volumetric Production Payments and (b) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar-Denominated Production Payments, and less all cash payments during such period relating to non-cash charges that were added back to Consolidated Net Income in determining the Consolidated Fixed Charge Coverage Ratio in any prior period to

     (b) without duplication, the sum of Consolidated Interest Expense for such period,

in each case after giving pro forma effect to, without duplication,

     (1) the incurrence of the Indebtedness giving rise to the need to make such calculation and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such period;

     (2) the incurrence, repayment or retirement of any other Indebtedness by the Person and its Restricted Subsidiaries since the first day of such period as if such Indebtedness was incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such period);

     (3) in the case of Acquired Debt or any acquisition occurring at the time of the incurrence of such Indebtedness, the related acquisition, assuming such acquisition had been consummated on the first day of such period; and

     (4) any acquisition or disposition by such Person and its Restricted Subsidiaries of any company or any business or any assets out of the ordinary course of business, whether by merger, stock purchase or sale or asset purchase or sale, or any related repayment of Indebtedness, in each case since the first day of such period, assuming such acquisition or disposition had been consummated on the first day of such period;

provided that

     (1) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not

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outstanding for any part of the period for which the computation is being made but which bears, at the option of such Person, a fixed or floating rate of interest, shall be computed by applying at the option of such Person either the fixed or floating rate, and

     (2) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period.

     “Consolidated Income Tax Expense” of any Person means, for any period, the provision for federal, state, local and foreign income taxes (including state franchise taxes accounted for as income taxes in accordance with GAAP) of such Person and its Restricted Subsidiaries for such period as determined, on a Consolidated basis, in accordance with GAAP.

     “Consolidated Interest Expense” of any Person means, without duplication, for any period, the sum of

     (a) the interest expense, less interest income, of such Person and its Restricted Subsidiaries for such period, on a Consolidated basis, excluding any interest attributable to Dollar-Denominated Production Payments but including, without limitation,

     (1) amortization of debt discount (excluding amortization of capitalized debt issuance costs),

     (2) the net cash costs associated with Interest Rate Agreements (including amortization of discounts),

     (3) the interest portion of any deferred payment obligation,

     (4) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing and

     (5) accrued interest, minus

     (b) to the extent included in (a) above, write-offs of deferred financing costs of such Person and its Restricted Subsidiaries during such period and any charge related to, or any premium paid in connection with, paying any such Indebtedness of such Person and its Restricted Subsidiaries prior to its Stated Maturity, plus

     (c) (1) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period and

     (2) all capitalized interest of such Person and its Restricted Subsidiaries plus

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     (d) the interest expense under any Guaranteed Debt of such Person and any Restricted Subsidiary to the extent not included under any other clause hereof, whether or not paid by such Person or its Restricted Subsidiaries, plus

     (e) dividend payments by the Person with respect to Disqualified Stock and of any Restricted Subsidiary with respect to Preferred Stock (except, in either case, dividends paid solely in Qualified Capital Stock of such Person or such Restricted Subsidiary, as the case may be).

     “Consolidated Net Income” of any Person means, for any period, the Consolidated net income (or loss) of such Person and its Restricted Subsidiaries for such period on a Consolidated basis as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (or loss), by excluding, without duplication,

     (1) all extraordinary gains or losses net of taxes (less all fees and expenses relating thereto),

     (2) the portion of net income (or loss) of such Person and its Restricted Subsidiaries on a Consolidated basis allocable to minority interests in unconsolidated Persons or Unrestricted Subsidiaries to the extent that cash dividends or distributions have not actually been received by such Person or one of its Consolidated Restricted Subsidiaries,

     (3) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan,

     (4) gains or losses, net of taxes (less all fees and expenses relating thereto), in respect of dispositions of assets other than in the ordinary course of the Oil and Gas Business (including, without limitation, dispositions pursuant to Sale Leaseback Transactions, but excluding transactions such as farmouts, sales of leasehold inventory and sales of undivided interests in drilling prospects),

     (5) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders,

     (6) any write-downs of non-current assets, provided that any ceiling limitation write-downs under SEC guidelines shall be treated as capitalized costs, as if such write-downs had not occurred,

     (7) any cumulative effect of a change in accounting principles, and

     (8) all deferred financing costs written off, and premiums paid, in connection with any early extinguishment of Indebtedness.

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     “Consolidated Non-cash Charges” of any Person means, for any period, the aggregate depreciation, depletion, amortization and exploration expense and other non-cash charges of such Person and its Restricted Subsidiaries on a Consolidated basis for such period, as determined in accordance with GAAP (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period but including, without limitation, any non-cash charge arising from any grant of Capital Stock, options to acquire Capital Stock, or other equity based awards).

     “Consolidation” and “Consolidated” mean, with respect to any Person, the consolidation of the accounts of such Person and each of its Subsidiaries if and to the extent the accounts of such Person and each of its Subsidiaries would normally be consolidated with those of such Person, all in accordance with GAAP.

     “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

     “Credit Facility” means, one or more debt facilities (including, without limitation, the Senior Credit Facility), commercial paper facilities or other debt instruments, indentures or agreements, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to the lenders or to special purpose entities formed to borrow from the lenders against such receivables), letters of credit or other debt obligations, in each case, as amended, restated, modified, renewed, refunded, restructured, supplemented, replaced or refinanced from time to time in whole or in part from time to time, including without limitation any amendment increasing the amount of Indebtedness incurred or available to be borrowed thereunder, extending the maturity of any Indebtedness incurred thereunder or contemplated thereby or deleting, adding or substituting one or more parties thereto (whether or not such added or substituted parties are banks or other institutional lenders).

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means:

     (a) with respect to any Fixed Rate Loan, the Applicable Fixed Rate plus 2% per annum; and

     (b) with respect to any Floating Rate Loan or any other amount, (i) the Base Rate plus (ii) the Applicable Floating Rate Margin, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Floating Rate Margin) otherwise applicable to such Loan plus 2% per annum.

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     “Disinterested Director” means, with respect to any transaction or series of related transactions, a member of the board of directors of the Borrower who does not have any material direct or indirect financial interest (other than as a shareholder or employee of the Borrower or any Subsidiary) in or with respect to such transaction or series of related transactions.

     “Disqualified Stock” means (i) the Series A Preferred Stock and (ii) any other Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the principal of the Loans or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity (other than upon a change of control of or sale of assets by the Borrower in circumstances where the holders of the Loans would have similar rights), or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity at the option of the holder thereof.

     “Dollar” and “$” mean lawful money of the United States.

     “Dollar-Denominated Production Payment” means a production payment required to be recorded as a borrowing in accordance with GAAP, together with all undertakings and obligations in connection therewith.

     “Eligible Assignee” means any Person that (a) meets the requirements to be an assignee under Sections 10.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)) and (b) is a “qualified institutional buyer” within the meaning of Rule 144A.

     “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Restricted Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

     “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership

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or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

     “Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

     “Eurodollar Rate Loan” means a Floating Rate Loan that bears interest at a rate based on the Eurodollar Rate.

     “Event of Default” has the meaning specified in Section 8.01.

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     “Excess Proceeds” means any Net Available Cash from an Asset Sale not applied in accordance with Section 7.04(b) within 365 days from the date of such Asset Sale.

     “Exchange Notes” means the Initial Exchange Notes and the Second Exchange Notes.

     “Exchanged Properties” means properties or assets or Capital Stock representing an equity interest in or assets used or useful in the Oil and Gas Business, received by the Borrower or a Restricted Subsidiary in a substantially concurrent purchase and sale, trade or exchange as a portion of the total consideration for other such properties or assets.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), 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 such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a).

     “Existing Agreement” means that certain Bridge Loan Agreement dated as of November 21, 2006, among the Borrower (under its former name of Riata Energy, Inc.), Bank of America, N.A. and the other lenders from time to time party thereto.

     “Fair Market Value” means, with respect to any asset or property, the sale value that would be obtained in an arm’s-length free market transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. Fair Market Value of an asset or property in excess of $10,000,000 shall be determined by the board of directors of the Borrower acting in good faith, in which event it shall be evidenced by a resolution of the board of directors.

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

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     “Final Maturity Date” means the Fixed Rate Maturity Date and the Floating Rate Maturity Date in the case of Fixed Rate Loans and Floating Rate Loans, respectively.

     “Fixed Rate Borrowing” means a borrowing consisting of simultaneous Fixed Rate Loans made by each of the Fixed Rate Lenders pursuant to Section 2.01(a).

     “Fixed Rate Commitment” means, as to each Fixed Rate Lender, its obligation to make Fixed Rate Loans to the Borrower pursuant to Section 2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Fixed Rate Lender’s name on Schedule 2.01 under the caption “Fixed Rate Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Fixed Rate Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

     “Fixed Rate Facility” means, at any time, (a) on or prior to the Closing Date, the aggregate amount of the Fixed Rate Commitments at such time and (b) thereafter, the aggregate principal amount of the Fixed Rate Loans of all Fixed Rate Lenders outstanding at such time.

     “Fixed Rate Lender” means (a) at any time on or prior to the Closing Date, any Lender that has a Fixed Rate Commitment at such time and (b) at any time after the Closing Date, any Lender that holds Fixed Rate Loans at such time.

     “Fixed Rate Loan” means an advance made by any Fixed Rate Lender under the Fixed Rate Facility, together with any increases in principal amount of such Loans as a payment of PIK Interest pursuant to Section 2.05(a).

     “Fixed Rate Maturity Date” means April 1, 2015.

     “Floating Rate Borrowing” means a borrowing consisting of simultaneous Floating Rate Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Floating Rate Lenders pursuant to Section 2.01(b).

     “Floating Rate Commitment” means, as to each Floating Rate Lender, its obligation to make Floating Rate Loans to the Borrower pursuant to Section 2.01(b) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Floating Rate Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Floating Rate Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

     “Floating Rate Facility” means, at any time, (a) on or prior to the Closing Date, the aggregate amount of the Floating Rate Commitments at such time and (b) thereafter, the aggregate principal amount of the Floating Rate Loans of all Floating Rate Lenders outstanding at such time.

     “Floating Rate Lender” means at any time, (a) on or prior to the Closing Date, any Lender that has a Floating Rate Commitment at such time and (b) at any time after the Closing Date, any Lender that holds Floating Rate Loans at such time.

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     “Floating Rate Loan” means an advance made by any Floating Rate Lender under the Floating Rate Facility.

     “Floating Rate Maturity Date” means April 1, 2014.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “Foreign Subsidiary” means any Restricted Subsidiary of the Borrower that (x) is not organized under the laws of the United States of America or any State thereof or the District of Columbia, or (y) was organized under the laws of the United States of America or any State thereof or the District of Columbia that has no material assets other than Capital Stock of one or more foreign entities of the type described in clause (x) above and is not a guarantor of Indebtedness under a Credit Facility.

     “FRB” means the Board of Governors of the Federal Reserve System of the United States.

     “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

     “GAAP” means generally accepted accounting principles in the United States which are in effect from time to time.

     “Governmental Authority” means the government of the United States or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank).

     “Guarantee” means the guarantee by any Guarantor of the obligations of the Borrower under this Agreement, including the obligations to pay principal of, premium, if any, and interest when due and payable on the Loans, and all other amounts due or to become due under or in connection with this Agreement, the Loans and the performance of all other obligations to the Administrative Agent and the Lenders under this Agreement and the Loans, according to the respective terms thereof.

     “Guaranteed Debt” of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement, made primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss,

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     (1) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness,

     (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services,

     (3) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered),

     (4) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or to cause such debtor to achieve certain levels of financial performance or

     (5) otherwise to assure a creditor against loss;

provided that the term “guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business.

     “Guarantors” means, collectively, (i) NEG Oil & Gas LLC, ROC Gas Company, National Onshore LP, National Offshore LP, NEG Operating LLC, Lariat Services, Inc., Lariat Compression Company, SandRidge Operating Company, Integra Energy, L.L.C., PetroSource Energy Company, LP, PetroSource Production Company, L.P. and SandRidge Holdings, Inc. and (ii) each Person which becomes a Guarantor after the Closing Date pursuant to Section 6.12.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     “Immaterial Subsidiary” means any Subsidiary with total assets of less than $500,000, as determined in accordance with its latest financial statements.

     “Incremental Margin” means (i) prior to May 31, 2008, 0%, (ii) from May 31, 2008 through but excluding the 90-day anniversary thereof, 0.25% and (iii) thereafter, 0.50%; provided that the Incremental Margin shall be 0% on any date on and after the Initial Exchange Date.

     “Indebtedness” means, with respect to any Person, without duplication,

     (1) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any Trade Accounts Payable and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit issued under letter of credit facilities, acceptance facilities or other similar facilities,

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     (2) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments,

     (3) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding Trade Accounts Payable,

     (4) all obligations under or in respect of currency exchange contracts, oil, gas or other hydrocarbon price hedging arrangements and Interest Rate Agreements of such Person (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time),

     (5) all Capital Lease Obligations of such Person,

     (6) the Attributable Indebtedness of such Person related to any Sale Leaseback Transaction,

     (7) all Indebtedness referred to in clauses (1) through (6) above of other Persons and all dividends of other Persons, to the extent the payment of such Indebtedness or dividends is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness,

     (8) all Guaranteed Debt of such Person,

     (9) all Disqualified Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends,

     (10) all Preferred Stock of any Restricted Subsidiary of the Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends,

     (11) with respect to any Production Payment and Reserve Sale, any warranties or guaranties of production or payment by such Person with respect to such Production Payment and Reserve Sale but excluding other contractual obligations of such Person with respect to such Production Payment and Reserve Sale and

     (12) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (1) through (11) above.

     For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock or Preferred Stock which does not have a fixed repurchase price shall be calculated in accordance

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with the terms of such Disqualified Stock or Preferred Stock as if it were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock or Preferred Stock, such Fair Market Value to be determined in good faith by the board of directors of the issuer of such Disqualified Stock or Preferred Stock. Subject to clause (11) of the preceding sentence, Production Payments and Reserve Sales shall not be deemed to be Indebtedness.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitee” has the meaning specified in Section 10.04(b).

     “Information” has the meaning specified in Section 10.07.

     “Initial Exchange” has the meaning set forth in Section 6.15.

     “Initial Exchange Date” has the meaning set forth in Section 6.15.

     “Initial Exchange Note” means a note of the Borrower issued pursuant to the Initial Exchange Note Indenture.

     “Initial Exchange Note Indenture” means the collective reference to one or more indentures to be entered into to give effect to the exchange right of the Lenders pursuant to Section 6.15, having economic terms (including interest rate, maturity and prepayment provisions) and negative covenants substantially the same as those applicable to the Loans, except as otherwise contemplated by Section 6.15 and as modified to reflect customary provisions for notes issued in an offering pursuant to Rule 144A by similar issuers, all as proposed by the Lead Arranger for the Exchange Notes and reasonably acceptable to the Borrower.

     “Initial Lenders” means Banc of America Bridge LLC, Goldman Sachs Credit Partners L.P., Lehman Commercial Paper Inc. and Deutsche Bank AG, New York Branch.

     “Initial Loan” means a Loan made by an Initial Lender on the Closing Date pursuant to Section 2.01.

     “Interest Payment Date” means the first Business Day of each April, July, October and January, beginning with July 2007, and the Initial Exchange Date or the Final Maturity Date, as applicable.

     “Interest Period” means, as to each Loan, (i) in the case of the first Interest Period, the period beginning on the Closing Date and ending on the first Interest Payment Date and (ii) in the case of each subsequent Interest Period, the period beginning on the last day of the immediately preceding Interest Period and ending on the next succeeding Interest Payment Date.

     “Interest Rate Agreements” means one or more of the following agreements which shall be entered into from time to time by one or more financial institutions: interest rate protection

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agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements.

     “Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

     “Investment” means, with respect to any Person, directly or indirectly, any advance, loan (including guarantees), or other extension of credit or capital contribution to any other Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities issued or owned by any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. “Investment” shall exclude direct or indirect advances to customers or suppliers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the Borrower’s or any Restricted Subsidiary’s balance sheet, endorsements for collection or deposit arising in the ordinary course of business and extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. If the Borrower of any Restricted Subsidiary of the Borrower sells or otherwise disposes of any Capital Stock of any direct or indirect Subsidiary of the Borrower such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Borrower (other than the sale of all of the outstanding Capital Stock of such Subsidiary), the Borrower will be deemed to have made an Investment on the date of such sale or disposition equal to the Fair Market Value of the Borrower’s Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in Section 7.05.

     “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

     “Lead Arranger” means Banc of America Securities LLC.

     “Lender” has the meaning specified in the introductory paragraph hereto.

     “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

     “Lien” means any mortgage or deed of trust, charge, pledge, lien (statutory or otherwise), privilege, security interest, assignment, deposit, arrangement, hypothecation, claim, preference, priority or other encumbrance for security purposes upon or with respect to any property of any kind (including any conditional sale, capital lease or other title retention agreement, any leases in the nature thereof, and any agreement to give any security interest), real or personal, movable or

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immovable, now owned or hereafter acquired. A Person will be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease Obligation or other title retention agreement. References herein to Liens allowed to exist upon any particular item of Property shall also be deemed (whether or not stated specifically) to allow Liens to exist upon any accessions, improvements or additions to such property, upon any contractual rights relating primarily to such Property, and upon any proceeds of such Property or of such accessions, improvements, additions or contractual rights.

     “Liquid Securities” means securities (i) of an issuer that is not an Affiliate of the Borrower, (ii) that are publicly traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market and (iii) as to which the Borrower is not subject to any restrictions on sale or transfer (including any volume restrictions under Rule 144 under the Securities Act or any other restrictions imposed by the Securities Act) or as to which a registration statement under the Securities Act covering the resale thereof is in effect for as long as the securities are held; provided that securities meeting the requirements of clauses (i), (ii) and (iii) above shall be treated as Liquid Securities from the date of receipt thereof until and only until the earlier of (a) the date on which such securities are sold or exchanged for cash or Cash Equivalents and (b) 360 days following the date of receipt of such securities. If such securities are not sold or exchanged for cash or Cash Equivalents within 360 days of receipt thereof, for purposes of determining whether the transaction pursuant to which the Borrower or a Restricted Subsidiary received the securities was in compliance with the provisions of Section 7.04, such securities shall be deemed not to have been Liquid Securities at any time.

     “Loan” means a Fixed Rate Loan or a Floating Rate Loan, and “Loans” means any combination of the foregoing.

     “Loan Documents” means this Agreement and the Guaranty.

     “Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

     “Loan Parties” means, collectively, the Borrower and each Guarantor.

     “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), results of operations or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries taken as a whole; (b) a material impairment of (i) the rights and remedies of the Administrative Agent or any Lender under any Loan Document or (ii) the ability of the Loan Parties to perform their obligations under the Loan Documents; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

     “Material Change” means an increase or decrease (except to the extent resulting from changes in prices) of more than 30% during a fiscal quarter in the estimated discounted future net revenues from proved oil and gas reserves of the Borrower and its Restricted Subsidiaries,

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calculated in accordance with clause (i)(a) of the definition of Adjusted Consolidated Net Tangible Assets; provided, however, that the following will be excluded from the calculation of Material Change: (i) any acquisitions during the quarter of oil and gas reserves with respect to which the discounted future net revenues from proved oil and gas reserves have been estimated or confirmed by independent petroleum engineers and (ii) any dispositions of properties and assets during such quarter that were disposed of in compliance with Section 7.04.

     “Midstream Assets” means (i) assets used primarily for gathering, transmission, storage, processing or treatment of natural gas, natural gas liquids or other hydrocarbons or carbon dioxide and (ii) equity interests of any Person that has no substantial assets other than assets referred to in clause (i).

     “MNPI” has the meaning specified in Section 6.02.

     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Net Available Cash” from an Asset Sale or Sale Leaseback Transaction means cash proceeds received therefrom (including (i) any cash proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received and (ii) the Fair Market Value of Liquid Securities and Cash Equivalents, and excluding (iii) any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the assets or property that is the subject of such Asset Sale or Sale Leaseback Transaction and (iv) except to the extent subsequently converted to cash, within 360 days after such Asset Sale or Sale Leaseback Transaction, Cash Equivalents or Liquid Securities; consideration constituting Exchanged Properties or consideration other than as identified in the immediately preceding clauses (i) and (ii)), in each case net of:

     (a) all legal, title and recording expenses, commissions and other fees and expenses incurred, and all federal, state, foreign and local taxes required to be paid or accrued as a liability under GAAP as a consequence of such Asset Sale or Sale Leaseback Transaction,

     (b) all payments made on any Indebtedness (but specifically excluding Indebtedness of the Borrower and its Restricted Subsidiaries assumed in connection with or in anticipation of such Asset Sale or Sale Leaseback Transaction) which is secured by any assets subject to such Asset Sale or Sale Leaseback Transaction, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or Sale Leaseback Transaction or by applicable law, be repaid out of the proceeds from such Asset Sale or Sale Leaseback Transaction, provided that such payments are made in a manner that results in the permanent reduction

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in the balance of such Indebtedness and, if applicable, a permanent reduction in any outstanding commitment for future incurrences of Indebtedness thereunder,

     (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale or Sale Leaseback Transaction and

     (d) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale or Sale Leaseback Transaction and retained by the Borrower or any Restricted Subsidiary after such Asset Sale or Sale Leaseback Transaction;

provided, however, that if any consideration for an Asset Sale or Sale Leaseback Transaction (which would otherwise constitute Net Available Cash) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Available Cash only at such time as it is released to such Person or its Restricted Subsidiaries from escrow.

     “Net Cash Proceeds” means with respect to any issuance or sale of Capital Stock or debt securities or Capital Stock that has been converted into or exchanged for Capital Stock as referred to in Section 7.05, the proceeds of such issuance or sale in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Borrower or any Restricted Subsidiary), net of attorney’s fees, accountant’s fees and brokerage, consultation, underwriting and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

     “Net Working Capital” means (i) all current assets of the Borrower and its Restricted Subsidiaries, less (ii) all current liabilities of the Borrower and its Restricted Subsidiaries, except current liabilities included in Indebtedness, in each case as set forth in Consolidated financial statements of the Borrower prepared in accordance with GAAP, provided, however, that all of the following shall be excluded in the calculation of Net Working Capital: (a) current assets or liabilities relating to the mark-to-market value of Interest Rate Agreements and hedging arrangements constituting Permitted Debt, (b) any current assets or liabilities relating to non-cash charges arising from any grant of Capital Stock, options to acquire Capital Stock, or other equity based awards, and (c) any current assets or liabilities relating to non-cash charges or accruals for future abandonment liabilities.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

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     “Oil and Gas Business” means the business of exploiting, exploring for, developing, acquiring, operating, producing, processing, gathering, marketing, storing, selling, hedging, treating, swapping, refining and transporting hydrocarbons and carbon dioxide and other related energy businesses, including contract drilling and other oilfield services.

     “Oil and Gas Liens” means (i) Liens on any specific property or any interest therein, construction thereon or improvement thereto to secure all or any part of the costs incurred for surveying, exploration, drilling, extraction, development, operation, production, construction, alteration, repair or improvement of, in, under or on such property and the plugging and abandonment of wells located thereon (it being understood that, in the case of oil and gas producing properties, or any interest therein, costs incurred for “development” shall include costs incurred for all facilities relating to such properties or to projects, ventures or other arrangements of which such properties form a part or which relate to such properties or interests); (ii) Liens on an oil or gas producing property to secure obligations incurred or guarantees of obligations incurred in connection with or necessarily incidental to commitments for the purchase or sale of, or the transportation or distribution of, the products derived from such property; (iii) Liens arising under partnership agreements, oil and gas leases, overriding royalty agreements, net profits agreements, production payment agreements, royalty trust agreements, incentive compensation programs for geologists, geophysicists and other providers of technical services to the Borrower or a Restricted Subsidiary, master limited partnership agreements, farm-out agreements, farm-in agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, operating agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements which are customary in the Oil and Gas Business; provided, however, in all instances that such Liens are limited to the assets that are the subject of the relevant agreement, program, order or contract; (iv) Liens arising in connection with Production Payments and Reserve Sales; provided that such Liens are limited to the property that is subject to such Production Payments and Reserve Sales, and such Production Payments and Reserve Sales either (a) were created in connection with the acquisition or financing of the property and were incurred within 90 days after the acquisition of the property subject thereto, or (b) constitute Asset Sales made in compliance with Section 7.04; and (v) Liens on pipelines or pipeline facilities that arise by operation of law.

     “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

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

     “Participant” has the meaning specified in Section 10.06(d).

     “Pari Passu Indebtedness” means any Indebtedness of the Borrower or a Guarantor that is pari passu in right of payment to the Loans or a Guarantee, as the case may be.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “PCAOB” means the Public Company Accounting Oversight Board.

     “Permitted Business Investments” means Investments and expenditures made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of actively engaging therein through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with third parties, including (i) ownership interests in oil and gas properties or gathering, transportation, processing, storage or related systems and (ii) Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited) and other similar agreements (including for limited liability companies) with third parties, excluding, however, Investments in Persons other than Restricted Subsidiaries.

     “Permitted Investment” means

     (1) Investments in any Restricted Subsidiary or any Person which, as a result of such Investment, (a) becomes a Restricted Subsidiary or (b) is merged or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or any Restricted Subsidiary;

     (2) Indebtedness of the Borrower or a Restricted Subsidiary described under clauses (4), (5) and (6) of the definition of “Permitted Debt;”

     (3) Investments in any of the Loans or Exchange Notes;

     (4) Cash Equivalents;

     (5) Investments in property, plant and equipment used in the ordinary course of business and Permitted Business Investments;

     (6) Investments acquired by the Borrower or any Restricted Subsidiary in connection with an Asset Sale permitted under Section 7.04 to the extent such Investments are non-cash proceeds as permitted under such covenant;

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     (7) Investments in existence on the date hereof;

     (8) Investments acquired in exchange for the issuance of Capital Stock of the Borrower (other than Disqualified Stock of the Borrower or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary);

     (9) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and worker’s compensation, performance and other similar deposits provided to third parties in the ordinary course of business;

     (10) loans or advances to employees of the Borrower in the ordinary course of business for bona fide business purposes of the Borrower and its Restricted Subsidiaries (including travel, entertainment and relocation expenses) in the aggregate amount outstanding at any one time of not more than $2,000,000;

     (11) any Investments received in good faith in settlement or compromise of receivables or other obligations that were obtained in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;

     (12) other Investments in the aggregate amount outstanding at any one time of up to the greater of (x) $25,000,000 and (y) 5.0% of Adjusted Consolidated Net Tangible Assets; and

     (13) guarantees received with respect to any Permitted Investment listed above.

     In connection with any assets or property contributed or transferred to any Person as an Investment, such property and assets shall be equal to the Fair Market Value at the time of Investment, without regard to subsequent changes in value.

     “Permitted Lien” means:

     (1) any Lien existing as of the date hereof securing Indebtedness or obligations existing on the date hereof and not otherwise referred to in this definition;

     (2) any Lien with respect to the Senior Credit Facility or any successor Credit Facilities securing Indebtedness incurred thereunder that could be borrowed under Section 7.02;

     (3) any Lien securing the Loans, the Guarantees and other obligations arising under this Agreement;

     (4) any Lien in favor of the Borrower or a Restricted Subsidiary;

     (5) any Lien arising by reason of:

     (A) any judgment, decree or order of any court, so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been

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duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;

     (B) taxes, assessments or governmental charges or claims that are not yet delinquent or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, provided that any reserve or other appropriate provision as will be required in conformity with GAAP will have been made therefor;

     (C) security made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security;

     (D) good faith deposits in connection with tenders, leases and contracts (other than contracts for the payment of Indebtedness);

     (E) zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights of way, utilities, sewers, electric lines, telephone or telegraph lines, and other similar purposes, provisions, covenants, conditions, waivers, restrictions on the use of property or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, Liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee), none of which materially impairs the use of any parcel of property material to the operation of the business of the Borrower or any Restricted Subsidiary or the value of such property for the purpose of such business;

     (F) deposits to secure public or statutory obligations, or in lieu of surety or appeal bonds;

     (G) operation of law or contract in favor of mechanics, carriers, warehousemen, landlords, materialmen, laborers, employees, suppliers and similar persons, incurred in the ordinary course of business for sums which are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings which suspend the collection thereof;

     (H) normal depository arrangements with banks;

     (6) any Lien securing Acquired Debt created prior to (and not created in connection with, or in contemplation of) the incurrence of such Indebtedness by the Borrower or any Restricted Subsidiary; provided that such Lien only secures the assets acquired in connection with the transaction pursuant to which the Acquired Debt became an obligation of the Borrower or a Restricted Subsidiary;

     (7) any Lien to secure performance bids, leases (including, without limitation, statutory and common law landlord’s liens), statutory obligations, letters of credit and

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other obligations of a like nature and incurred in the ordinary course of business of the Borrower or any Subsidiary and not securing or supporting Indebtedness, and any Lien to secure statutory or appeal bonds;

     (8) any Lien securing Indebtedness permitted to be incurred pursuant to clause (6) or clause (8) of the definition of Permitted Debt, so long as none of such Indebtedness constitutes debt for borrowed money;

     (9) any Lien securing Capital Lease Obligations or Purchase Money Obligations incurred in accordance with Section 7.02(b)(vii) and which are incurred or assumed solely in connection with the acquisition, development or construction of real or personal, moveable or immovable property commencing within 90 days of such incurrence or assumption; provided that such Liens only extend to such acquired, developed or constructed property, such Liens secure Indebtedness in an amount not in excess of the original purchase price or the original cost of any such assets or repair, addition or improvement thereto, and the incurrence of such Indebtedness is permitted by Section 7.02;

     (10) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Borrower or any of its Restricted Subsidiaries;

     (11) (A) Liens on property, assets or shares of stock of a Person at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Borrower or any of its Restricted Subsidiaries; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary or such merger or consolidation; provided further, that any such Lien may not extend to any other property owned by the Borrower or any Restricted Subsidiary and assets fixed or appurtenant thereto; and (B) Liens on property, assets or shares of capital stock existing at the time of acquisition thereof by the Borrower or any of its Restricted Subsidiaries; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such acquisition and do not extend to any property other than the property so acquired;

     (12) Oil and Gas Liens, in each case which are not incurred in connection with the borrowing of money;

     (13) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clauses (1) through (12) so long as no additional collateral is granted as security thereby; and

     (14) in addition to the items referred to in clauses (1) through (13) above, Liens of the Borrower and its Restricted Subsidiaries to secure Indebtedness in an aggregate amount at any time outstanding which does not exceed 5.0% of Adjusted Consolidated Net Tangible Assets as most recently determined at such time.

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     “Permitted MLP Securities” means equity securities (including incentive distribution rights) of a master limited partnership (or limited liability company or similar business entity with pass-through treatment for U.S. Federal income tax purposes) that has a class of equity securities traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market, provided that such master limited partnership (or other entity) is an Affiliate of the Borrower.

     “Permitted Refinancing Indebtedness” means any Indebtedness of the Borrower or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, extend, substitute, defease, refund, refinance or replace (“refinance”) other Indebtedness of the Borrower or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

     (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness being refinanced (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

     (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being refinanced;

     (3) if the Indebtedness being refinanced is subordinated in right of payment to the Loans, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Loans on terms at least as favorable to the holders of Loans as those contained in the documentation governing the Indebtedness being refinanced; and

     (4) such Indebtedness is incurred either by the Borrower or by the Restricted Subsidiary, as applicable, that is the obligor on the Indebtedness refinanced.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Permitted Debt” has the meaning specified in Section 7.02(b).

     “Permitted Payment” has the meaning specified in Section 7.05(b).

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

     “PIK Interest” shall have the meaning set forth in Section 2.05(a).

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     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Platform” has the meaning specified in Section 6.02.

     “Preferred Stock” means, with respect to any Person, any Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Capital Stock of any other class in such Person.

     “Production Payments” means, collectively, Dollar-Denominated Production Payments and Volumetric Production Payments.

     “Production Payments and Reserve Sales” means the grant or transfer by the Borrower or a Restricted Subsidiary to any Person of a royalty, overriding royalty, net profits interest, Production Payment, partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties where the holder of such interest has recourse solely to such properties, production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas Business, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Borrower or a Restricted Subsidiary.

     “Property” means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock and other securities issued by any other Person (but excluding Capital Stock or other securities issued by such first mentioned Person).

     “Public-Side Lender” has the meaning specified in Section 6.02.

     “Purchase Money Obligation” means any Indebtedness secured by a Lien on assets related to the business of the Borrower which are purchased or constructed by the Borrower at any time after the Loans are issued; provided that

     (1) the security agreement or conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively a “Purchase Money Security Agreement”) shall be entered into within 90 days after the purchase or substantial completion of the construction of such assets and shall at all times be confined solely to the assets so purchased or acquired (together with any additions, accessions, and other related assets referred to in the last sentence of the above definition of “Liens”),

     (2) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of

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additions, improvements, and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and

     (3) (A) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions, improvements and accessions) shall not at the time such Purchase Money Security Agreement is entered into exceed 100% of the purchase price to the Borrower of the assets subject thereto or (B) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased or acquired subject to the last sentence of the above definition of “Liens”).

     “Qualified Capital Stock” of any Person means any and all Capital Stock of such Person other than Disqualified Stock.

     “Register” has the meaning specified in Section 10.06(c).

     “Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

     “Registration Default” has the meaning specified in Section 6.15.

     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Required Lenders” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the Commitments shall have or shall have been terminated, Lenders holding in the aggregate more than 50% of the outstanding principal amount of the Loans.

     “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

     “Restricted Payment” has the meaning set forth in Section 7.05.

     “Restricted Subsidiary” of a Person means any Subsidiary of that Person that is not an Unrestricted Subsidiary.

     “Rule 144A” means Rule 144A promulgated under the Securities Act.

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     “Sale Leaseback Transaction” means, with respect to the Borrower or any of its Restricted Subsidiaries, any arrangement with any Person providing for the leasing by the Borrower or any of its Restricted Subsidiaries of any real property or equipment, acquired or placed into service more than 180 days prior to such arrangement, whereby such property has been or is to be sold or transferred by the Borrower or any of its Restricted Subsidiaries to such Person.

     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

     “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

     “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Second Exchange Notes” has the meaning specified in Section 6.15.

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

     “Securities Laws” means the Securities Act and regulations thereunder, the Securities Exchange Act of 1934 and regulations thereunder, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

     “Senior Credit Facility” means that certain Credit Agreement dated as of November 21, 2006 among the Borrower (f/k/a Riata Energy, Inc.), Bank of America and the other lenders party thereto, as such agreement, in whole or in part, in one or more instances, may be amended, renewed, extended, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time (including, without limitation, any successive amendments, renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing).

     “Series A Preferred Stock” means the Series A Convertible Preferred Stock of the Borrower issued pursuant to the Certificate of Designations filed on December 11, 2006.

     “Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” of the Borrower within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC as in effect on the date hereof.

     “Stated Maturity” means, when used with respect to any Indebtedness or any installment of interest thereon, the dates specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest, as the case may be, is due and payable.

     “Subordinated Indebtedness” means Indebtedness of the Borrower or a Guarantor subordinated in right of payment to the Loans or a Guarantee, as the case may be.

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     “Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

     “Subsidiary” of a Person means

     (1) any corporation more than 50% of the outstanding voting power of the Voting Stock of which is owned or controlled, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries thereof, or

     (2) any limited partnership of which such Person or any Subsidiary of such Person is a general partner, or

     (3) any other Person in which such Person, or one or more other Subsidiaries of such Person, or such Person and one or more other Subsidiaries, directly or indirectly, has more than 50% of the outstanding Capital Stock or has the power, by contract or otherwise, to direct or cause the direction of the policies, management and affairs thereof.

     “Surviving Entity” has the meaning specified in Section 7.03(a)(i).

     “Syndication Completion Date” means the earlier of (i) the date on which the Lead Arranger notifies the Lenders that the Lead Arranger has completed its primary syndication of the Initial Loans to its satisfaction but in any event not later than 60 days after the initial launch of the syndication on IntraLinks or (ii) the 180^th day after the Closing Date.

     “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

     “Trade Accounts Payable” of any Person means accounts payable or other obligations of that Person or any Restricted Subsidiary to trade creditors created or assumed by the Person or such Restricted Subsidiary in the ordinary course of business in connection with the obtaining of goods or services.

     “Tranche” means, with respect to any Loan or Commitment, whether such Loan is a Fixed Rate Loan or Floating Rate Loan and whether such Commitment is a Fixed Rate Commitment or a Floating Rate Commitment.

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     “Type” means, with respect to a Floating Rate Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “United States” and “U.S.” mean the United States of America.

     “Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as such pursuant to and in compliance with Section 7.09.

     “Unrestricted Subsidiary Indebtedness” of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary

     (1) as to which neither the Borrower nor any Restricted Subsidiary is directly or indirectly liable (by virtue of the Borrower or any such Restricted Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt of the Borrower or any Restricted Subsidiary to any Affiliate of the Borrower, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Borrower shall be deemed to have made a Restricted Payment equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary and

     (2) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Indebtedness of the Borrower or any Restricted Subsidiary to declare, a default on such Indebtedness of the Borrower or any Restricted Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity;

provided that notwithstanding the foregoing, any Unrestricted Subsidiary may guarantee the Loans or any Credit Facility.

     “Volumetric Production Payment” means a production payment that is recorded as a sale in accordance with GAAP, whether or not the sale price must be recorded as deferred revenue, together with all undertakings and obligations in connection therewith.

     “Voting Stock” of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

     “Ward Group” means (i) Tom L. Ward (“Ward”); (ii) Ward’s wife; (iii) any of Ward’s lineal descendants; (iv) Ward’s estate; (v) any trust of which at least one of the trustees is Ward, or the principal beneficiaries of which are any one or more of the Persons in (i)-(iv); (vi) any

35

Person which is controlled by any one or more of the Persons in (i)-(v); and (vii) any group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the SEC thereunder as in effect on the date hereof) that includes one or more of Persons described in clauses (i) through (vi) above, provided that such Persons described in clauses (i) through (vi) above control more than 50% of the voting power of such group.

     “Weighted Average Life to Maturity” means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment and (b) the amount of each such principal payment by (2) the sum of all such principal payments.

     “Well Participation Program” means that certain Well Participation Program effective as of June 8, 2006 by and among the Borrower and certain executive officers of the Borrower, as in effect on the Closing Date.

     “Wholly Owned Restricted Subsidiary” means a Restricted Subsidiary all the Capital Stock of which is owned by the Borrower or another Wholly Owned Restricted Subsidiary (other than directors’ qualifying shares).

     1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

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     (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

     (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

     1.03 Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

     1.04 Petroleum Terms.

     As used herein, the terms “proved reserves,” “proved developed reserves,” “proved developed producing reserves,” “proved developed nonproducing reserves,” and “proved undeveloped reserves” have the meaning given such terms from time to time and at the time in question by the Society of Petroleum Engineers of the American Institute of Mining Engineers.

     1.05 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

ARTICLE II.
THE COMMITMENTS AND LOANS

     2.01 Loans. (a) Subject to the terms and conditions set forth herein, each Fixed Rate Lender severally agrees to make a single loan to the Borrower on the Closing Date in an amount not to exceed such Fixed Rate Lender’s Fixed Rate Commitment Percentage of the Fixed Rate Facility. The Fixed Rate Borrowing shall consist of Fixed Rate Loans made simultaneously by the Fixed Rate Lenders in accordance with their respective Applicable Percentage of the Fixed Rate Facility. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.

     (b) Subject to the terms and conditions set forth herein, each Floating Rate Lender severally agrees to make a single loan to the Borrower on the Closing Date in an amount not to exceed such Floating Rate Lender’s Floating Rate Commitment. The Floating Rate Borrowing shall consist of Floating Rate Loans made simultaneously by the Floating Rate Lenders in

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accordance with their respective Floating Rate Commitments. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed.

     2.02 Borrowings, Conversions and Continuations of Loans.

     (a) The Borrowings of Loans, each conversion of Floating Rate Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of Loans, of any conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each conversion or continuation of Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Floating Rate Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) in the case of a conversion or continuation, the principal amount of Loans to be converted or continued, and (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted. If the Borrower fails to specify a Type of Loan in a Loan Notice with respect to Floating Rate Loans or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Floating Rate Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.

     (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its ratable share of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of the Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Closing Date. Upon satisfaction of the conditions set forth in Article IV, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of the Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.

     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

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     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to Loans.

     2.03 Prepayments.

     (a) Optional.

          (i) Fixed Rate Loans. At any time on or after April 1, 2011, the Borrower may prepay the Fixed Rate Loans at its option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days’ prior notice to the Administrative Agent, at the following prepayment prices (expressed as a percentage of principal amount), plus accrued and unpaid interest to the prepayment date, if prepaid during the twelve-month period beginning on April 1 of the years indicated below:

Year	Redemption Price
2011		104.313	%
2012		102.156	%
2013 and thereafter		100.00	%

          (ii) Floating Rate Loans. At any time on or after April 1, 2009 and subject to Section 3.05, the Borrower may prepay the Floating Rate Loans at its option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days’ prior notice to the Administrative Agent, at the following prepayment prices (expressed as a percentage of principal amount), plus accrued and unpaid interest to the prepayment date, if prepaid during the twelve-month period beginning on April 1 of the years indicated below:

Year	Redemption Price
2009		103.00	%
2010		102.00	%
2011		101.00	%
2012 and thereafter		100.00	%

          (iii) Any partial prepayment shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate

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Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.

     (b) Clean-Up Call. If after giving effect to the Initial Exchange, the aggregate amount of Fixed Rate Loans or Floating Rate Loans is less than 10% of the aggregate principal amount of Fixed Rate Loans or Floating Rate Loans, as applicable, made on the Closing Date (the “Affected Tranche”), the Borrower may at its option prepay Loans of the Affected Tranche or Affected Tranches in whole (but not in part) at 100% of the outstanding principal amount thereof, together with interest thereon to the date of payment, provided that any such prepayment will be made, if at all, not later than 60 days after the Initial Exchange Date.

     (c) Mandatory. The Borrower shall, within 7 Business Days of the date on which the aggregate amount of Excess Proceeds exceeds $20,000,000, prepay Loans in an aggregate amount equal to the amount of Excess Proceeds at 100% of the principal amount of such Loans plus accrued and unpaid interest, if any, on the amount so prepaid to the date of payment. Any such prepayment shall be applied ratably to all Loans, treated for this purpose as a single Tranche. Any Lender may elect, on not less than 4 Business Days’ prior written notice to the Administrative Agent with respect to any mandatory prepayment made pursuant to this Section 2.03(c) not to have such prepayment applied to such Lender’s Loans, in which case, the full amount not so applied shall be retained by the Borrower.

     (d) Applications. Prepayments made pursuant to this Section 2.03 shall be applied ratably to the Loans of the Lenders of the Tranche so repaid.

     2.04 Repayment of Loans.

     (a) The Fixed Rate Loans will mature and be paid in full on the Fixed Rate Maturity Date.

     (b) The Floating Rate Loans will mature and be paid in full on the Floating Rate Maturity Date.

     (c) The Final Maturity Date for all Loans tendered in the Initial Exchange shall be deemed to be the closing date for the Initial Exchange.

     2.05 Interest.

     (a) Fixed Rate Loans. Subject to the provisions of subsection (c) below, each Fixed Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Applicable Fixed Rate for such Interest Period. For any Interest Period prior to the fourth anniversary of the Closing Date, the Borrower may, at its option, elect to pay interest on the Fixed Rate Loans (i) entirely in cash (“Cash Interest”, and any such Interest Period for which Cash Interest is elected in accordance with the next succeeding sentence, a

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“Cash Interest Period”), in which case interest for such Interest Period shall be payable in cash, or (ii) entirely in kind (“PIK Interest”; and any such Interest Period for which PIK Interest is elected in accordance with the next succeeding sentence, a “PIK Interest Period”), in which case interest for such Interest Period shall be payable by increasing the outstanding principal amount of the Loans by the amount of interest accrued during such Interest Period. The Borrower must elect the form of payment of interest for the Fixed Rate Loans, whether Cash Interest or PIK Interest, with respect to each Interest Period prior to the fourth anniversary of the Closing Date by delivering a notice to the Administrative Agent five Business Days prior to the start of such Interest Period. The Administrative Agent shall promptly deliver a corresponding notice to each Lender. In the absence of such an election for any Interest Period, interest on the Loans shall be payable according to the election for the previous Interest Period. “Applicable Fixed Rate” means (x) during any Cash Interest Period, 8.625% and (y) during any PIK Interest Period, 9.375% plus, in each case, the Incremental Margin applicable at such time.

     (b) Floating Rate Loans. Subject to the provisions of subsection (c) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Floating Rate Margin and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Floating Rate Margin. “Applicable Floating Rate Margin” means (x) for any Eurodollar Rate Loan, 3.625% and (y) for any Base Rate Loan, 2.625% plus, in each case, the Incremental Margin applicable at such time.

     (c) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

          (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders (or automatically upon and during the continuance of (x) any Default under clause (h) of Section 8.01 or (y) any failure to pay principal of any Loan when due), such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

          (iii) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

     (d) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

     2.06 Fees. The Borrower shall pay to the Administrative Agent, the Lead Arranger and the Lenders, as applicable, for their own respective accounts fees separately agreed among

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such parties in writing. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

     2.07 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

     2.08 Evidence of Debt.

     The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

     2.09 Payments Generally; Administrative Agent’s Clawback.

     (a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its ratable share of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

     (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the Closing Date that such Lender will not make available to the Administrative Agent such Lender’s share of the Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender

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has not in fact made its share of the Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in the Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

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

     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the Initial Loans set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or to make its payment under Section 10.04(c).

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     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

     2.10 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

     (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

     (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans

     to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

     The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender, as the case may be, receives an amount equal to the sum it would have received had no such

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deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

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

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

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

     Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

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     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

     (f) Treatment of Certain Refunds. If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

     3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of

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the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

     3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

     3.04 Increased Costs; Reserves on Eurodollar Rate Loans.

     (a) Increased Costs Generally. If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e));

     (ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or

     (iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or any other amount) then, upon request of such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

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     (b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

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

     (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

     (e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

     3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Floating Rate Loan (other than pursuant to the Initial Exchange) other than a Base Rate Loan on a day other than the

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last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Floating Rate Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

     (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13;

including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

     3.06 Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Sections 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13.

     3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

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ARTICLE IV.
CONDITIONS PRECEDENT TO LOANS

     The obligation of each Initial Lender to make its Initial Loan hereunder is subject to satisfaction of the following conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

     (i) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

     (ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;

     (iii) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

     (iv) a favorable opinion of Vinson and Elkins LLP, counsel to the Loan Parties, addressed to the Administrative Agent, Lead Arranger, each Co-Arranger and each Lender, as to the matters set forth in Exhibit E and such other matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request;

     (v) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies, or an exhibit, of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

     (vi) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in paragraphs (xvi) and (xvii) below have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;

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     (vii) certificates attesting to the Solvency of each Loan Party before and after giving effect to the transactions contemplated by this Agreement and the incurrence of indebtedness related thereto and application of proceeds, from its chief financial officer;

     (viii) audited consolidated financial statements of the Borrower for the 2004 and 2005 fiscal years and unaudited consolidated financial statements of the Borrower for any interim quarterly periods that have ended since the most recent of such audited financial statements, which in each case, (1) shall be satisfactory in form and substance to the Lead Arranger and the Lenders, (2) shall not be materially inconsistent with the Information heretofore provided to the Lenders, and (3) shall meet the requirements of Regulation S-X under the Securities Act, and all other accounting rules and regulations of the SEC promulgated thereunder applicable to a registration statement under such Act on Form S-1.

     (ix) evidence of the receipt by the Borrower of not less than $250,000,000 cash proceeds from the issuance of Equity Interests of the Borrower;

     (x) evidence that the Existing Agreement has been or concurrently with the Closing Date is being terminated and repaid in full;

     (xi) such other certificates, documents, or opinions as the Administrative Agent or the Required Lenders reasonably may require;

     (xii) any fees required to be paid on or before the Closing Date shall have been paid;

     (xiii) unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent);

     (xiv) the Closing Date shall have occurred on or before March 31, 2007;

     (xv) there shall have been no change, occurrence or development since December 31, 2005 that could reasonably be expected to have a Material Adverse Effect;

     (xvi) the representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Article IV, the representations and warranties contained in subsections 5.05(a) and (b) of

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Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01; and

     (xvii) no Default shall exist, or would result from the Initial Loans or from the application of the proceeds thereof.

     Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Article IV, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Administrative Agent and the Lenders that:

     5.01 Existence, Qualification and Power. Each Loan Party and each of its Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

     5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation that is material to the Loan Parties to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.

     5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (i) the authorizations, approvals, actions, notices and filings listed on Schedule 5.03, all of which have been duly obtained, taken, given or made and are in full force and effect, (ii) routine authorizations, approvals, actions, notices and filings in the ordinary course of business (e.g. tax filings, annual reports, environmental filings, etc.); (iii) any

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necessary authorizations, approvals, actions, notices and filings (including the filing of a shelf registration statement) necessary in order to comply with Sections 6.15(e) and 6.16 and (iv) authorizations, approvals and consents necessary in connection with the Borrower’s mineral class leases with the general land office of State of Texas.

     5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms.

     5.05 Financial Statements; No Material Adverse Effect. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries dated September 30, 2006, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness.

     (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

     (d) The consolidated pro forma balance sheet of the Borrower and its Subsidiaries as at September 30, 2006, and the related consolidated pro forma statements of income of the Borrower and its Subsidiaries for the nine months then ended, certified by the chief financial officer or treasurer of the Borrower, copies of which have been furnished to each Lender, fairly present the consolidated pro forma financial condition of the Borrower and its Subsidiaries as at such date and the consolidated pro forma results of operations of the Borrower and its Subsidiaries for the period ended on such date, all in accordance with GAAP (except for the absence of footnotes and subject to year-end audit adjustments).

     5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain

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to this Agreement or any other Loan Document or (b) except as specifically disclosed in Schedule 5.06 (the “Disclosed Litigation”), either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and there has been no change in the status, or financial effect on any Loan Party or any Restricted Subsidiary thereof, of the matters described in Schedule 5.06 that could reasonably be expected to have a Material Adverse Effect.

     5.07 No Default. Neither any Loan Party nor any Restricted Subsidiary thereof is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

     5.08 Ownership of Property; Liens. (a) Each Loan Party and each of its Restricted Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     (b) The property of each Loan Party and each of its Restricted Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

     5.09 Environmental Compliance. (a) The Loan Parties and their respective Restricted Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.09, such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (b) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, none of the properties currently or formerly owned or operated by any Loan Party or any of its Restricted Subsidiaries is listed or proposed for listing on the National Priorities List under 42 USC § 9605(a)(8)(B) or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Restricted Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Restricted Subsidiaries in quantities or in a manner as to create Environmental Liability.

          (c) As of the Closing Date and except (i) as otherwise set forth in Schedule 5.09 or (ii) to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law that is reasonably expected to result in

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material Environmental Liability to any Loan Party or any of its Restricted Subsidiaries; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Restricted Subsidiaries have been disposed of in a manner not reasonably expected to result in material Environmental Liability to any Loan Party or any of its Restricted Subsidiaries.

     5.10 Insurance. The properties of the Borrower and its Restricted Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Restricted Subsidiary operates.

     5.11 Taxes. The Borrower and its Restricted Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Restricted Subsidiary that would, if made, have a Material Adverse Effect.

     5.12 ERISA Compliance. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws except for such events of noncompliance which could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (c) Except to the extent the same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

     5.13 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are (in the case of corporate securities) fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except those

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permitted under the Loan Documents or permitted by Section 7.01. As of the Closing Date, no Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. Set forth on Part (c) of Schedule 5.13 is a complete and accurate list of all Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its incorporation, the address of its principal place of business and its U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification number, its unique identification number issued to it by the jurisdiction of its incorporation. As of the Closing Date, the copy of the charter of each Loan Party and each amendment thereto provided pursuant to Article IV is a true and correct copy of each such document, each of which is valid and in full force and effect.

     5.14 Margin Regulations; Investment Company Act. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

     (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

     5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished in writing by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished) contains as of the date so furnished any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     5.16 Compliance with Laws. Each Loan Party and each Restricted Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     5.17 Solvency. Each Loan Party is, individually and together with its Restricted Subsidiaries on a Consolidated basis, Solvent.

     5.18 Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any of its Restricted Subsidiaries are 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

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other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.19 Labor Matters.

          There are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Restricted Subsidiaries as of the Closing Date and neither the Borrower nor any Restricted Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

ARTICLE VI.
AFFIRMATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Restricted Subsidiary to:

     6.01 Financial Statements. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of Section 6.02:

     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, (i) a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a copy of the report and opinion of a Registered Public Accounting Firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit or with respect to the absence of any material misstatement; and (ii) commencing at such time as the Borrower is required to prepare the same for SEC reporting purposes, an opinion of such Registered Public Accounting Firm independently assessing the Borrower’s internal controls over financial reporting in accordance with Item 308 of the SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which the Required Lenders do not object, and such consolidating statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries; and

     (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated

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statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

     In addition to the foregoing, within five Business Days after providing the reports required by clauses (a) or (b) above, the Borrower shall make one or more of its senior officers available for a conference call with the Administrative Agent and the Lenders, at a time reasonably agreed to by the Administrative Agent and the Borrower, to discuss the information contained in such reports.

     If the Borrower has made one or more Designations and any Unrestricted Subsidiary or group of Unrestricted Subsidiaries would, but for its or their Designation, constitute a Significant Subsidiary or Subsidiaries, the reports required by clauses (a) and (b) above shall include a reasonably detailed presentation, either on the face of such reports or in the footnotes thereto, of the financial condition and results of operations of the Borrower and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries.

     6.02 Certificates; Other Information. Deliver to the Administrative Agent and the Lenders as contemplated by the penultimate paragraph of this Section 6.02:

     (a) [reserved];

     (b) [reserved];

     (c) promptly after the same are available, copies of all annual, regular, periodic and special reports, registration statements and proxy statements which the Borrower may file or be required to file with the SEC under Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (d) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

     (e) [reserved];

     (f) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Restricted Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof;

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     (g) not later than five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of all notices, requests and other documents (including amendments, waivers and other modifications) so received under or pursuant to any instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and, from time to time upon request by the Administrative Agent, such information and reports regarding such instruments, indentures and loan and credit and similar agreements as the Administrative Agent may reasonably request;

     (h) promptly after the assertion or occurrence thereof, notice of any action or proceeding against or of any noncompliance by any Loan Party or any of its Restricted Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect;

     (i) [reserved];

     (j) [reserved]; and

     (k) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Restricted Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time reasonably request.

     Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

     The Borrower hereby acknowledges that (a) the Administrative Agent and/or Lead Arranger will make available to the Lenders materials and/or information provided by or on

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behalf of the Borrower hereunder (collectively, “Borrower Materials”) either by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) or by delivery or electronic communication to the applicable Lenders and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities except as contemplated below) (each, a “Public-Side Lender”). The Borrower hereby agrees that so long as the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (x) all Borrower Materials that are to be posted on the Platform shall be clearly and conspicuously marked “PUBLIC-SIDE” which, at a minimum, shall mean that the words “PUBLIC-SIDE” shall appear prominently on the first page thereof; (y) by marking Borrower Materials “PUBLIC-SIDE,” the Borrower shall be deemed to have authorized the Administrative Agent, the Lead Arranger and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that (A) prior to the creation of a Public Market, Lenders shall treat such Borrower Materials as containing material non-public information with respect to the Borrower and its Subsidiaries (“MNPI”), and the Borrower shall be deemed to have represented to the Lenders that it expects such Borrower Materials will cease to be MNPI at the time of creation of a Public Market and (B) to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); and (z) any Borrower Materials that are not marked “PUBLIC-SIDE” as contemplated above shall be treated as containing MNPI, shall not be posted on the Platform and shall be available to Lenders only upon request therefor (which request may apply generally to all such Borrower Materials). Any such request shall constitute a confirmation from the applicable Lender that it has compliance procedures for dealing with such MNPI, and that it will use and maintain such information only in compliance with those procedures, its contractual obligations and applicable law, including federal and state securities laws.

     Each Public-Side Lender shall designate individuals or advisors authorized to act on behalf of the Public-Side Lender to receive Borrower Materials not designated as “PUBLIC-SIDE” pursuant to the immediately preceding paragraph, including any notices pursuant to Section 6.03.

     6.03 Notices. Promptly notify the Administrative Agent and each Lender:

     (a) of the occurrence of any Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Restricted Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Restricted Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Restricted Subsidiary, including pursuant to any applicable Environmental Laws;

     (c) of the occurrence of any ERISA Event;

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     (d) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary;

     (e) of the determination by the Registered Public Accounting Firm providing the opinion required (but only if required) under Section 6.01(a)(ii) (in connection with its preparation of such opinion) or the Borrower’s determination at any time of the occurrence or existence of any Internal Control Event; and

     (f) of the date on which Excess Proceeds from Asset Sales exceeds $20,000,000, which the Borrower is required to use to make a mandatory prepayment pursuant to Section 2.03(c).

     Each notice pursuant to this Section 6.03 (other than Section 6.03(f)) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

     6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Restricted Subsidiary; and (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, except, in the case of (a) or (b), for such amounts that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Sections 7.03 or 7.04; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

     6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     6.07 Maintenance of Insurance. Maintain (at its own expense) insurance with financially sound and reputable insurance companies, as well as insurance in such amounts, with such limitations or deductibles, against such risks, and in such form as are customarily

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maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations.

     6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

     6.09 Books and Records. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

     6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

     6.11 Use of Proceeds. The Borrower shall apply the proceeds of the Credit Extensions to (i) refinance the Borrower’s existing bridge credit facility under the Existing Agreement, (ii) pay certain fees and expenses incurred in connection with entering into this Agreement, (iii) provide working capital for the Borrower and its Subsidiaries including the issuance of letters of credit, capital expenditures, and other lawful corporate purposes and (iv) finance permitted acquisitions by the Borrower and its Subsidiaries of oil and gas properties and other assets related to the exploration, production and development of oil and gas properties.

     6.12 Covenant to Guarantee Obligations. Upon the formation or acquisition of any new direct or indirect Restricted Subsidiary (excluding (i) any Foreign Subsidiary and (ii) any Immaterial Subsidiary) by any Loan Party, then the Borrower shall, at the Borrower’s expense within 20 days after such formation or acquisition (or such longer period as the Administrative Agent may in its discretion approve), cause such Restricted Subsidiary to duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ obligations under the Loan Documents.

     6.13 Compliance with Environmental Laws. Comply, and cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all

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applicable Environmental Laws and Environmental Permits; obtain and renew all material Environmental Permits necessary for its current operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance in all material respects with the requirements of all applicable Environmental Laws; provided, however, that neither the Borrower nor any of its Restricted Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is not required by applicable Environmental Laws or being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

     6.14 [Reserved]

     6.15 Exchange Notes.

     (a) At any time after the one-year anniversary of the Closing Date but not later than April 30, 2008, the Borrower shall make an offer to all the Lenders under this Agreement to exchange the Loans for Initial Exchange Notes (such exchange, the “Initial Exchange”, and the date of such exchange, the “Initial Exchange Date”) having a principal amount equal to that of the Loans exchanged therefor and issued pursuant to the Initial Exchange Note Indenture. The Initial Exchange will be made pursuant to an offering memorandum customary for transactions pursuant to Rule 144A and relating to the Initial Exchange Notes and will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934 and any other securities laws and regulations thereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Agreement solely with respect to the Initial Exchange, the Borrower will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations with respect to the Initial Exchange described in this Agreement by virtue thereof. Each Lender participating in the Initial Exchange must be eligible to purchase securities in an offering conducted pursuant to Rule 144A. For avoidance of doubt, only one Initial Exchange will occur during the term of the Loans.

     (b) Failure to make the Initial Exchange will not constitute a Default under this Agreement. The Loans and any Initial Exchange Notes subsequently issued under the Initial Exchange Note Indenture will be separate debt obligations of the Borrower and will not be treated as a single class, including, without limitation, for purposes of waivers, amendments, redemptions and offers to purchase.

     (c) If the Initial Exchange Date does not occur on or prior to May 31, 2008, the Borrower shall pay liquidated damages to the Lenders with respect to the first 90-day period immediately following such date in an amount equal to 0.25% per annum on the outstanding principal amount of the Loans. The amount of liquidated damages will increase by an additional 0.25% per annum on the outstanding principal amount of the Loans with respect to each subsequent 90-day period until the occurrence of the Initial Exchange, up to a maximum amount of liquidated damages under this subsection of 0.50% per annum. Any such liquidated damages shall be payable to but excluding the Initial Exchange Date and as provided in Section 2.05.

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     (d) The Initial Exchange will be made solely pursuant to the offering memorandum described above and an offer to exchange and this Agreement shall not constitute an offer to exchange the Loans or an offer of the Initial Exchange Notes.

     (e) The Initial Exchange Note Indenture shall provide that no later than November 30, 2008 the Borrower shall offer an exchange of the Initial Exchange Notes for notes registered with the SEC (the “Second Exchange Notes”), which Second Exchange Notes shall have substantially similar terms as the Initial Exchange Notes. The Initial Exchange Note Indenture shall further provide that (i) upon failure to comply with the foregoing requirements (a “Registration Default”), the Borrower shall pay liquidated damages to each holder of Initial Exchange Notes with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to 0.25% per annum on the principal amount of Initial Exchange Notes held by such holder and (ii) the amount of such liquidated damages shall increase by an additional 0.25% per annum on the principal amount of Initial Exchange Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages for all Registration Defaults of 0.50% per annum.

     6.16 Change of Control.

     (a) If a Change of Control occurs, each Lender will have the right to require the Borrower to prepay all of such Lender’s Loans at a prepayment price in cash equal to 101% of the principal amount of such Lender’s Loans, plus accrued and unpaid interest to the date of prepayment.

     (b) No later than the date that is 60 days after any Change of Control, the Borrower will mail a notice (the “Change of Control Offer”) to each Lender, with a copy to the Administrative Agent:

     (i) stating that a Change of Control has occurred or may occur and that such Lender has the right to require the Borrower to prepay such Lender’s Loans at a prepayment price in cash equal to 101% of the principal amount plus accrued and unpaid interest to, but not including, the date of prepayment (the “Change of Control Payment”);

     (ii) stating the prepayment date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

     (iii) describing the circumstances and relevant facts regarding the transaction or transactions that constitute the Change of Control;

     (iv) describing the procedures determined by the Borrower, consistent with this Agreement, that a Lender must follow in order to have its Loans prepaid; and

     (v) if such notice is mailed prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control.

     (c) On the Change of Control Payment Date, if the Change of Control shall have occurred, the Borrower will, to the extent lawful pay to the Administrative Agent for application

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to the repayment of all Loans properly submitted for prepayment pursuant to the Change of Control Offer an amount equal to the Change of Control Payment in respect of all Loans so submitted.

     (d) The Borrower will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Borrower and prepays all Loans validly submitted for prepayment under such Change of Control Offer.

ARTICLE VII.
NEGATIVE COVENANTS

     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit any Restricted Subsidiary to, directly or indirectly:

     7.01 Liens. (a) The Borrower will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create or incur, in order to secure any Indebtedness, any Lien of any kind, other than Permitted Liens, upon any property or assets (including any intercompany notes) of the Borrower or any Restricted Subsidiary owned on the date hereof or acquired after the date hereof, or assign or convey, in order to secure any Indebtedness, any right to receive any income or profits therefrom, unless the Loans (or a Guarantee in the case of Liens of a Guarantor) are directly secured equally and ratably with (or, in the case of Subordinated Indebtedness, prior or senior thereto, with the same relative priority as the Loans shall have with respect to such Subordinated Indebtedness) the Indebtedness secured by such Lien.

     (b) Notwithstanding the foregoing, any Lien securing the Loans or a Guarantee granted pursuant to clause (a) above shall be automatically and unconditionally released and discharged upon:

     (i) any sale, exchange or transfer to any Person not an Affiliate of the Borrower of the property or assets secured by such Lien,

     (ii) any sale, exchange or transfer to any Person not an Affiliate of the Borrower of all of the Capital Stock held by the Borrower or any Restricted Subsidiary in, or all or substantially all the assets of, any Restricted Subsidiary creating such Lien, or

     (iii) with respect to any Lien securing a Guarantee, the release of such Guarantee in accordance with the terms of this Agreement.

     7.02 Indebtedness. (a) The Borrower will not, and will not cause or permit any of its Restricted Subsidiaries to, create, issue, incur, assume, guarantee or otherwise in any manner become directly or indirectly liable for the payment of or otherwise incur, contingently or otherwise (collectively, “incur”), any Indebtedness (including any Acquired Debt and the issuance of Disqualified Stock), unless such Indebtedness is incurred by the Borrower or any Guarantor and, in each case, the Borrower’s Consolidated Fixed Charge Coverage Ratio for the

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most recent four full fiscal quarters for which financial statements are available immediately preceding the incurrence of such Indebtedness taken as one period is at least equal to or greater than 2.50:1.

     (b) Notwithstanding the foregoing, the Borrower and, to the extent specifically set forth below, the Restricted Subsidiaries may incur each and all of the following (collectively, the “Permitted Debt”):

     (i) Indebtedness of the Borrower or any Guarantors (whether as borrowers or guarantors) under one or more Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (i) not to exceed the greater of (x) $750,000,000 and (y) 30.0% of Adjusted Consolidated Net Tangible Assets;

     (ii) Indebtedness of the Borrower or any Guarantor pursuant to the Loans of either series or any Exchange Notes issued in exchange for the Loans or the Initial Exchange Notes;

     (iii) Indebtedness of the Borrower or any Guarantor outstanding on the date hereof, and not otherwise referred to in this definition of “Permitted Debt;”

     (iv) intercompany Indebtedness between or among the Borrower and any of its Restricted Subsidiaries; provided, however, that:

     (A) if the Borrower or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the Loans, in the case of the Borrower, or the Loan Guarantee, in the case of a Guarantor; and

     (B) (1) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than the Borrower or a Restricted Subsidiary thereof (other than pursuant to a Credit Facility) and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Borrower or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Borrower or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (iv);

     (v) guarantees by the Borrower or any Guarantor of any Indebtedness of the Borrower or any of the Guarantors which is permitted to be incurred under this Agreement;

     (vi)

     (A) obligations pursuant to Interest Rate Agreements entered into in the ordinary course of business with respect to Indebtedness permitted by this Agreement;

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     (B) obligations under currency exchange contracts entered into in the ordinary course of business; and

     (C) obligations pursuant to hedging arrangements (including, without limitation, swaps, caps, floors, collars, options and similar agreements) entered into in the ordinary course of business for the purpose of protecting, on a net basis, against price risks, basis risks, or other risks encountered in the Oil and Gas Business;

     (vii) Indebtedness of the Borrower or any Restricted Subsidiary represented by Capital Lease Obligations (whether or not incurred pursuant to Sale Leaseback Transactions) or Purchase Money Obligations or other Indebtedness incurred or assumed in connection with the acquisition or development of real or personal, movable or immovable, property in each case incurred for the purpose of financing or refinancing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Borrower, in an aggregate principal amount pursuant to this clause (vii) (together with the aggregate principal amount of any Permitted Refinancing Indebtedness in respect of Indebtedness originally incurred pursuant to this clause (vii)) not to exceed $50,000,000 outstanding at any time; provided that the principal amount of any Indebtedness permitted under this clause (vii) did not in each case at the time of incurrence exceed the Fair Market Value, as determined by the Borrower in good faith, of the acquired or constructed asset or improvement so financed;

     (viii) Indebtedness of the Borrower or any Guarantor in connection with

     (A) one or more standby letters of credit issued for the account of the Borrower or a Guarantor in the ordinary course of business and

     (B) other letters of credit, surety, bid, performance, appeal or similar bonds, bankers’ acceptances, completion guarantees or similar instruments; provided that, in each case contemplated by this clause (viii), upon the drawing of such letters of credit or other instrument, such obligations are reimbursed within 30 days following such drawing; provided, further, that with respect to clauses (A) and (B), such Indebtedness is not in connection with the borrowing of money or the obtaining of advances or credit;

     (ix) obligations relating to oil or gas balancing positions arising in the ordinary course of business;

     (x) Indebtedness of the Borrower or any Restricted Subsidiary arising from agreements for indemnification or purchase price adjustment obligations or similar obligations, earn-outs or other similar obligations or from guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Borrower or a Restricted Subsidiary pursuant to such an agreement, in each case incurred or assumed in connection with the acquisition or disposition of any business, assets or Capital Stock of a Restricted Subsidiary;

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     (xi) Permitted Refinancing Indebtedness of the Borrower or any Restricted Subsidiary issued in exchange for, or the net proceeds of which are used to renew, extend, substitute, defease, refund, refinance or replace, any Indebtedness, including any Disqualified Stock, incurred pursuant to Section 7.02(a) and clauses (ii), (iii) and (vii) of this Section 7.02(b);

     (xii) the incurrence by the Borrower or any of its Restricted Subsidiaries of Acquired Debt in connection with a transaction meeting either one of the financial tests set forth in Section 7.03(a)(iii);

     (xiii) any obligation arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness is extinguished within five business days of incurrence; and

     (xiv) Indebtedness of the Borrower or any Restricted Subsidiary in addition to that described in clauses (i) through (xiii) above, and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness shall not exceed $40,000,000 outstanding at any one time in the aggregate.

     (c) For purposes of determining compliance with this Section, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness permitted by this Section, the Borrower in its sole discretion may classify or reclassify such item of Indebtedness and only be required to include the amount of such Indebtedness as one of such types (or to divide such Indebtedness between two or more of such types); provided that any Indebtedness under the Senior Credit Facility which is in existence on the Closing Date shall be deemed to have been incurred pursuant to clause (i) of this subsection (b) above rather than subsection (a) above.

     (d) Indebtedness permitted by this Section need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness.

     (e) Accrual of interest, accretion of principal or liquidation preference (or similar amount) in respect of Preferred Stock or amortization of original issue discount, and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the accretion or payment of dividends on any Disqualified Stock or Preferred Stock (including without limitation the Series A Preferred Stock) in the form of additional shares of the same class of Disqualified Stock or Preferred Stock and the issuance of additional shares of Series A Preferred Stock pursuant to warrants issued and outstanding on the Closing Date will not be deemed to be an incurrence of Indebtedness for purposes of this covenant; provided, in each such case, that the amount thereof as accrued shall be included as required in the calculation of the Consolidated Fixed Charge Coverage Ratio of the Borrower.

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     (f) For purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred.

     (g) If Indebtedness is secured by a letter of credit that serves only to secure such Indebtedness, then the total amount deemed incurred shall be equal to the greater of (x) the principal of such Indebtedness and (y) the amount that may be drawn under such letter of credit.

     (h) The amount of Indebtedness issued at a price less than the amount of the liability thereof shall be determined in accordance with GAAP.

     7.03 Consolidation, Merger and Sale of Assets.

     (a) The Borrower will not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of Persons, or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions, if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Borrower and its Restricted Subsidiaries on a Consolidated basis to any other Person or group of Persons (other than the Borrower or a Guarantor), unless at the time and after giving effect thereto:

     (i) either (A) the Borrower will be the continuing corporation or (B) the Person (if other than the Borrower) formed by such consolidation or into which the Borrower is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all of the properties and assets of the Borrower and its Restricted Subsidiaries on a Consolidated basis (the “Surviving Entity”) will be a corporation, limited liability company or limited partnership (provided that in the event the Surviving Entity is a limited partnership, then a Subsidiary of the Surviving Entity that is a corporation or limited liability company shall execute an amendment to this Agreement pursuant to which it shall become a co-obligor of the Surviving Entity’s obligations under the Loans and this Agreement) duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and the Surviving Entity expressly assumes, by an amendment to this Agreement, in a form reasonably satisfactory to the Administrative Agent, all the obligations of the Borrower under the Loans and this Agreement, and the Loans and this Agreement will remain in full force and effect as so supplemented;

     (ii) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of the Borrower or any of its Restricted Subsidiaries which becomes the obligation of the Borrower or any of its Restricted Subsidiaries as a result of such transaction as having been incurred at the time of such transaction), no Default or Event of Default will have occurred and be continuing;

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     (iii) immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred on the first day of the four-quarter period for which financial statements are available ending immediately prior to the consummation of such transaction with the appropriate adjustments with respect to the transaction being included in such pro forma calculation), the Borrower (or the Surviving Entity if the Borrower is not the continuing obligor under this Agreement) (A) could incur $1.00 of additional Indebtedness (other than Permitted Debt) under the provisions of Section 7.02 or (B) have a Consolidated Fixed Charge Coverage Ratio not less than the Consolidated Fixed Charge Coverage Ratio of the Borrower immediately prior to such transaction;

     (iv) unless the Borrower is the continuing obligor under this Agreement, at the time of the transaction, each Guarantor, if any, unless it is the other party to the transactions described above, will have by amendment to this Agreement confirmed that its Guarantee shall apply to the Surviving Entity’s obligations under this Agreement and the Loans;

     (v) at the time of the transaction, if any of the property or assets of the Borrower or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 7.01 are complied with; and

     (vi) at the time of the transaction, the Borrower or the Surviving Entity will have delivered, or caused to be delivered, to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, an officers’ certificate and an opinion of counsel, each to the effect that such consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease or other transaction and the amendment to this Agreement in respect thereof comply with the terms of this Agreement.

     (b) Each Guarantor will not, and the Borrower will not permit a Guarantor to, in a single transaction or through a series of related transactions, (x) consolidate with or merge with or into any other Person (other than the Borrower or any other Guarantor) or (y) sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of Persons (other than the Borrower or any other Guarantor) or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, in the case of clause (y) would result in a sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Guarantor and its Restricted Subsidiaries on a Consolidated basis to any other Person or group of Persons (other than the Borrower or any Guarantor), unless at the time and after giving effect thereto

     (i) either (A) the Guarantor or the Borrower will be the continuing Person in the case of a merger involving the Guarantor or (B) the Person (if other than the Guarantor) formed by such consolidation or into which such Guarantor is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Guarantor and its Restricted Subsidiaries on a Consolidated basis (the “Surviving Guarantor Entity”) expressly assumes, by an amendment to this Agreement, in a form reasonably satisfactory to the

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Administrative Agent, all the obligations of such Guarantor under its Guarantee of the Loans and this Agreement, and such Guarantee and this Agreement will remain in full force and effect;

     (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default will have occurred and be continuing; and

     (iii) at the time of the transaction such Guarantor or the Surviving Guarantor Entity will have delivered, or caused to be delivered, to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, an officers’ certificate and an opinion of counsel, each to the effect that such consolidation, merger, transfer, sale, assignment, conveyance, lease or other transaction and the supplemental indenture in respect thereof comply with this Agreement;

provided, however, that this Section 7.03(b) shall not apply to any Guarantor whose Guarantee of the Loans is unconditionally released and discharged in accordance with Section 9.10 of this Agreement.

     (c) In the event of any transaction (other than a lease) described in and complying with the conditions listed in Sections 7.03(a) and (b) in which the Borrower or any Guarantor, as the case may be, is not the continuing Person, the successor Person formed or remaining or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower or such Guarantor, as the case may be, and the Borrower or any Guarantor, as the case may be, shall be discharged from all obligations and covenants under this Agreement and the Loans or its Guarantee, as the case may be.

     (d) Notwithstanding the foregoing, the Borrower or any Guarantor may merge with an Affiliate incorporated or organized solely for the purpose of reincorporating or reorganizing the Borrower or Guarantor in another jurisdiction to realize tax or other benefits.

     7.04 Asset Sale. (a) The Borrower will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) the Borrower or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets and property subject to such Asset Sale and (ii) at least 75% of the aggregate consideration paid to the Borrower or such Restricted Subsidiary in connection with such Asset Sale and all other Asset Sales since the date hereof, on a cumulative basis, is in the form of cash, Cash Equivalents, Liquid Securities, Exchanged Properties (including pursuant to asset swaps), the assumption by the purchaser of liabilities of the Borrower (other than liabilities of the Borrower that are by their terms subordinated to the Loans) or liabilities of any Guarantor that made such Asset Sale (other than liabilities of a Guarantor that are by their terms subordinated to such Guarantor’s Guarantee), in each case as a result of which the Borrower and its remaining Restricted Subsidiaries are no longer liable for such liabilities, or, solely in the case of any Asset Sale of Midstream Assets, Permitted MLP Securities.

     (b) The Net Available Cash from Asset Sales by the Borrower or a Restricted Subsidiary may be applied by the Borrower or such Restricted Subsidiary, to the extent the

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Borrower or such Restricted Subsidiary elects (or is required by the terms of any Pari Passu Indebtedness of the Borrower or a Restricted Subsidiary), to

     (i) repay any Indebtedness of the Borrower other than Subordinated Indebtedness; or

     (ii) reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Borrower or another Restricted Subsidiary) or make capital expenditures in the Oil and Gas Business.

     (c) Excess Proceeds shall be applied to prepay the Loans in accordance with Section 2.03(c).

     7.05 Restricted Payments. (a) The Borrower will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly:

     (i) pay any dividend on, or make any distribution to holders of, any shares of the Borrower’s Capital Stock (other than dividends or distributions payable solely in shares of the Borrower’s Qualified Capital Stock);

     (ii) purchase, redeem, defease or otherwise acquire or retire for value, directly or indirectly, the Borrower’s Capital Stock;

     (iii) make any principal payment on, or purchase, redeem, defease, retire or otherwise acquire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness, except a payment on, or a purchase, redemption, defeasance, retirement or other acquisition of such Subordinated Indebtedness within one year of its final maturity;

     (iv) pay any dividend or distribution on any Capital Stock of any Restricted Subsidiary to any Person (other than (A) to the Borrower or any of its Wholly Owned Restricted Subsidiaries or any Guarantor or (B) dividends or distributions made by a Restricted Subsidiary on a pro rata basis to all holders of the Capital Stock of such Restricted Subsidiary); or

     (v) make any Investment in any Person (other than any Permitted Investments);

     (any of the foregoing actions described in clauses (i) through (v) above, other than any such action that is a Permitted Payment (as defined below), collectively, “Restricted Payments”) (the amount of any such Restricted Payment, if other than cash, shall be the Fair Market Value of the assets proposed to be transferred, as determined by the board of directors of the Borrower, whose determination shall be conclusive and evidenced by a board resolution), unless

     (A) immediately after giving effect to such proposed Restricted Payment on a pro forma basis, no Default or Event of Default shall have occurred and be continuing;

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     (B) immediately after giving effect to such Restricted Payment on a pro forma basis, the Borrower could incur $1.00 of additional Indebtedness (other than Permitted Debt) under Section 7.02(a); and

     (C) after giving effect to the proposed Restricted Payment, the aggregate amount of all such Restricted Payments declared or made after the date of this Agreement (including all Designation Amounts) does not exceed the sum of:

     (1) 50% of the aggregate Consolidated Net Income of the Borrower accrued on a cumulative basis during the period beginning April 1, 2007 and ending on the last day of the Borrower’s last fiscal quarter ending prior to the date of the Restricted Payment (or, if such aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of such loss);

     (2) the aggregate Net Cash Proceeds, or the Fair Market Value of property other than cash, received (i) after the date hereof by the Borrower either (1) as capital contributions in the form of common equity to the Borrower or (2) from the issuance or sale (other than to any of its Subsidiaries) of Qualified Capital Stock of the Borrower (except, in each case, to the extent such proceeds are used to purchase, redeem or otherwise retire Capital Stock or Subordinated Indebtedness as set forth below in Sections 7.05(b)(ii) and (b)(iii) below) (and excluding the Net Cash Proceeds from the issuance of Qualified Capital Stock financed, directly or indirectly, using funds borrowed from the Borrower or any Subsidiary until and to the extent such borrowing is repaid) and (ii) on or after March 20, 2007 and not later than the Closing Date by the Borrower, but only to the extent of the Net Cash Proceeds of the amount (if any) by which the aggregate cash proceeds received by the Borrower from the issuance of its Equity Interests on the Closing Date exceeds $250,000,000;

     (3) the aggregate Net Cash Proceeds received after the date hereof by the Borrower (other than from any of its Subsidiaries) upon the exercise of any options, warrants or rights to purchase Qualified Capital Stock of the Borrower (and excluding the Net Cash Proceeds from the exercise of any options, warrants or rights to purchase Qualified Capital Stock financed, directly or indirectly, using funds borrowed from the Borrower or any Subsidiary until and to the extent such borrowing is repaid);

     (4) the aggregate Net Cash Proceeds received after the date hereof by the Borrower from the conversion or exchange, if any, of debt securities or Disqualified Stock of the Borrower or its Restricted Subsidiaries into or for Qualified Capital Stock of the Borrower plus, to the extent such debt securities or Disqualified Stock were issued after the

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date hereof, the aggregate of Net Cash Proceeds from their original issuance (and excluding the Net Cash Proceeds from the conversion or exchange of debt securities or Disqualified Stock financed, directly or indirectly, using funds borrowed from the Borrower or any Subsidiary until and to the extent such borrowing is repaid);

     (5)

(a) in the case of the disposition or repayment of any Investment constituting a Restricted Payment (including any Investment in an Unrestricted Subsidiary) made after the date of this Agreement, an amount (to the extent not included in Consolidated Net Income) equal to the amount received with respect to such Investment, less the cost of the disposition of such Investment and net of taxes, and

(b) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (as long as the designation of such Subsidiary as an Unrestricted Subsidiary was deemed a Restricted Payment), the Fair Market Value of the Borrower’s interest in such Subsidiary at the time of such redesignation; and

     (6) any amount which previously qualified as a Restricted Payment on account of any guarantee entered into by the Borrower or any Restricted Subsidiary; provided that such guarantee has not been called upon and the obligation arising under such guarantee no longer exists.

     (b) Notwithstanding the foregoing, and in the case of clauses (ii) through (ix) below, so long as no Default or Event of Default is continuing or would arise therefrom, the foregoing provisions shall not prohibit the following actions (each of clauses (i) through (ix) being referred to as a “Permitted Payment”):

     (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment was permitted by the provisions of paragraph (a) of this Section 7.05, and such payment shall be deemed to have been paid on such date of declaration;

     (ii) the purchase, defeasance, redemption, or other acquisition or retirement for value of any Capital Stock of the Borrower in exchange for (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip), or out of the Net Cash Proceeds of a substantially concurrent issuance and sale for cash (other than to a Subsidiary) of, any Qualified Capital Stock of the Borrower; provided that the Net Cash Proceeds from the issuance of such Qualified Capital Stock shall be excluded from clause (C)(2) above;

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     (iii) the purchase, redemption, defeasance, retirement or other acquisition for value or payment of principal of any Subordinated Indebtedness in exchange for, or in an amount not in excess of the Net Cash Proceeds of, a substantially concurrent issuance and sale for cash (other than to any Subsidiary of the Borrower) of any Qualified Capital Stock of the Borrower, provided that the Net Cash Proceeds from the issuance of such shares of Qualified Capital Stock shall be excluded from clause (C)(2) above;

     (iv) the purchase, redemption, defeasance, retirement or other acquisition for value or payment of principal of any Subordinated Indebtedness (other than Disqualified Stock) through the substantially concurrent issuance of Permitted Refinancing Indebtedness;

     (v) any purchase, redemption, retirement, defeasance or other acquisition for value of any Subordinated Indebtedness pursuant to the provisions of such Subordinated Indebtedness upon a Change of Control or an Asset Sale after the Borrower shall have complied with the provisions of Sections 6.16 or 7.04 as the case may be and prepaid all Loans presented for prepayment in connection with the Change of Control Offer or Asset Sale, as the case may be;

     (vi) the purchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Borrower held by any current or former officers, directors or employees of the Borrower or any of its Subsidiaries (or permitted transferees of such current or former officers, directors or employees) pursuant to the terms of agreements (including employment agreements) or plans approved by the Borrower’s board of directors, including any such purchase, redemption, defeasance or other acquisition or retirement of such Capital Stock that is deemed to occur upon the exercise of stock options or similar rights if such shares represent all or a portion of the exercise price or are surrendered in connection with satisfying Federal income tax obligations; provided, however, that the aggregate amount of such purchases, redemptions, defeasances or other retirements and acquisitions pursuant to this clause (vi) will not, in the aggregate, exceed $2,000,000 per fiscal year;

     (vii) loans made to officers, directors or employees of the Borrower or any Restricted Subsidiary approved by the board of directors of the Borrower in an aggregate amount not to exceed $2,000,000 outstanding at any one time, the proceeds of which are used solely (A) to purchase Capital Stock of the Borrower in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options or (B) to refinance loans, together with accrued interest thereon, made pursuant to item (A) of this clause (vii);

     (viii) payments of dividends on the Series A Preferred Stock outstanding on the Closing Date, together with any additional Series A Preferred Stock issued after the Closing Date pursuant to warrants issued and outstanding on the Closing Date, in an amount in any fiscal year not to exceed the dividend rate required under the terms thereof as set forth in the Certificate of Designations with respect to such Series A Preferred Stock on the Closing Date;

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     (ix) payments to dissenting stockholders of the Borrower (A) pursuant to applicable law or (B) in connection with the settlement or other satisfaction of legal claims made pursuant to or in connection with a consolidation, merger or transfer of assets in connection with a transaction that is not prohibited by this Agreement; or

     (x) payments made by any Person other than the Borrower or any Restricted Subsidiary to the stockholders of the Borrower in connection with or as part of (A) a merger or consolidation of the Borrower with or into such Person or a Subsidiary of such Person, or (B) a merger of a Subsidiary of such Person into the Borrower; and

     (xi) Restricted Payments not exceeding $25,000,000 in the aggregate.

     7.06 Change in Nature of Business.

     Neither the Borrower nor any of its Restricted Subsidiaries will directly or indirectly engage in any line or lines of business activity other than that which is an Oil and Gas Business, except to such extent as would not be material to the Borrower and its Restricted Subsidiaries, taken as a whole.

     7.07 Transactions with Affiliates. The Borrower will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with or for the benefit of any Affiliate of the Borrower (other than the Borrower or a Restricted Subsidiary) unless such transaction or series of related transactions is entered into in good faith and in writing and

     (a) such transaction or series of related transactions is on terms that are no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than those that would be available in a comparable transaction in arm’s-length dealings with a party who is not an Affiliate of the Borrower,

     (b) with respect to any transaction or series of related transactions involving aggregate value in excess of $10,000,000,

     (i) the Borrower delivers an officers’ certificate to the Administrative Agent certifying that such transaction or series of related transactions complies with clause (a) above, and

     (ii) such transaction or series of related transactions has been approved by a majority of the Disinterested Directors of the board of directors of the Borrower, or in the event there is only one Disinterested Director, by such Disinterested Director, or

     (c) with respect to any transaction or series of related transactions involving aggregate value in excess of $30,000,000, the Borrower delivers to the Administrative Agent a written opinion of an investment banking firm of national standing or other recognized independent expert with experience appraising the terms and conditions of the type of transaction or series of related transactions for which an opinion is required stating that the transaction or series of

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related transactions is fair to the Borrower or such Restricted Subsidiary from a financial point of view;

provided, however, that this provision shall not apply to:

     (i) employee benefit arrangements with any officer or director of the Borrower, including under any employment agreement, stock option or stock incentive plans, and customary indemnification arrangements with officers or directors of the Borrower, in each case entered into in the ordinary course of business,

     (ii) the payment of reasonable and customary fees to directors of the Borrower or any of its Restricted Subsidiaries who are not employees of the Borrower or any Affiliate,

     (iii) any Restricted Payments or Permitted Payments made in compliance with Section 7.05,

     (iv) sales of Capital Stock (other than Disqualified Stock) of the Borrower to Affiliates of the Borrower,

     (v) in the case of contracts for purchase of drilling equipment or sale of oil field service supplies or natural gas or other operational contracts, any such contracts are entered into in the ordinary course of business on terms substantially similar to those contained in similar contracts entered into by the Borrower or any Restricted Subsidiary and third parties, or if neither the Borrower nor any Restricted Subsidiary has entered into a similar contract with a third party, that the terms are no less favorable than those available from third parties on an arm’s length basis, as determined by the board of directors of the Borrower,

     (vi) any customary agreements with stockholders of the Borrower providing for preemptive, voting, tag-along and similar rights to certain stockholders of the Borrower, provided that such agreements are approved in advance by a majority of the Disinterested Directors, and

     (vii) any transactions undertaken pursuant to any contracts in existence on the Closing Date (as in effect on the Closing Date) and any renewals, replacements or modifications of such contracts (pursuant to new transactions or otherwise) on terms no less favorable to the holders of the Loans than those in effect on the Closing Date.

     7.08 Burdensome Agreements.  The Borrower will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause to come into existence or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

     (i) pay dividends or make any other distribution on its Capital Stock to the Borrower or any other Restricted Subsidiary,

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     (ii) pay any Indebtedness owed to the Borrower or any other Restricted Subsidiary,

     (iii) make loans or advances to the Borrower or any other Restricted Subsidiary or

     (iv) transfer any of its properties or assets to the Borrower or any other Restricted Subsidiary.

     (b) However, clause (a) above will not prohibit any encumbrance or restriction created, existing or becoming effective under or by reason of:

     (i) any agreement (including the Senior Credit Facility) in effect on the date hereof;

     (ii) any agreement or instrument with respect to a Restricted Subsidiary that is not a Restricted Subsidiary of the Borrower on the date hereof, in existence at the time such Person becomes a Restricted Subsidiary of the Borrower and not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary, provided that such encumbrances and restrictions are not applicable to the Borrower or any Restricted Subsidiary or the properties or assets of the Borrower or any Restricted Subsidiary other than such Subsidiary which is becoming a Restricted Subsidiary;

     (iii) any agreement or instrument governing any Acquired Debt or other agreement of any Person or related to assets acquired by or merged into or consolidated with the Borrower or any Restricted Subsidiaries, so long as such encumbrance or restriction (A) was not entered into in contemplation of the acquisition, merger or consolidation transaction, and (B) is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets or subsidiaries of the Person, so acquired, so long as the agreement containing such restriction does not violate any other provision of this Agreement;

     (iv) any applicable law or any requirement of any regulatory body;

     (v) the security documents evidencing any Liens securing obligations or Indebtedness (provided such Liens are otherwise permitted to be incurred under the provisions of Section 7.01) that limit the right of the debtor to dispose of the assets subject to such Liens;

     (vi) provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Restricted Subsidiary, or restrictions in licenses relating to the property covered thereby, or other encumbrances or restrictions in agreements or instruments relating to specific assets or property that restrict generally the transfers of such assets or property, provided, however, that such encumbrances or restrictions do not materially impact the ability of the Borrower to make payments on the Loans when due as required by the terms of this Agreement;

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     (vii) asset sale agreements with respect to asset sales permitted to be made under the provisions of Section 7.04 that limit the transfer of such assets pending the closing of such sale;

     (viii) shareholders’, partnership, joint venture and similar agreements entered into in the ordinary course of business; provided, however, that such encumbrances or restrictions do not apply to any Restricted Subsidiaries other than the applicable company, partnership, joint venture or other entity; and provided, further, however, that such encumbrances and restrictions do not materially impact the ability of the Borrower to make payments on the Loans when due as required by the terms of this Agreement;

     (ix) cash or other deposits, or net worth requirements or similar requirements, imposed by suppliers or landlords under contracts entered into in the ordinary course of business;

     (x) any other Credit Facility governing debt of the Borrower or any Guarantor, permitted to be incurred by Section 7.02; provided, however, that such encumbrances or restrictions are not (in the view of the board of directors of the Borrower as expressed in a board resolution thereof) materially more restrictive, taken as a whole, than those contained in the Senior Credit Facility;

     (xi) customary restrictions on the disposition or distribution of assets or property in agreements entered into in the ordinary course of the Oil and Gas Business of the types described in the definition of Permitted Business Investments; and

     (xii) the Initial Exchange Note Indenture or any agreement, amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (i) through (xi), or in this clause (xii); provided that the terms and conditions of any such encumbrances or restrictions are no more restrictive in any material respect taken as a whole than those under or pursuant to the agreement so extended, renewed, refinanced or replaced.

     7.09 Designation of Unrestricted Subsidiaries.

     (a) The board of directors of the Borrower may designate after the Closing Date any Subsidiary as an “Unrestricted Subsidiary” (a “Designation”) only if:

     (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation;

     (ii)

     (A) the Borrower would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to Section 7.05(a) in an amount (the “Designation Amount”) equal to the greater of (1) the net book value of the

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Borrower’s interest in such Subsidiary calculated in accordance with GAAP or (2) the Fair Market Value of the Borrower’s interest in such Subsidiary, or

     (B) the Designation Amount is less than $1,000;

     (iii) the Borrower would be permitted to incur $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to Section 7.02 at the time of such Designation (assuming the effectiveness of such Designation);

     (iv) such Unrestricted Subsidiary does not own any Capital Stock in any Restricted Subsidiary of the Borrower which is not simultaneously being designated an Unrestricted Subsidiary;

     (v) such Unrestricted Subsidiary is not liable, directly or indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness, provided that an Unrestricted Subsidiary may provide a Guarantee for the Loans; and

     (vi) such Unrestricted Subsidiary is not a party to any agreement, contract, arrangement or understanding at such time with the Borrower or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Borrower or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Borrower or, in the event such condition is not satisfied, the value of such agreement, contract, arrangement or understanding to such Unrestricted Subsidiary shall be deemed a Restricted Payment.

In the event of any such Designation, the Borrower shall be deemed, for all purposes of this Agreement, to have made an Investment equal to the Designation Amount that constitutes a Restricted Payment pursuant to Section 7.05.

     (b) The Borrower shall not and shall not cause or permit any Restricted Subsidiary to at any time

     (i) provide credit support for, guarantee or subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), provided, however, that the provisions of this clause (b)(i) shall not be deemed to prevent Permitted Investments in Unrestricted Subsidiaries that are otherwise allowed under this Agreement, or

     (ii) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary.

     (c) For purposes of the foregoing, the Designation of a Subsidiary of the Borrower as an Unrestricted Subsidiary shall be deemed to be the Designation of all of the Subsidiaries of such Subsidiary as Unrestricted Subsidiaries. Unless so designated as an Unrestricted

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Subsidiary, any Person that becomes a Subsidiary of the Borrower will be classified as a Restricted Subsidiary.

     (d) The Borrower may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a “Revocation”) if:

     (i) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation;

     (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of this Agreement; and

     (iii) unless such redesignated Subsidiary shall not have any Indebtedness outstanding (other than Indebtedness that would be Permitted Debt), immediately after giving effect to such proposed Revocation, and after giving pro forma effect to the incurrence of any such Indebtedness of such redesignated Subsidiary as if such Indebtedness was incurred on the date of the Revocation, the Borrower could incur $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to Section 7.02.

     (e) All Designations and Revocations must be evidenced by a resolution of the board of directors of the Borrower delivered to the Administrative Agent certifying compliance with the foregoing provisions of this covenant.

     7.10 Payments for Consent.

     Neither the Borrower nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement or the Loans of either Tranche unless such consideration is offered to be paid or is paid to all holders of Loans of such Tranche that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

     7.11 Sale Leaseback Transactions.

     The Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale Leaseback Transaction; provided, that the Borrower or any of its Restricted Subsidiaries may enter into a Sale Leaseback Transaction if:

     (a) the Borrower or such Subsidiary could have incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale Leaseback Transaction pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 7.02(a);

     (b) the gross cash proceeds of such Sale Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale Leaseback Transaction; and

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     (c) the transfer of assets in such Sale Leaseback Transaction is permitted by, and the Borrower applies the proceeds of such transaction in the same manner and to the same extent as Net Available Cash and Excess Proceeds from an Asset Sale in compliance with, Section 7.04.

ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES

     8.01 Events of Default. Any of the following shall constitute an Event of Default:

     (a) there shall be a default in the payment of any interest on any Loan or any other amount (other than amounts referred to in clause (b) below) under this Agreement when it becomes due and payable, and such default shall continue for a period of 3 Business Days; or

     (b) there shall be a default in the payment of the principal of (or premium, if any, on) any Loan when due (upon acceleration, optional or mandatory prepayment or otherwise); or

     (c) there shall be a default in the performance or breach of the provisions set forth in Section 7.03; or

     (d) there shall be a default in the performance, or breach, of any covenant or agreement of the Borrower or any Guarantor under this Agreement (other than a default in the performance, or breach, of a covenant or agreement which is specifically dealt with in clause (a), (b) or (c) above) and such default shall continue for 30 days; or

     (e)

     (i) any default in the payment of the principal, premium, if any, or interest on any Indebtedness shall have occurred under any of the agreements, indentures or instruments under which the Borrower, any Guarantor or any other Significant Subsidiary then has outstanding Indebtedness in excess of $30,000,000 when the same shall become due and payable in full and such default shall have continued after any applicable grace period and shall not have been cured or waived and, if not already matured at its final maturity in accordance with its terms, the holder of such Indebtedness shall have the right to accelerate such Indebtedness or

     (ii) an event of default as defined in any of the agreements, indentures or instruments described in Section 8.01(e)(i) shall have occurred and the Indebtedness thereunder, if not already matured at its final maturity in accordance with its terms, shall have been accelerated; or

     (f) any Guarantee shall for any reason cease to be, or shall for any reason be asserted in writing by any Guarantor or the Borrower not to be, in full force and effect and enforceable in accordance with its terms, except to the extent contemplated by this Agreement and any such Guarantee; or

     (g) one or more judgments, orders or decrees of any court or regulatory or administrative agency for the payment of money in excess of $30,000,000 (determined net of any

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amounts covered by insurance policies by insurers believed by the Borrower in good faith to be credit-worthy), either individually or in the aggregate, shall be rendered against the Borrower, any Guarantor or any other Significant Subsidiary or any of their respective properties and shall not be discharged and either (i) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (ii) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal or otherwise, shall not be in effect; or

     (h) the Borrower or any Restricted Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

     (i) the Borrower or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy.

     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of Required Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Loans to be terminated, whereupon such commitments and obligation shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and

     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.

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     8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

     First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

     Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders (including fees and time charges for attorneys who may be employees of any Lender) and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

ARTICLE IX.
ADMINISTRATIVE AGENT

     9.01 Appointment and Authority.

     Each of the Lenders hereby irrevocably appoints Bank of America, N.A. to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except to the extent Sections 9.03(b) and 9.06 expressly contemplate rights of others, the provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a third party beneficiary of any of such provisions.

     9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.

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Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

     9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower or a Lender.

     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

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     9.04 Reliance by Administrative Agent.

     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender, unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

     9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent

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shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, neither the Lead Arranger nor any Co-Arranger shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except as expressly provided herein or therein.

     9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

     (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.06 and 10.04) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent

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and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.06 and 10.04.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

     9.10 Guaranty Matters. The Guarantee of a Guarantor will be released automatically:

     (a) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Borrower or a Restricted Subsidiary, if the sale or other disposition does not violate Section 7.04 hereof;

     (b) in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Borrower or a Restricted Subsidiary, if the sale or other disposition does not violate Section 7.04 hereof; or

     (c) if the Borrower designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with Section 7.09 hereof.

     In each case as specified in this Section 9.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

ARTICLE X.
MISCELLANEOUS

     10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

     (a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

     (b) postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to

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the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

     (c) reduce the principal of, or the rate of interest specified herein on, any Loan or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

     (d) change Section 2.10 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender, or, if such sharing or allocation is between Fixed Rate Loans and Floating Rate Loans, the consent of Lenders with more than 50% of the Commitments (or if the Commitments have been terminated, Lenders holding more than 50% of the outstanding principal amount of the Loans) of each such Tranche, voting as separate classes;

     (e) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Lender; or

     (f) release all or substantially all of the value of the Guaranty without the written consent of each Lender.

and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document.

     10.02 Notices; Effectiveness; Electronic Communication.

     (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

     (i) if to the Borrower or the Administrative Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

     (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the

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recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

     (b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

     (d) Change of Address, Etc. Each of the Borrower and the Administrative Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address,

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telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, and the Administrative Agent. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

     (e) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. Furthermore, each Public-Side Lender agrees to cause at least one individual at or on behalf of such Public-Side Lender to at all times have selected the “PRIVATE-SIDE INFORMATION” or similar designation on the content declaration screen of the Platform in order to enable such Public-Side Lender or its delegate, in accordance with such Public-Side Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “PUBLIC-SIDE” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

     10.03 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     10.04 Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent or any Lender in connection with the enforcement or protection of its

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rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), the Lead Arranger, each Co-Arranger and each Lender and each Related Party of each of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Lead Arranger, each Co-Arranger or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Lead Arranger, such Co-Arranger or such Related Party, as the case may be, such Lender’s ratable share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity or

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against the Lead Arranger or any Co-Arranger acting in its capacity as such. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.09(d).

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

     (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

     (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

     10.06 Successors and Assigns.

     (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations

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hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section or, (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

     (i) Minimum Amounts.

     (A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment or the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

     (B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $1,000,000 unless the Administrative Agent otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

     (ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned.

     (iii) Required Consents. The consent of the Borrower and the Administrative Agent (each of which such consents not to be unreasonably withheld or delayed) shall be required unless (1) in the case of the Borrower consent only, an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and provided that the Borrower

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shall be deemed to have consented to any assignment if it shall not have responded to any request therefor before 4:00 P.M. (New York City time) three Business Days after the day on which such request was received.

     (iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount, if any, required as set forth in Schedule 10.06; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

     (v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

     (vi) No Assignment to Non-Qualified Institutional Buyers or Natural Persons. No such assignment shall be made to (x) a Person that is not a “qualified institutional buyer” within the meaning of Rule 144A or (y) a natural person.

     (vii) No Assignment During Syndication. Except pursuant to transactions arranged by the Lead Arranger, no Lender may sell or assign (other than to an Affiliate) any portion of its interest in the Initial Loans until the Syndication Completion Date.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The

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Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent (except as set forth below), sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, (iv) prior to the Syndication Completion Date, no such participation may be granted by any Lender except to an Affiliate of such Lender and (v) no such participation may be granted by any Lender to a Person that is not a “qualified institutional buyer” within the meaning of Rule 144A.

     Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.03 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be

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of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

     (h) Notice to Lead Arranger. The Lead Arranger shall be notified of any participation (except to an Affiliate of the transferor Lender) until the 180^th day after the Closing Date.

     10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lead Arranger, each of the Co-Arrangers and each of the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) bona fide or potential assignees, transferees and participants in connection with contemplated assignments, transfers or participations of any Loans or any participations therein or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, the Lead Arranger, any Co-Arranger or any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

     For purposes of this Section, “Information” means all non-public information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as nonpublic and confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to confidential information of a similar nature.

     Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

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     10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

     10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

     10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Article IV, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the

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Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Loans, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

     10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     10.13 Replacement of Lenders. If (i) any Lender requests compensation under Section 3.04 or (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or (iii) any Lender is unwilling to approve an amendment hereto which has been approved by Required Lenders but requires approval of such Lender to be effective, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

     (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

     (d) in the case of an assignment resulting from clause (iv) above, such assignment will result in effectiveness of such increase or amendment; and

     (e) such assignment does not conflict with applicable Laws.

     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

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     10.14 Governing Law; Jurisdiction; Etc.

     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     (b) SUBMISSION TO JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) WAIVER OF VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     10.15 Waiver of Jury Trial.

     EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT

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OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     10.16 No Advisory or Fiduciary Responsibility.

     In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Lead Arranger and the Co-Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Administrative Agent, the Lead Arranger and each of the Co-Arrangers is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Administrative Agent, the Lead Arranger or any Co-Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Administrative Agent, the Lead Arranger or any Co-Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Administrative Agent, the Lead Arranger or any Co-Arranger has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Administrative Agent, the Lead Arranger, each of the Co-Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and none of the Administrative Agent, the Lead Arranger or any Co-Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Administrative Agent, the Lead Arranger and the Co-Arrangers have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Administrative Agent, the Lead Arranger or any Co-Arranger with respect to any breach or alleged breach of agency or fiduciary duty.

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     10.17 USA PATRIOT Act Notice.

     Each Lender that is subject to the Act (as hereinafter defined) and each of the Administrative Agent, the Lead Arranger and each Co-Arranger (each in its capacity as such and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender, the Administrative Agent, the Lead Arranger or any Co-Arranger, as applicable, to identify the Borrower in accordance with the Act.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

SANDRIDGE ENERGY, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	President and Chief Executive Officer

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Suzanne M. Paul
	Name:	Suzanne M. Paul
	Title:	Vice President
BANC OF AMERICA BRIDGE LLC, as a Lender
By:	/s/ Alysa Trakas
	Name:	Alysa Trakas
	Title:	Vice President
BANC OF AMERICA SECURITIES LLC, as Lead Arranger
By:	/s/ Jeffrey J. McLane
	Name:	Jeffrey J. McLane
	Title:	Principal

GOLDMAN SACHS CREDIT PARTNERS L.P., as Co-Arranger and a Lender
By:	/s/ Bruce H. Mendelsohn
	Name:	Bruce H. Mendelsohn
	Title:	Authorized Signatory

LEHMAN BROTHERS INC., as Co-Arranger
By:	/s/ Timothy N. Hartzell
	Name:	Timothy N. Hartzell
	Title:	Managing Director
LEHMAN COMMERCIAL PAPER INC., as a Lender
By:	/s/ Jeff Ogden
	Name:	Jeff Ogden
	Title:	Managing Director

DEUTSCHE BANK SECURITIES INC., as Co-Arranger
By:	/s/ Kevin M. Sherlock
	Name:	Kevin M. Sherlock
	Title:	Managing Director
DEUTSCHE BANK AG, NEW YORK BRANCH, as a Lender
By:	/s/ Marguerite Sutton
	Name:	Marguerite Sutton
	Title:	Director

SCHEDULE 2.01

COMMITMENTS

Lender	Fixed Rate Commitment		Floating Rate Commitment
Banc of America Bridge LLC	$	229,125,000	$	123,375,000
Deutsche Bank AG, New York Branch	$	149,500,000	$	80,500,000
Goldman Sachs Credit Partners L.P.	$	149,500,000	$	80,500,000
Lehman Commercial Paper Inc.	$	121,875,000	$	65,625,000
Total	$	650,000,000	$	350,000,000

SCHEDULE 5.03

GOVERNMENTAL AUTHORIZATIONS

None.

SCHEDULE 5.05

SUPPLEMENT TO INTERIM FINANCIAL STATEMENTS

(Continued on next page)

Supplement to Interim Financial Statements: Existing Indebtedness

		3/15/2007		Collateral
SYMBOL ENERGY
	LARCO		2,287,129.15	NA
SAGEBRUSH
	BANK OF AMERICA		4,000,000.00	All Bank of America cash accounts
	ROC		3,125,000.00	NA
			7,125,000.00
SR OPERATING
	N/P SDI		7,970,907.91	NA
	DAN JORDAN — AIRPLANE		252,777.76
	AICCO-Insurance Policies		2,398,624.25	NA
	AICCO-Insurance Policies		742,885.29	NA
	AICCO-Insurance Policies		305,367.53	NA
			11,670,562.74
HONDO HEAVY HAUL
	N/P JOHN DEERE		145,631.06	John Deere 724J Loader with 9’ Forks
	N/P PACCAR FINANCIAL		324,179.82	Quantity of 6 2003 Peterbilt 379-127 Vehicles
			469,810.88
LARIAT
*	MERRILL LYNCH #1		13,219,174.35	Rig #1 — Rig #7 and Ancillary Equipment
*	MERRILL LYNCH #2		1,662,818.55	Rig #13 and All Associated Equipment
*	MERRILL LYNCH #3		3,511,600.54	Rig #12 and All Associated Equipment
*	MERRILL LYNCH #4		1,811,403.86	Rig #14 and All Associated Equipment
*	MERRILL LYNCH #5		791,881.95	Service/Workover Rigs
*	MERRILL LYNCH #6		1,376,864.92	Rig #15 and All Associated Equipment
*	MERRILL LYNCH #7		1,595,583.63	Rig #16 and All Associated Equipment
*	MERRILL LYNCH #8		2,014,347.37	Rig #19 and All Associated Equipment
*	MERRILL LYNCH #9		708,446.28	Misc Trucks & Equipment

		3/15/2007		Collateral
*	MERRILL LYNCH #10		7,360,628.14	Rig #22 and 3 Pulling Units
*	MERRILL LYNCH #11		5,357,528.07	Rig #24 and All Associated Equipment
*	MERRILL LYNCH #12		7,566,748.67	Rig #26
*	MERRILL LYNCH #13		840,753.28	Pulling Units 11, 12, 13, & 17
*	MERRILL LYNCH #14		5,969,613.78	Rig #28
*	MERRILL LYNCH #15		5,189,799.77	Rig #28
	DAIMLER CHRYSLER #11970		16,114.28	2005 Sterling Acterra Tractor
	DAIMLER CHRYSLER #11974		16,114.28	2005 Sterling Acterra Tractor
	N/P DIAMLER CHRYSLER #83592		67,667.25	2007 Western Star 4900 Tractor
	N/P DIAMLER CHRYSLER #83593		67,667.25	2007 Western Star 4900 Tractor
	N/P DIAMLER CHRYSLER #81856		29,697.81	2007 Sterling Acterra Tractor
	N/P DIAMLER CHRYSLER #66004		64,213.62	2007 Western Star 4900 Tractor
	N/P DIAMLERCHRYSLER #81858		31,071.49	2007 Sterling Acterra Tractor
	N/P DIAMLERCHRYSLER #81859		32,302.92	2007 Sterling Acterra Tractor
	N/P DIAMLERCHRYSLER #81860		32,302.82	2007 Sterling Acterra Tractor
	N/P DIAMLERCHRYSLER #81861		33,355.49	2007 Sterling Acterra Tractor
	N/P JOHN DEERE #2582		42,178.49	2005 330CLC Excavator
	N/P JOHN DEERE CREDIT #9496		32,868.06	850C Long Track Crawler Dozer
	N/P JOHN DEERE CREDIT #6211		58,960.68	1050C Crawler Dozer
	N/P JOHN DEERE CREDIT #2526		30,811.13	850C Long Track Crawler Dozer
	N/P JOHN DEERE CREDIT #6277		54,893.05	1050C Crawler Dozer
	N/P JOHN DEERE CREDIT #64644		51,827.61	544H Loader
	N/P JOHN DEERE CREDIT #79513		60,093.66	544H Loader
	N/P JOHN DEERE CREDIT #79321		45,442.63	544H Loader
	N/P JOHN DEERE CREDIT #87862		64,445.24	544H Loader
	JOHN DEERE CREDIT #6762		7,638.21	2005 310SG Wheel Loader Backhoe
	N/P JDC #1063		31,922.64	1 850C Dozer
	N/P JDC #78141		69,599.16	1 544H Front Loader
	N/P JDC #3935		68,897.03	724J Loader
	N/P JDC #62412,61917,01125,611051		461,201.24	Backhoes,Motograders
	N/P JDC #611397,430,431,468,224		821,480.97	4 Motograders, 1 Loader
	N/P JDC		851,073.40	2 dozers, 1 loader, 2 backhoes
*	DAIMLER CHRYSLER		608,046.72	15 Freightliner Trucks
	GE CAPITAL CORP		1,128,498.96	10 Mack Trucks
	PACCAR #24856 & #24870		138,899.47	2-2004 Peterbilts
	PACCAR		46,516.63	Kenworths
	PACCAR #5780267		274,919.05	2-2007 Peterbilts and 2-2004 Peterbilts
	PACCAR #5783865		144,622.90	2-2004 Peterbilts
	PACCAR		147,347.81	2-2004 Peterbilts

		3/15/2007		Collateral
			64,609,885.11
*	THIS LARIAT DEBT IS GUARANTEED BY SDI
SDI
	BANK OF AMERICA		225,000,000.00	Oil & Gas Properties
	CITICAPITAL		184,106.36	2 CAT Generators
			225,184,106.36
*	THIS LARIAT DEBT IS GUARANTEED BY SDI
LARCO
	RIATA ENERGY		5,635,243.89	NA
NEG
	AICCO-Insurance Policies		2,559,014.92	NA
RIAGRA
	N/P SDI		8,983,980.36	NA
ROC
	N/P SDI		62,333.53	NA
PSEC
	N/P SDI		31,813,722.36	NA
	SUBORDINATED DEBT-SDI		6,540,000.00	NA
			38,353,722.36
PSPC
	N/P SDI		5,902,097.77	NA
TOTAL			372,842,887.07
LESS INTER-CO NOTES			72,320,414.97
TOTAL			300,522,472.10

SCHEDULE 5.06

LITIGATION

     Riata Energy, Inc. and Riata Piceance, LLC, Plaintiffs, V. Elliott Roosevelt, Jr., E.R. Family Limited Partnership and Ceres Resource Partners, L.P., Defendants.; No. 04-11461-E; In the 101^st Judicial District Court in and for Dallas County, Tx

     Harvey Y. Yates Company, Plaintiff, v Riata Energy, Inc. Defendant; No. 10376; In the 112^TH District Court in and for Pecos County, Tx

SCHEDULE 5.09

ENVIRONMENTAL MATTERS

None.

SCHEDULE 5.13

SUBSIDIARIES,
OTHER EQUITY INVESTMENTS
AND LOAN PARTY INFORMATION

(Continued on next page)

SCHEDULE 5.13

SandRidge Energy, Inc.

PART A AND PART B — all Subsidiaries and Equity Interests of Loan Parties

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
SDI	SandRidge Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-8084793
SUBSIDIARY ENTITIES
	Algerita Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1400800	100%SDI
SOC	SandRidge Operating Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541245	100%SDI
	Cup Of The Day #1, LLC	701 S. Tyler, Ste 102	Amarillo, TX 79201	13-4301747	100%SOC
CSLLC	Chaparral Supply, LLC	P. O. Box 1417	Ft. Stockton, Texas 79735	26-0036758	100%SOC
IEL	Integra Energy, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2887527	85%SOC
	Cholla Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	01-0557493	100%IEL
CHOLP	Cholla Pipeline, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	26-0025092	36%IEL, 17%ROC
TPL	Transpecos Logging, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2897434	100%SOC
	Black Bayou Exploration, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-4790561	100%SDI
LSI	Lariat Services, Inc.	2402 West Wall	Midland, TX 79701	75-2500702	100%SDI
LARCO	Lariat Compression Company	5432 N. Highway 1053	Ft. Stockton, TX 79735	75-2545523	100%LSI
SYMENE	Symbol Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2882968	100%LARCO
HONDO	Hondo Heavy Haul	13416 W. 1-20 East	Odessa, TX 79765	20-3568524	100%LSI
	Larclay, GP, LLC	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4727861	50%LSI
	Larclay, L.P.	701 S. Taylor, Suite 426	Amarillo, TX 79101	20-4728095	50%LSI
MCRLLC	Midcontinent Resources, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0096928	100%SDI
PSEML	PetroSource Energy Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1237622	100%SDI
PSEC	PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2629471	99%SDI, 1% PSEM
PSCO2	PSCO2, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0547903	99%PSEC, 1% PSEML
PSPC	PetroSource Production Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1918006	99%PSEC, 1% PSEML
	PSE Holdings, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2950920	100%SDI
PSEM	PSE Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2622462	100%SDI
RLC	Riagra Land & Cattle	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2569335	100%SDI
SDC	SandRidge Drilling Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2563168	100%SDI
RIAN	Riata Energy Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0333569	100%SDI
REIPIC	Riata Piceance, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-0023468	100%SDI
	Riata Wolfcamp Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-2214412	100%SDI
ROC	ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2541148	100%SDI
SBP	Sagebrush Pipeline, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-1550515	70%ROC
SMM	Sierra Madera Management, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	43-1969581	100%SDI
SMCO2	Sierra Madera CO2 Pipeline, Ltd	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0881558	99%SDI, 1% SMM

Symbol	Company Name	Address	City/State/Zip	FEIN	OWNERSHIP
SandRidge Holdings, Inc. Acquisition		1601 NW Expwy, 1600	Oklahoma City, OK 73118	20-5878401	100% SDI
NEG	NEG Oil & Gas, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	03-0573934	100% Sandridge
SUBSIDIARY ENTITIES
NEGH	NEG Holding, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	75-2958833	100%NEG
NEGO	NEG Operating, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776535	100%NEGH
NGXGP	NGX GP of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776542	100%NEGO
NGXLP	NGX LP Of Delaware LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776545	100%NEGO
NGXELP	NGX Energy Limited Partnership	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776546	99%NGXLP, 1%NGXGP
SHANA	Shana National LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776549	100%NEGO
MIDR	Mid River, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776548	100%NEG
OFFGP	Offshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776539	100%NEG
OFFLP	Offshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776538	100%NEG
NOFFSH	National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	11-3758786	99%OFFLP, 1%OFFGP
ONGP	Onshore GP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0833283	100%NEG
ONLP	Onshore LP, LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	87-0776536	100%NEG
NONSH	National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	47-0953489	99%ONLP, 1%ONGP
GBPIPE	Galveston Bay Pipeline Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0595703	100%NONSH
GBPROC	Galveston Bay Processing Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	76-0570422	100%NONSH

PART C — LOAN PARTIES INFORMATION

Company Name	Address	City/State/Zip	Jurisdiction	FEIN Number
SandRidge Operating Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541245
Integra Energy, L.L.C.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2887527
Lariat Compression Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2545523
NEG Oil & Gas LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	03-0573934
NEG Operating LLC	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	87-0776535
National Offshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	11-3758786
National Onshore LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	47-0953489
PetroSource Energy Company, LP	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-2629471
PetroSource Production Company, L.P.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-1918006
SandRidge Energy, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	20-8084793
ROC Gas Company	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Texas	75-2541148
Sandridge Holdings, Inc.	1601 NW Expwy, 1600	Oklahoma City, OK 73118	Delaware	20-5878401

SCHEDULE 10.02

ADMINISTRATIVE AGENT’S OFFICE;
CERTAIN ADDRESSES FOR NOTICES

BORROWER:
SandRidge Energy, Inc.
1601 Northwest Expressway, Suite 1600
Oklahoma City, OK 73118
Attention: Matt McCann
Telephone: (405) 753-5600
Telecopier: (405) 753-5988
Electronic Mail: mmccann@sdrge.com
Website Address: www.sandridgeenergy.com

U.S. Taxpayer Identification Number: 20-8084793

ADMINISTRATIVE AGENT:

Administrative Agent’s Office
(for payments and Requests for Credit Extensions):
Bank of America, N.A.
One Independence Center
101 North Tryon Street
Mail Code: NC1-001-04-39
Charlotte, NC 28255-001
Attention: Renee Blackmore
Telephone: (704) 387-2484
Telecopier: (704) 719-5450
Account No.: 1366212250600
Ref: SandRidge Energy, Inc.
ABA# 026009593

Other Notices as Administrative Agent:
Bank of America, N.A.
Agency Management
231 South LaSalle Street
Mail Code: IL1-231-10-41
Chicago, IL 60697
Attention: Suzanne M. Paul
Telephone: (312) 923-1640
Telecopier: (877) 206-8435
Electronic Mail: suzanne.m.paul@bankofamerica.com

SCHEDULE 10.06

PROCESSING AND RECORDATION FEES

     The Administrative Agent will charge a processing and recordation fee (an “Assignment Fee”) in the amount of $2,500 for each assignment; provided, however, that in the event of two or more concurrent assignments to members of the same Assignee Group (which may be effected by a suballocation of an assigned amount among members of such Assignee Group) or two or more concurrent assignments by members of the same Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group), the Assignment Fee will be $2,500 plus the amount set forth below:

Transaction	Assignment Fee
First four concurrent assignments or suballocations to members of an Assignee Group (or from members of an Assignee Group, as applicable)		-0-
Each additional concurrent assignment or suballocation to a member of such Assignee Group (or from a member of such Assignee Group, as applicable)	$	500

EXHIBIT A

FORM OF LOAN NOTICE

Date: ___________, _____

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of March 22, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among SandRidge Energy, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

     The undersigned hereby requests (select one):

     o A Borrowing of Initial Loans                    o A conversion or continuation of Loans

     1.   On                                                                               (a Business Day).

     2.   In the amount of $                                                            .

     3.   Comprised of                                                                     .

[Type of Loan requested]

     4.   For Eurodollar Rate Loans: with an Interest Period of                  months.

SANDRIDGE ENERGY, INC.
By:
	Name:
	Title:

A-1
Form of Loan Notice

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                     ,

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of March 22, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among SandRidge Energy, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                               of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

     1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

     1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

     2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

     3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

[select one:]

B-1
Form of Compliance Certificate

     [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

—or—

     [the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

     4. The representations and warranties of the Borrower contained in Article V of the Agreement, and any representations and warranties of any Loan Party that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                                   ,                          .

SANDRIDGE ENERGY, INC.
By:
	Name:
	Title:

B-2
Form of Compliance Certificate

EXHIBIT C

ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each] ¹ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each] ² Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]³ hereunder are several and not joint.]⁴ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to

1	For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
2	For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
3	Select as appropriate.
4	Include bracketed language if there are either multiple Assignors or multiple Assignees.

C-1
Form of Assignment and Assumption

[the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.	Assignor[s]:
2.	Assignee[s]:
	[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]
3.	Borrower(s):
4.	Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement
5.	Credit Agreement: Credit Agreement, dated as of March 22, 2007 among SandRidge Energy, Inc., the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.
6.	Assigned Interest[s]: 5

				Aggregate				Percentage
				Amount of		Amount of		Assigned of
		Facility		Commitment/Loans		Commitment/Loans		Commitment/			CUSIP
Assignor[s]6	Assignee[s]7	Assigned8		for all Lenders9		Assigned		Loans10			Number
			________	$	________	$	________		________	%
			________	$	________	$	________		________	%
			________	$	________	$	________		________	%

[7. Trade Date:                                         ]¹¹

5	The reference to “Loans” in the table should be used only if the Credit Agreement provides for Term Loans.
6	List each Assignor, as appropriate.
7	List each Assignee, as appropriate.
8	Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Floating Rate Commitment”, “Fixed Rate Commitment”, etc.).
9	Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.
10	Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
11	To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

C-2
Form of Assignment and Assumption

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

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

ASSIGNOR [NAME OF ASSIGNOR]
By:
	Title:
ASSIGNEE [NAME OF ASSIGNEE]
By:
	Title:

Consented to and Accepted: BANK OF AMERICA, N.A, as  Administrative Agent
	By:
		Title:
	Consented to: SANDRIDGE ENERGY, INC.
	By:
		Title:

C-3
Form of Assignment and Assumption

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

[                                                   ]¹²

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

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

          1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is a “qualified institutional buyer” within the meaning of Rule 144A, (iii) it meets all the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b)(iii) of the Credit Agreement), (iv) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (vi) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vii) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it

¹² Describe Credit Agreement at option of Administrative Agent.

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Form of Assignment and Assumption

has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (viii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; and (c) acknowledges that [the][each] Assigned Interest is not a “security” and confirms that (i) it is not relying on the protections of the U.S. Securities Act of 1933, as amended, or the rules or regulations thereunder or similar laws governing the offer and sale of securities and (ii) it is not requesting the delivery of any financial information in addition to that provided for in the Credit Agreement with respect to [the][each] Assigned Interest.

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

          3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

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Form of Assignment and Assumption

EXHIBIT D

EXECUTION VERSION

GUARANTY

dated as of March 22, 2007

from

THE GUARANTORS NAMED HEREIN

and

THE ADDITIONAL GUARANTORS REFERRED TO HEREIN

in favor of

THE GUARANTEED PARTIES REFERRED HEREIN

TABLE OF CONTENTS

Section	Page
Section 1. Guaranty; Limitation of Liability		1
Section 2. Guaranty Absolute		2
Section 3. Waivers and Acknowledgments		3
Section 4. Subrogation; Contribution		4
Section 5. Payments Free and Clear of Taxes, Etc.		5
Section 6. Representations and Warranties		7
Section 7. Covenants		7
Section 8. Amendments, Guaranty Supplements, Etc.		7
Section 9. Notices, Etc.		8
Section 10. No Waiver; Remedies		8
Section 11. Right of Set-off		8
Section 12. Subordination		9
Section 13. Continuing Guaranty; Assignments under the Credit Agreement		10
Section 14. Execution in Counterparts		10
Section 15. Terms Generally; References and Titles		10
Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.		11
Exhibit A — Guaranty Supplement

GUARANTY

          GUARANTY dated as of March 22, 2007 made by the Persons listed on the signature pages hereof and the Additional Guarantors (as defined in Section 8(b)) (such Persons so listed and the Additional Guarantors being, collectively, the “Guarantors” and, individually, each a “Guarantor”) in favor of the Guaranteed Parties (as defined below).

          PRELIMINARY STATEMENT. SandRidge Energy, Inc., a Delaware corporation (the “Borrower”), is party to a Credit Agreement dated as of March 22, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with certain Lenders party thereto, Bank of America, N.A., as Administrative Agent (the “Administrative Agent”) and Banc of America Securities LLC, as Lead Arranger, and Deutsche Bank Securities Inc., Goldman Sachs Credit Partners L.P. and Lehman Brothers Inc., as Co-Arrangers. Each Guarantor may receive, directly or indirectly, a portion of the proceeds of the Loans under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to the making of Loans by the Guaranteed Parties under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty. The Lenders and the Administrative Agent are herein called the “Guaranteed Parties”.

          NOW, THEREFORE, in consideration of the premises and in order to induce the Guaranteed Parties to enter into, and to make Loans under, the Credit Agreement, each Guarantor, jointly and severally with each other Guarantor, agrees as follows:

          Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) Each Guarantor and by its acceptance of this Guaranty the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor

hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the Guarantors irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Section 4(b) below, will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means law with respect to any proceeding of the type referred to in Section 8.01(h) of the Credit Agreement or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty or any other guaranty, then, subject to Section 4, each Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents.

          Section 2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of any other Loan Party arising under the Loan Documents or otherwise with respect to any Loan, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

     (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

     (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

     (c) any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

     (d) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

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     (e) any failure of any Guaranteed Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to such Guaranteed Party;

     (f) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

     (g) any other circumstance (including any statute of limitations) or any existence of or reliance on any representation by any Guaranteed Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Guaranteed Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had been due but not made at such time.

          Section 3. Waivers and Acknowledgments. (a) Each Guarantor unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Guaranteed Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person.

          (b) Each Guarantor unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

          (c) Each Guarantor unconditionally and irrevocably waives:

     (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Guaranteed Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person, and

     (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

          (d) Each Guarantor unconditionally and irrevocably waives any duty on the part of any Guaranteed Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects

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of any other Loan Party or any of its Subsidiaries now or hereafter known by such Guaranteed Party.

          (e) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits and it has determined that this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of such Guarantor.

          Section 4. Subrogation; Contribution.

          (a) Each Guarantor unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty or any other Loan Document, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Guaranteed Party against the Borrower, any other Loan Party or any other insider guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of:

     (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and

     (ii) the irrevocable termination or expiration in whole of all Commitments,

such amount shall be received and held in trust for the benefit of the Guaranteed Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents. If:

     (x) any Guarantor shall make payment to any Guaranteed Party of all or any part of the Guaranteed Obligations,

     (y) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and

     (z) all Commitments shall have been irrevocably terminated or shall have irrevocably expired in whole,

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the Guaranteed Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment or other condition made by such Guarantor pursuant to this Guaranty.

          (b) Each Guarantor (a “Contributing Guarantor”) agrees that, in the event a payment shall be made by any other Guarantor (a “Claiming Guarantor”) hereunder in respect of any Guaranteed Obligation, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net assets of such Contributing Guarantor on the date of such payment and the denominator shall be the aggregate net assets of all the Guarantors on the date of such payment, in each case as determined in accordance with GAAP.

          Section 5. Payments Free and Clear of Taxes, Etc.

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

          (b) Without limiting the provisions of subsection (a) above, each Guarantor shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

          (c) Each Guarantor shall indemnify each Guaranteed Party, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes which (i) arise from any payment made hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and (ii) are paid by such Guaranteed Party, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority but net of any foreign tax credit or the benefit of any deduction or other tax benefit determined in good faith by such Guaranteed Party to be attributable to the imposition of such Indemnified Tax. A certificate as to the amount of such payment or liability delivered in good faith to a Guarantor by a Guaranteed Party (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Guaranteed Party, shall be conclusive absent manifest error.

          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a guarantor to a Governmental Authority, such Guarantor shall deliver to the

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Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Guarantor is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to such Guarantor (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by a Guarantor or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by a Guarantor or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by such Guarantor or the Administrative Agent as will enable such Guarantor or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

          (f) Without limiting the generality of the foregoing, in the event that a Guarantor is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under the Credit Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

          (g) If any Guaranteed Party determines that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Guarantor or with respect to which a Guarantor has paid additional amounts pursuant to this Section, it shall pay to such

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Guarantor an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Guarantor under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Guaranteed Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that such Guarantor, upon the request of such Guaranteed Party, agrees to repay the amount paid over to such Guarantor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Guaranteed Party in the event Guaranteed Party is required to repay such refund to such Governmental Authority. This Guaranty shall not be construed to require any Guaranteed Party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Guarantor or any other Person, and each Guaranteed Party shall make its determination under this subsection in its sole discretion.

          Section 6. Representations and Warranties. Each Guarantor makes each representation and warranty made in the Loan Documents by the Borrower with respect to such Guarantor and each Guarantor hereby further represents and warrants as follows:

     (a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

     (b) Such Guarantor has, independently and without reliance upon any Guaranteed Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and such Guarantor has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party.

          Section 7. Covenants. So long as any part of the Guaranteed Obligations shall remain unpaid or any Guaranteed Party shall have any Commitment, each Guarantor will perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan Documents on its or their part to be performed or observed or that the Borrower has agreed to cause such Guarantor or such Subsidiaries to perform or observe.

          Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor herefrom shall in any event be effective unless the same shall be entered into in accordance with Section 10.01 of the Credit Agreement.

          (b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Subsidiary Guarantor” shall also mean and be a reference to such Additional Guarantor, and

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(ii) each reference herein to “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement and all other Guaranty Supplements.

          Section 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied, or delivered to it, if to any Guarantor, addressed to it in care of the Borrower at the Borrower’s address in accordance with Section 10.02 of the Credit Agreement, if to the Administrative Agent or any other Guaranteed Party, at its address in accordance with Section 10.02 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively. Delivery of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart thereof.

          Section 10. No Waiver; Remedies. No failure on the part of any Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

          Section 11. Right of Set-off. To secure the repayment of the Guaranteed Obligations, each Guarantor grants to each Guaranteed Party, and each of their respective Affiliates, a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Guaranteed Party, at common Law, under the Loan Documents or otherwise, and each of which shall be upon and against:

     (a) any and all moneys, securities or other property (and the proceeds therefrom) of such Guarantor now or hereafter held or received by or in transit to any Guaranteed Party, from or for the account of such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise,

     (b) any and all deposits (general or special, time or demand, provisional or final) of such Guarantor with any Guaranteed Party, or any of their respective Affiliates and

     (c) any other credits and claims of Borrower at any time existing against any Guaranteed Party, including claims under certificates of deposit.

          At any time and from time to time after the occurrence of any Event of Default, each Guaranteed Party is authorized to foreclose upon, or to offset against the Guaranteed Obligations then due and payable (in either case without notice to such Guarantor), any and all items hereinabove referred to, irrespective of whether or not such Guaranteed Party shall have made any demand under this Guaranty, any other Loan Document and although such obligations

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of such Guarantor may be contingent or unmatured or are owed to a branch or office of such Guaranteed Party different from the branch or office holding such items. The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other.

          Section 12. Subordination. Each Guarantor subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 12:

     (a) Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

     (b) In any proceeding under any Bankruptcy Law relating to any other Loan Party, the Guaranteed Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations.

     (c) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Guaranteed Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

     (d) After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion:

     (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and

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     (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

          Section 13. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall:

     (a) remain in full force and effect until it is released in accordance with the Credit Agreement,

     (b) be binding upon the Guarantor, its successors and assigns and

     (c) inure to the benefit of and be enforceable by the Guaranteed Parties and their permitted successors, transferees and assigns.

Without limiting the generality of clause (c) of the immediately preceding sentence, any Guaranteed Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including all or any portion of its Commitments, the Loans owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Guaranteed Party herein or otherwise, as and to the extent provided in Section 10.06 of the Credit Agreement. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Guaranteed Parties.

          Section 14. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

          Section 15. Terms Generally; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context requires otherwise:

     (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

     (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns;

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     (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Guaranty in its entirety and not to any particular provision hereof;

     (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Guaranty;

     (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time; and

     (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

References to any document, instrument, or agreement shall include:

     (i) all exhibits, schedules, and other attachments thereto, and

     (ii) 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 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. 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.

          Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a)THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     (b) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH

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GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT AGAINST ANY GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) EACH GUARANTOR IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9. NOTHING IN THIS GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     (e) EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. EACH GUARANTOR (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

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          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first-above written.

NEG OIL & GAS LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
NATIONAL ONSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
NATIONAL OFFSHORE LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
ROC GAS COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
LARIAT COMPRESSION COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer

SANDRIDGE OPERATING COMPANY
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
INTEGRA ENERGY, L.L.C. By: SandRidge Operating Company, managing member
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
PETROSOURCE ENERGY COMPANY, LP
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
PETROSOURCE PRODUCTION COMPANY, L.P.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
NEG OPERATING LLC
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer
SANDRIDGE HOLDINGS, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer

LARIAT SERVICES, INC.
By:	/s/ Tom L. Ward
	Name:	Tom L. Ward
	Title:	Chief Executive Officer

Exhibit A
To The
Guaranty

FORM OF GUARANTY SUPPLEMENT

_________ __, ____

BANK OF AMERICA, N.A., as Administrative Agent
9 West 57th Street
New York, New York 10019

Credit Agreement dated as of March 22, 2007 among
SandRidge Energy, Inc. (the “Borrower”),
the Guaranteed Parties party to the Credit Agreement,
Bank of America, N.A., as Administrative Agent and Banc of America Securities LLC, as Lead
Arranger, and Deutsche Bank Securities Inc., Goldman Sachs Credit Partners L.P. and Lehman Brothers
Inc. as Co-Arrangers

Ladies and Gentlemen:

          Reference is made to the above-captioned Credit Agreement and to the Guaranty referred to therein (such Guaranty, as in effect on the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, together with this Guaranty Supplement, being the “Guaranty”). Capitalized terms defined in the Guaranty or in the Credit Agreement and not otherwise defined herein are used herein as therein defined.

          Section 1. Guaranty; Limitation of Liability. (a) The undersigned absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party (such Obligations being the “Guaranteed Obligations”), and will pay any and all expenses (including fees and expenses of counsel) incurred by the Administrative Agent or any other Guaranteed Party in enforcing any rights under this Guaranty Supplement, the Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) The undersigned, and by their acceptance of this Guaranty Supplement, the Administrative Agent and each other Guaranteed Party, confirm that it is the intention of all such Persons that this Guaranty Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty

A-1

Supplement, the Guaranty and the Obligations of the undersigned hereunder and thereunder. To effectuate the foregoing intention, the Administrative Agent, the other Guaranteed Parties and the undersigned hereby irrevocably agree that the Obligations of the undersigned under this Guaranty Supplement and the Guaranty at any time shall be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Section 4(b) of the Guaranty, will result in the Obligations of the undersigned under this Guaranty Supplement and the Guaranty not constituting a fraudulent transfer or conveyance.

          (c) If any payment shall be required to be made to any Guaranteed Party under this Guaranty Supplement, the Guaranty or any other guaranty, then, subject to Section 4, the undersigned will contribute, to the maximum extent permitted by applicable law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Guaranteed Parties under or in respect of the Loan Documents.

          Section 2. Obligations Under the Guaranty. The undersigned hereby agrees, as of the date first-above written, to be bound as a Guarantor by all of the terms and conditions of the Guaranty to the same extent as each of the other Guarantors thereunder. The undersigned further agrees, as of the date first above written, that each reference in the Guaranty to an “Additional Guarantor” or a “Guarantor” shall also mean and be a reference to the undersigned, and each reference in any other Loan Document to a “Guarantor” or a “Loan Party” shall also mean and be a reference to the undersigned.

          Section 3. Representations and Warranties. As of the date first-above written, the undersigned makes each representation and warranty set forth in Section 6 of the Guaranty to the same extent as each other Guarantor.

          Section 4. Delivery by Telecopier. Delivery of an executed counterpart of a signature page to this Guaranty Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty Supplement.

          Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a)THIS GUARANTY SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     (b) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR

A-2

PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. THE UNDERSIGNED AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY GUARANTEED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT AGAINST THE UNDERSIGNED OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) THE UNDERSIGNED IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SUBSECTION (b) ABOVE. THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) THE UNDERSIGNED IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9 OF THE GUARANTY. NOTHING IN THIS GUARANTY SUPPLEMENT OR THE GUARANTY WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     (e) THE UNDERSIGNED IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY SUPPLEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, AND (II) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. THE UNDERSIGNED (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER THEREIN BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL

A-3

SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY.

Very truly yours, [NAME OF ADDITIONAL GUARANTOR]
By
	Title:

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EXHIBIT E

OPINION OF COUNSEL TO THE LOAN PARTIES

EX-10.21

Exhibit 10.21

September 21, 2007

Mr. N. Malone Mitchell, 3rd
Longfellow Energy, LP
Dalea Partners, LP
4801 Gaillardia Parkway, Suite 225
Oklahoma City, Oklahoma 73142

Re:      Agreement for the Purchase of Interests in the
Pinon Field Area, Pecos County Texas; in the
Piceance Basin in Rio Blanco County, Colorado;
and in other lands as shown on the attached exhibits (the “Agreement”)

Dear Malone:

Subject to the terms and conditions hereinafter set forth, SandRidge Energy, Inc. (“SandRidge”) hereby agrees to purchase from Longfellow Energy, LP (“Longfellow”), Dalea Partners, LP (“Dalea”), all affiliates and/or subsidiaries of Longfellow, and N. Malone Mitchell 3^rd, collectively (“Sellers”) all of Sellers’ right, title and interest in and to the following oil and gas properties:

•	The Interests (as that term is defined therein) acquired under the Purchase and Sale Agreement dated August 22, 2007 between Clayton Williams Energy, Inc. (“CWEI”) and Longfellow Energy, LP, which is attached as Exhibit A (“CWEI Agreement”). These Interests shall be referred to as the “CWEI Interests.”
•	The oil and gas leases, together with all rights incident thereto, acquired under the Purchase and Sale Agreement dated August 22, 2007 between Clayton Williams Ranch Co., et at., (“Williams”) and Longfellow Ranch Partners, LP and Longfellow Energy, LP, which is attached as Exhibit A-1 (“Williams Agreement”). These oil and gas leases, together with all incidental rights, shall be referred to as the “Williams O&G Leasehold” and are described in Section 1(a) (iii) (c) of the Williams Agreement.
	(For convenience the parties have attached Exhibit B which is intended to reflect a more complete legal description of the combined CWEI Interests and Williams O&G Leasehold, it being the intent of the parties to include all such interests regardless of whether a particular oil and gas lease or well is inadvertently omitted or incorrectly described in the CWEI Agreement, Williams Agreement or Exhibit B.)

Discovering Beneath | Exploring Beyond™

1601 N.W. Expressway. Suite 1600, Oklahoma City, OK 73118 • Phone 405.753.5500, Fax 405.753.5975
• sandridgeenergy.com

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 2

• Working interests in SandRidge or affiliate, operated wells and leasehold, including all interests acquired by Sellers or any designee of Sellers under the Well Participation Program, whether operated by SandRidge or an affiliate; and various overriding royalty interests in SandRidge’s Piceance Basin Properties. These interests are described on Exhibit C and shall be referred to as the “Longfellow Interests.” It is the intent of the parties to include all oil and gas leasehold interests, including working interests and overriding royalty interests, in and to the oil and gas properties operated by SandRidge or any affiliate regardless of whether a particular oil and gas lease or well is inadvertently omitted or incorrectly described on Exhibit C. Specifically excluded from the Longfellow Interests are any mineral, royalty, or surface interests of Sellers. Specifically included in the Longfellow Interests is one non-operated oil and gas property referred to as the Thompson 2-15 well located in Beckham County, Oklahoma, together with all associated oil and gas leasehold interest.

• Collectively the CWEI Interests, the Williams O&G Leasehold, and Longfellow Interests shall be referred to as “the Subject Interests.”

Purchase Price

The purchase price for the Subject Interests shall be Thirty Two Million Dollars ($32,000,000).

Effective Date

Sellers shall be liable for all costs and expenses relating or attributable to the Subject Interests (including but not limited to production, severance or excise taxes and royalties) and entitled to all revenues and production, including oil in tanks, relating or attributable to the Subject Interests prior to August 1, 2007 (the “Effective Date”). SandRidge shall be responsible for such costs and expenses and entitled to such revenues and production from and after the Effective Date. Any ad valorem taxes associated with the Subject Interests shall be prorated between the Sellers and SandRidge at Closing based on the Effective Date. Any adjustments pursuant to this section will be made at Closing, if possible. If adjustment amounts are undetermined or estimated as of Closing, an adjustment will be made within ninety (90) days of Closing.

Closing

Closing shall occur no later than twenty (20) days after the consummation of the initial public offering of the common stock of SandRidge (the “IPO”) or August 27, 2008, whichever shall first occur; provided however, that SandRidge shall have no obligation to close until five (5) business days after Sellers’ complete and close on their acquisition of both the CWEI Interests and the Williams O&G Leasehold.

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 3

Adjustment to Purchase Price for Delayed Closing

     If Closing does not occur before January 1, 2008, the Purchase Price shall be increased according to the following:

• If Closing occurs during January 2008, the Purchase Price shall be $32,160,000

• If Closing occurs during February 2008, the Purchase Price shall be $32,320,000

• If Closing occurs during March 2008, the Purchase Price shall be $32,480,000

• If Closing occurs during April 2008, the Purchase Price shall be $32,640,000

• If Closing occurs during May 2008, the Purchase Price shall be $32,800,000

• If Closing occurs during June 2008, the Purchase Price shall be $32,960,000

• If Closing occurs during July 2008, the Purchase Price shall be $33,120,000

• If Closing occurs during August 2008, the Purchase Price shall be $33,280,000

If Closing does not occur on or before August 27, 2008, the Purchase Price shall be $33,440,000 and Sellers may bring an action seeking specific performance under this Agreement. The above adjustments to the Purchase Price shall not be applicable to the extent Closing is delayed because Sellers have not closed on the acquisition of the CWEI Interests or Williams O&G Leasehold on or before November 15, 2007, or Sellers otherwise refuse to close. If Sellers close on the CWEI Interests or Williams O&G Leasehold subsequent to November 15, 2007, then the above adjustments to the Purchase Price will be revised accordingly to take into account the date Sellers actually close on both the CWEI Interests and Williams O&G Leasehold. Further, if Sellers refuse or fail to close under this Agreement, then SandRidge may bring an action seeking specific performance under this Agreement in addition to any other remedies available to SandRidge.

Payment Obligations for Capital Expenditures and Revenue Distribution

To the extent that SandRidge is the operator of the Subject Interests, and to the extent Sellers pay capital costs incurred for time periods following after the Effective Date that are attributable to Sellers’ interest in the Subject Interests, such amounts paid by Sellers would only serve to increase the purchase price adjustments, if any, under this Agreement at Closing. Therefore, the parties agree that Sellers shall not be obligated to pay any capital costs incurred for time periods after the Effective Date with respect to the Subject Interests operated by SandRidge or its NEG affiliates. Notwithstanding, to the extent Sellers are entitled to receive revenue attributable to Sellers’ interest in the Subject Interests, such revenues will be distributed in the ordinary course of business until Closing. Should Sellers receive revenues for production periods after the Effective Date, those amounts shall be credited to SandRidge as a downward adjustment to the Purchase Price. Provided, if SandRidge’s acquisition of the Subject Interests from Sellers does not close, then Sellers remain obligated for all capital costs attributable to Sellers’ interests in the Subject Interests operated by SandRidge or its NEG affiliates.

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 4

Purchaser and Section 1031 Exchanges

SandRidge reserves the right to substitute as purchaser hereunder any of its affiliates, without otherwise altering the terms and conditions of this Agreement.

SandRidge and Sellers hereby agree that SandRidge shall have the right at any time prior to Closing to assign all or a portion of its rights under this Agreement to a Qualified Intermediary (as that term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations) in order to accomplish the transaction in a manner that will comply, either in whole or in part, with the requirements of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, (“Code”). Likewise, each of the Sellers shall have the right at any time prior to Closing to assign all or a portion of its rights under this Agreement to a Qualified Intermediary for the same purpose. In the event any of the parties assigns their rights under this Agreement pursuant to this paragraph, such party agrees to notify the other party in writing of such assignment at or before Closing. If Seller(s) assigns its rights under this Agreement for this purpose, SandRidge agrees to (i) consent to such assignment of its rights in this Agreement, and (ii) pay the Purchase Price into a qualified escrow or qualified trust account at Closing as directed in writing. If SandRidge assigns its rights under this Agreement for this purpose, Sellers agree to (i) consent to the assignment by SandRidge of its rights in this Agreement in (ii) accept the Purchase Price from the qualified escrow or qualified trust account at Closing, and (iii) at Closing, convey and assign directly to SandRidge or to the Qualified Intermediary, at the option of SandRidge, the which are the subject of this Agreement upon satisfaction of the other conditions to Closing and other terms and conditions hereof. Sellers and SandRidge acknowledge and agree that any assignment of this Agreement to a Qualified Intermediary shall not release either party from any of their respective liabilities and obligations to each other under this Agreement, and that none of the parties represents to the other that any particular tax treatment will be given to either Party as a result thereof.

No Gas Imbalance

To the knowledge of Sellers and SandRidge, the Subject Interests are in balance as of the Effective Date. Provided, however, if an aggregate net gas imbalance relative to the Subject Interests exists as of the Effective Date (a “Gas Imbalance”), the Purchase Price shall be increased if the Subject Interests are underproduced, or decreased if the Subject Interests are overproduced, by the product of (i) the amount (measured in MMBtu) of such Gas Imbalance, and (ii) $1.50 per MMBtu. The parties agree to use their best efforts to avoid creating a Gas Imbalance with respect to the Subject Interests for the period of time after the Effective Date and prior to Closing.

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 5

No Encumbrances

The Interests are, or will be delivered at Closing, free and clear of any mortgages, liens or other encumbrances (including without limitation preferential purchase rights, carried interests, reversionary “back-in” working interests, or similar interests that might adversely affect the quantum or quality of the Subject Interests), other than leasehold royalty and overriding royalties in existence and of record as of the Effective Date, CWEI’s right to participate for a 12.5% working interest in the Dimple Hills Prospect in accordance with the Exploration and Development Agreement attached to this Agreement as Exhibit D, and encumbrances known to SandRidge as of the Effective Date.

Title and Form of Assignment of the Interests

Dalea has provided CWEI and Williams Ranch with notice that it will be the purchaser of the CWEI Interests and William O&G Leasehold. The notice is attached as Exhibit E.

• With respect to the CWEI Interests, Dalea will convey the CWEI Interests to SandRidge on an assignment in the form of Exhibit C (form of assignment) attached to the CWEI Agreement (Exhibit A).

• With respect to the Williams O&G Leasehold, Dalea will convey the Williams O&G Leasehold to SandRidge on an assignment in the form of Exhibit D (form of Assignment) attached to the Williams Agreement (Exhibit B).

• With respect to the Longfellow Interests, Longfellow will convey the Longfellow Interests to SandRidge on the form of assignment attached to this Agreement as Exhibit F.

Sellers are conveying the Subject Interests to SandRidge with warranty of title being limited to “by, through or under Sellers, but not otherwise.” Because Sellers will hold title to the CWEI Interests and Williams O&G Leasehold for the time period between Sellers’ acquisition from CWEI and Williams and Closing with SandRidge, Sellers will assign to SandRidge, to the extent permitted, any rights or remedies they have with respect to the CWEI Interests and Williams O&G Leasehold.

Loss of Subject Interests

SandRidge’s agreement to pay the Purchase Price for the Subject Interests is based in part on the gross working interests and net revenue interests, if shown, on the attached exhibits, as well Sellers representations of the oil and gas interests to be acquired under the CWEI Agreement and Williams Agreement. To the extent the Subject Interests differ from that shown on the exhibits or as represented by Sellers, the Purchase Price will be adjusted accordingly. Sellers agree not to take any action or enter into any

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 6

agreement of any nature (including without limitation a mortgage or deed of trust, or an assignment or conveyance of any kind) which could in any way burden, encumber or otherwise diminish Sellers interest in the Subject Interests.

If, after the Effective Date but prior to Closing, all or any portion of the Subject Interests are destroyed or damaged, whether by fire, flood, earthquake, storm, theft, vandalism, riot, sabotage, accident or other casualty of a similar nature, or shall be taken by condemnation or under the right of eminent domain , Sellers and SandRidge may agree: (i) to exclude the affected property and adjust the Purchase Price by a mutually agreed upon amount; or (ii) to sell and transfer the affected property under the terms of this Agreement notwithstanding any such destruction or taking (without reduction of the Purchase Price) in which case Sellers shall, at Closing, pay to SandRidge all sums paid to Sellers by third parties by reason of the destruction, damage or taking of the affected property and shall assign, transfer and set over unto SandRidge all of the right, title and interest of Sellers in and to any claims against or unpaid proceeds or other payments from third parties arising out of such destruction or taking, including, but not limited to, insurance proceeds. Prior to Closing, Sellers shall not voluntarily compromise, settle or adjust any amounts payable by reason of any damage, destruction or taking of the Subject Interests during the aforementioned period without first obtaining the written consent of SandRidge.

Attorney’s Fees and Expenses

 If any party institutes an action or proceeding against the other relating to the provisions of this Agreement or any default hereunder, the unsuccessful party to such action or proceeding will reimburse the successful party for the reasonable expenses for attorney’s fees and other disbursements incurred by the successful party.

Consents and Approvals

SandRidge’s obligation to close on the Subject Interests is subject to the receipt of all necessary approvals and consents, whether corporate, third-party, or otherwise, and all necessary filings, approvals, or consents for the sale/purchase of the interests that may be required under any agreement or any governmental law or regulation. To the knowledge of SandRidge there are no necessary approvals or consents as of the Effective Date.

Confidentiality and Announcements

This Agreement is confidential and the parties agree to not disclose its terms, or the fact that discussions or negotiations are taking place, except to necessary consultants, business partners, financial advisors and attorneys who need to know such information in order to assist the parties in the transactions contemplated by this Agreement, and who agree to be bound by the obligations of confidentiality set out herein, and as

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 7

required by law. Additionally no press release concerning this Agreement, or any discussions or negotiations related thereto, shall be released without first consulting the other party.

Notices

     Any notices required under this Agreement should be provided as follows:

If to SandRidge:	If to Sellers:
V. Bruce Thompson	Matthew McCann
1601 N.W. Expressway	4801 Gaillardia Parkway
Suite 1600	Suite 225
Oklahoma City, Oklahoma 73118	Oklahoma City, Oklahoma 73142

Multiple Counterparts

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

Representations and Covenants of Sellers and SandRidge

To the knowledge of Sellers, all material royalties, rentals, and other payments due under or in respect of the Subject Interests have been properly and timely paid, all conditions necessary to keep the Subject Interests in full force have been fully performed. No notices have been received by Sellers or, to the knowledge of Sellers, by CWEI or Williams of any claims to the contrary and to the knowledge of Sellers, all of the Subject Interests are in full force and effect.

To the knowledge of Sellers, all material, valid laws, regulations, and orders of all governmental agencies having jurisdiction over the Subject Interests have been and shall continue to be complied with until Closing.

On the date hereof no claim, suit, action or other proceeding is pending before any court or governmental agency to which Sellers, CWEI, or Williams are a party and which might result in impairment or loss of Sellers’, CWEI’s, or Williams’ title to any part of the Subject Interests or that might hinder or impede operation of any of the Subject Interests or that might otherwise materially and adversely affect the value of the any of the Subject Interests, and to the knowledge of Sellers, no such claim, suit, action or other proceeding is threatened. Sellers shall promptly notify SandRidge of any such proceeding arising prior to Closing.

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 8

On the date hereof, Sellers are not aware of any material contract; commitment to make an expenditure in connection with the ownership or operation of the Subject Interests (other than routine expenses incurred in the normal operation of the Subject Interests; loss or reduction of gross working interest or net revenue interest from that shown on the attached exhibits or as represented by Sellers; or any other outstanding obligation the might result in impairment or loss of Sellers’ interest in the Subject Interests.

On the date hereof and at closing, the consummation of the transactions contemplated by this Agreement will not violate, or be in conflict with, the articles of incorporation, bylaws or governing documents of Sellers or any material provision of any agreement or instrument to which Sellers are a party, or will not violate or be in conflict with any material provision of any judgment, decree, order, statute, rule or regulation applicable to Sellers or any of the Subject Interests, or result in the creation or imposition of any lien on any of the Subject Interests.

On the date hereof and at closing, Sellers are duly organized, validly existing and in good standing under the laws of the state of their respective organization, have full legal power to carry on their business as now conducted, are authorized to hold title to the Subject Interests, and are in good standing and duly qualified to conduct its business in the jurisdiction where the Subject Interests are located. Further, the execution, delivery and performance of this Agreement by Sellers and the consummation of the transactions contemplated hereby have been duly and validly authorized pursuant to the governing documents of Sellers.

On the date hereof and at closing, SandRidge is duly organized, validly existing and in good standing under the laws of the state of its organization, has full legal power to carry on its business as now conducted, is authorized to hold title to the Subject Interests, and is in good standing and duly qualified to conduct its business in the jurisdiction where the Subject Interests are located. Further, the execution, delivery and performance of this Agreement by SandRidge and the consummation of the transactions contemplated hereby have been duly and validly authorized pursuant to the governing documents of SandRidge.

Further Assurances

At and after Closing, the parties agree to execute all documents necessary or appropriate to consummate the transactions contemplated by this Agreement.

Conditions

The obligations of SandRidge under this Agreement are subject to and conditioned upon the following:

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 9

• Execution and delivery of the Amended Surface Use and Damages Agreement between Longfellow Ranch Partners, LP and SandRidge covering the properties of Longfellow Ranch Partners, LP in Pecos, Terrell and Brewster Counties, Texas commonly known as the Longfellow Ranch, the Longfellow-Schneeman Ranch, and the West Ranch, together with related outstanding pipeline easements and rights-of-way. The West Ranch is being acquired by Longfellow Ranch Partners, LP under the Williams Agreement.

• Approval of the Board of Directors of SandRidge and receipt of the applicable Fairness Opinion.

• Execution and delivery by N. Malone Mitchell, 3^rd of the Lock-Up Letter Agreement.

• Settlement of all undisputed amounts owing by Sellers to SandRidge.

• Sellers’ closing under the CWEI Agreement and Williams Agreement.

          Upon execution by Sellers the terms of this Agreement shall become binding on the parties and enforceable by the parties. Time is of the essence. If the terms of this agreement are acceptable, please so indicate by signing the appropriate space below and returning one (1) original to the attention of the undersigned.

Should you have any questions regarding this offer, please do not hesitate to contact the undersigned.

Sincerely,

SANDRIDGE ENERGY, INC.

Tom L. Ward
Chairman and
Chief Executive Officer

(Agreement and acceptance signatures on following page)

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 10

AGREED TO AND ACCEPTED this 21^st day of September, 2007.

LONGFELLOW ENERGY, LP

By: Deut 8, LLC

By:	/s/ N. Malone Mitchell
	N. MalOne Mitchell, 3rd, Manager
DALEA PARTNERS, LP
By: Dalea Management, LLC
By:	/s/ N. Malone Mitchell
	N. Malone Mitchell 3rd, Manager
N. MALONE MITCHELL, 3RD
By:	/s/ N. Malone Mitchell
	N. Malone Mitchell, 3rd, individually

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 11

EXHIBIT “A”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, L.P, and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco County, Colorado, effective date of August 1, 2007.

CWEI Agreement

END OF EXHIBIT “A”

EXHIBIT “B”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, L.P. and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco County, Colorado, effective date of August 1, 2007.

Williams Agreement

END OF EXHIBIT “B”

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 12

EXHIBIT “C”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, LP and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco, Colorado, effective date of August 1, 2007.

PROPERTIES: Longfellow Interests: Will list the wells and their Wl and NRI being sold by Longfellow, together with a description of the applicable oil and gas leases

NOTE:

It is the Sellers’ intent to convey to SandRidge all of the Sellers’ right, title and interest in and to any oil and gas leases covering lands located in Pecos County, Texas and Rio Blanco County, Colorado, regardless of the omission of any particular well(s), leases or errors in description and interest amounts. The descriptions above are deemed to include all of Sellers’ interest in the wellhead equipment, personal property, facilities, and other improvements appurtenant to, or used or obtained, in connection with such leases.

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 13

END OF EXHIBIT “C”

EXHIBIT “D”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, L.P. and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco County, Colorado, effective date of August 1, 2007.

  Exploration and Development Agreement Covering the Dimple Hills Prospect

END OF EXHIBIT “D”

EXHIBIT “E”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, L.P. and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco County, Colorado, effective date of August 1, 2007.

Notice of Dalea Partners, LP

END OF EXHIBIT “E”

EXHIBIT “F”

Attached to and made a part of that certain Purchase Agreement dated August 31, 2007, by and between SandRidge Energy, Inc., as Buyer and Longfellow Energy, L.P. and Dalea Partners, LP, as Sellers covering interests in Pecos County, Texas and Rio Blanco County, Colorado, effective date of August 1, 2007.

Form of Assignment Covering Longfellow Interests

Letter Agreement for Acquisition of Properties
Longfellow Energy, LP
Dalea Partners, LP
Page 14

END OF EXHIBIT “F”

EX-21.1

Exhibit 21.1

SandRidge Subsidiaries:

	State of
Name	Organization
SandRidge Piceance, LLC	CO
PetroSource Energy Company, LLC	TX
Hondo Heavy Haul, LLC	TX
SandRidge Exploration and Production, LLC	DE
SandRidge Onshore, LLC	DE
SandRidge Offshore, LLC	DE
ROC Gas Company, Inc.	TX
Chaparral Supply, LLC	TX
Sagebrush Pipeline, LLC	CO
Integra Energy, LLC	TX
Cholla Pipeline, LP	TX
Riata Energy Operating, LLC	TX
Lariat Services, Inc.	TX
PSCO2, LLC	TX
PetroSource Production Co., LLC	TX
SandRidge Holdings, Inc.	DE

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Amendment No. 3 to Form S-1 (File No. 333-144004) of our report dated March 30, 2007, except for Restatement section of Note 1 to the consolidated financial statements, as to which the date is May 11, 2007 relating to the consolidated financial statements of SandRidge Energy, Inc., which appears in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP
Houston, Texas
October 3, 2007

EX-23.4

EXHIBIT 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated October 27, 2006, accompanying the financial statements of NEG Oil & Gas LLC and subsidiaries excluding National Energy Group, Inc., and the 10 ³/4% Senior Notes due from National Energy Group, Inc., but including National Energy Group, Inc.’s 50% membership interest in NEG Holding LLC as of December 31, 2004 and 2005 and for each of the three years in the period ended December 31, 2005 contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ Grant Thornton LLP

Houston, Texas
October 3, 2007

CORRESP

corresp