Facility A Borrowing Base and $75.0 million and (2) a term loan facility of up to the lesser of the Facility B Borrowing Base and $25.0 million. It is secured by substantially all of our assets and is guaranteed by our subsidiary.

The Facility A Borrowing Bases will be determined by the lenders at least semi-annually on each November 1 and May 1. The Facility A Borrowing Base, under the Credit Facility, on September 30, 2004 and December 31, 2004 was $28 million and $30 million, respectively, of which $19.0 and $18.0 million, respectively, were drawn and outstanding. The Facility A Borrowing Base, under the Prior Credit Facility, on December 31, 2003 was $19.0 million, of which $7.0 million was drawn and outstanding. We used proceeds from the public offering in February 2004 to repay the outstanding balance under the Prior Credit Facility.

We and the lenders may each request one unscheduled borrowing base determination subsequent to each scheduled determination. The Facility A Borrowing Base will at all times equal the Facility A Borrowing Base most recently determined by the lenders, less quarterly borrowing base reductions required subsequent to such determination. The lenders will reset the Facility A Borrowing Base amount at each scheduled and each unscheduled borrowing base determination date.

If the outstanding principal balance of the revolving loans under the Credit Facility exceeds the Facility A Borrowing Base at any time (including, without limitation, due to a quarterly borrowing base reduction (as described above)), we have the option within 30 days to take any of the following actions, either individually or in combination: make a lump sum payment curing the deficiency, pledge additional collateral sufficient in the lenders' opinion to increase the Facility A Borrowing Base and cure the deficiency or begin making equal monthly principal payments that will cure the deficiency within the ensuing six-month period. Those payments would be in addition to any payments that may come due as a result of the quarterly borrowing base reductions. Otherwise, any unpaid principal or interest will be due at maturity.

For each revolving loan, the interest rate will be, at our option, (1) the Eurodollar Rate, plus an applicable margin equal to 2.375% if the amount borrowed is greater than or equal to 90% of the Facility A Borrowing Base, 2.0% if the amount borrowed is less than 90%, but greater than or equal to 50% of the Facility A Borrowing Base, or 1.625% if the amount borrowed is less than 50% of the Facility A Borrowing Base; or (2) the Base Rate, plus an applicable margin of 0.375% if the amount borrowed is greater than or equal to 90% of the Facility A Borrowing Base. The interest rate on each term loan will be, at our option, (1) the Eurodollar Rate, plus an applicable margin to be determined by the lenders; or (2) the Base Rate, plus an applicable margin to be determined by the lenders. Interest on Eurodollar Loans is payable on either the last day of each Eurodollar option period or monthly, whichever is earlier. Interest on Base Rate Loans is payable monthly.

We are subject to certain covenants under the terms of the Credit Facility, which were amended at the time of the issuance of the Senior Secured Notes. These covenants, as amended, include, but are not limited to the maintenance of the following financial covenants: (1) a minimum current ratio of 1.0 to 1.0 (including availability under the borrowing base), (2) a minimum quarterly debt services coverage of 1.25 times, (3) a minimum shareholders' equity equal to $100.0 million, plus 100% of all subsequent common and preferred equity contributed by shareholders subsequent to June 30, 2004, plus 50% of all positive earnings occurring subsequent to June 30, 2004, plus, 180 days after issuance of any second-lien subordinated debt with another lender (the "Secured Subordinated Debt"), an amount equal to the difference, if positive, of (A) 50% of the net proceeds from the issuance less (B) 100% of all common and preferred equity contributed by shareholders from September 30, 2004 to the date of the issuance of any Secured Subordinated Debt, and (4) a maximum total recourse debt to EBITDA ratio (as defined in the Credit Facility) of not more than 3.0 to 1.0. The Credit Facility also places restrictions on additional indebtedness, dividends to shareholders, liens, investments, mergers, acquisitions, asset dispositions, asset pledges and mortgages, change of control, repurchase or redemption for cash of our common stock, speculative commodity transactions and other matters.

In connection with the Senior Secured Notes Purchase Agreement, we amended the Credit Facility including without limitation, to: (1) amend the covenant regarding maintenance of a minimum shareholders' equity, (2) add a new covenant requiring maintenance of a minimum EBITDA to interest expense ratio and (3) add other provisions and a consent which allow for the indebtedness incurred under the Senior Secured Notes.

On November 7, 2004, we determined that, as of September 30, 2004, we were not in compliance with the minimum current ratio covenant in the Credit Facility. We cured the noncompliance on October 29, 2004 with the issuance of the Senior Secured Notes. On November 10, 2004, the lenders under the Credit Facility agreed in a letter to the Company to waive the noncompliance period from September 30, 2004 through October 29, 2004.

At December 31, 2003 and 2004, no letters of credit were issued and outstanding under the Prior Credit Facility and the Credit Facility, respectively.

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