Exhibit 10.1

$57,500,000

AMENDED AND RESTATED

SENIOR SECURED DEBTOR-IN-POSSESSION CREDIT AGREEMENT

dated as of December 21, 2011

among

DELTA PETROLEUM CORPORATION,

as Borrower,

and

THE GUARANTORS PARTY HERETO,

as Guarantors,

and

THE LENDERS PARTY HERETO

and

WHITEBOX ADVISORS LLC,

as Administrative Agent and Collateral Agent,

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TABLE OF CONTENTS

 

September 30,

ARTICLE I DEFINITIONS

       2   

SECTION 1.01 Defined Terms

       2   

SECTION 1.02 Classification of Loans and Borrowings

       29   

SECTION 1.03 Terms Generally

       29   

SECTION 1.04 Accounting Terms; GAAP

       29   

SECTION 1.05 Resolution of Drafting Ambiguities

       29   

SECTION 1.06 Timing of Payment and Deliveries

       29   

ARTICLE II THE CREDITS

       30   

SECTION 2.01 Commitments

       30   

SECTION 2.02 Loans

       32   

SECTION 2.03 Borrowing Procedure

       Error! Bookmark not defined.   

SECTION 2.04 Evidence of Debt; Repayment of Loans

       33   

SECTION 2.05 Fees

       33   

SECTION 2.06 Interest on Loans

       34   

SECTION 2.07 Termination and Reduction of Commitments

       34   

SECTION 2.08 Interest Elections

       Error! Bookmark not defined.   

SECTION 2.09 Reserved

       35   

SECTION 2.10 Optional and Mandatory Prepayments of Loans

       35   

SECTION 2.11 Alternate Rate of Interest

       Error! Bookmark not defined.   

SECTION 2.12 Increased Costs

       37   

SECTION 2.13 Breakage Payments

       38   

SECTION 2.14 Payments Generally; Pro Rata Treatment; Sharing of Set Off

       38   

SECTION 2.15 Taxes

       40   

SECTION 2.16 Mitigation Obligations; Replacement of Lenders

       42   

SECTION 2.17 Reserved

       43   

SECTION 2.18 Letters of Credit

       Error! Bookmark not defined.   

SECTION 2.19 Defaulting Lenders

       43   

SECTION 2.20 Reserved

       44   

SECTION 2.21 Payment of Obligations

       44   

SECTION 2.22 No Discharge; Survival of Claims

       44   

ARTICLE III REPRESENTATIONS AND WARRANTIES

       44   

SECTION 3.01 Organization; Powers

       44   

SECTION 3.02 Authorization; Enforceability

       44   

SECTION 3.03 No Conflicts

       45   

SECTION 3.04 Financial Statements; Projections

       45   

SECTION 3.05 Properties

       46   

SECTION 3.06 Intellectual Property

       47   

SECTION 3.07 Equity Interests and Subsidiaries

       47   

SECTION 3.08 Litigation; Compliance with Laws

       47   

SECTION 3.09 [Reserved]

       47   

SECTION 3.10 Federal Reserve Regulations

       47   

 

ii

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September 30,

SECTION 3.11 Investment Company Act; Public Utility Holding Company Act

       48   

SECTION 3.12 Use of Proceeds

       49   

SECTION 3.13 Taxes

       49   

SECTION 3.14 No Material Misstatements

       49   

SECTION 3.15 Labor Matters

       49   

SECTION 3.16 [Reserved]

       50   

SECTION 3.17 Employee Benefit Plans

       50   

SECTION 3.18 Environmental Matters

       50   

SECTION 3.19 Insurance

       52   

SECTION 3.20 Legality; Validity and Enforceability of Liens

       52   

SECTION 3.21 Foreign Assets Control Regulations

       52   

SECTION 3.22 Anti-Terrorism Law

       52   

ARTICLE IV CONDITIONS TO CREDIT EXTENSIONS

       53   

SECTION 4.01 Conditions to Initial Credit Extensions

       53   

SECTION 4.02 Conditions to All Credit Extensions

       56   

SECTION 4.03 Exit Credit Facility

       Error! Bookmark not defined.   

ARTICLE V AFFIRMATIVE COVENANTS

       57   

SECTION 5.01 Financial Statements, Reports, etc.

       58   

SECTION 5.02 Litigation and Other Notices

       62   

SECTION 5.03 Existence; Businesses and Properties

       63   

SECTION 5.04 Insurance

       63   

SECTION 5.05 Obligations and Taxes

       65   

SECTION 5.06 Employee Benefits

       65   

SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Annual
Meetings

       66   

SECTION 5.08 Use of Proceeds

       66   

SECTION 5.09 Compliance with Environmental Laws; Environmental Reports

       66   

SECTION 5.10 Meetings with Lenders

       67   

SECTION 5.11 Additional Collateral; Additional Guarantors

       67   

SECTION 5.12 Security Interests; Further Assurances

       68   

SECTION 5.13 Information Regarding Collateral

       69   

SECTION 5.14 Subordination of Loans

       70   

SECTION 5.15 [Reserved]

       70   

SECTION 5.16 [Reserved]

       70   

SECTION 5.17 Cooperation with Advisors

       70   

ARTICLE VI NEGATIVE COVENANTS

       71   

SECTION 6.01 Indebtedness

       71   

SECTION 6.02 Liens

       72   

SECTION 6.03 Investments, Loans and Advances

       75   

SECTION 6.04 Mergers and Consolidations

       76   

SECTION 6.05 Asset Sales

       Error! Bookmark not defined.   

SECTION 6.06 Acquisitions

       Error! Bookmark not defined.   

SECTION 6.07 Dividends

       77   

 

iii

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September 30,

SECTION 6.08 Transactions with Affiliates

       77   

SECTION 6.09 Compliance with 13-Week Budget

       78   

SECTION 6.10 Prepayments of Indebtedness; Modifications of Organizational
Documents and Other Documents, etc.

       78   

SECTION 6.11 Limitation on Certain Restrictions on Subsidiaries

       79   

SECTION 6.12 Limitation on Issuance of Capital Stock

       79   

SECTION 6.13 Limitation on Creation of Subsidiaries

       79   

SECTION 6.14 Business

       79   

SECTION 6.15 Limitation on Accounting Changes

       79   

SECTION 6.16 Fiscal Year

       79   

SECTION 6.17 No Further Negative Pledge

       79   

SECTION 6.18 Anti-Terrorism Law; Anti-Money Laundering

       80   

SECTION 6.19 Embargoed Person

       80   

SECTION 6.20 [Reserved]

       80   

SECTION 6.21 Critical Vendor and Other Payments

       80   

SECTION 6.22 Pre-Petition Indebtedness

       81   

ARTICLE VII GUARANTEE

       81   

SECTION 7.01 The Guarantee

       81   

SECTION 7.02 Obligations Unconditional

       81   

SECTION 7.03 Reinstatement

       83   

SECTION 7.04 Subrogation; Subordination

       83   

SECTION 7.05 Remedies

       83   

SECTION 7.06 Instrument for the Payment of Money

       83   

SECTION 7.07 Continuing Guarantee

       83   

SECTION 7.08 General Limitation on Guarantee Obligations

       83   

SECTION 7.09 Release of Subsidiary Guarantors

       84   

SECTION 7.10 Right of Contribution

       84   

ARTICLE VIII EVENTS OF DEFAULT

       84   

SECTION 8.01 Events of Default

       84   

ARTICLE IX COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS

       89   

SECTION 9.01 Collateral Account

       89   

SECTION 9.02 Reserved

       90   

SECTION 9.03 Application of Proceeds

       90   

ARTICLE X THE ADMINISTRATWE AGENT

       91   

SECTION 10.01 Appointment

       91   

SECTION 10.02 Agent in Its Individual Capacity

       91   

SECTION 10.03 Exculpatory Provisions

       91   

SECTION 10.04 Reliance by Agent

       92   

SECTION 10.05 Delegation of Duties

       92   

SECTION 10.06 Successor Agent

       92   

SECTION 10.07 Non-Reliance on Agent and Other Lenders

       93   

 

iv

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September 30,

SECTION 10.08 Name Agents

       93   

SECTION 10.09 Indemnification

       93   

SECTION 10.10 Actions in Concert

       94   

SECTION 10.11 Enforcement

       94   

SECTION 10.12 Withholding Tax

       94   

ARTICLE XI MISCELLANEOUS

       95   

SECTION 11.01 Notices

       95   

SECTION 11.02 Waivers; Amendment

       97   

SECTION 11.03 Expenses; Indemnity

       99   

SECTION 11.04 Successors and Assigns

       101   

SECTION 11.05 Survival of Agreement

       104   

SECTION 11.06 Counterparts; Integration; Effectiveness

       104   

SECTION 11.07 Severability

       104   

SECTION 11.08 Right of Setoff

       104   

SECTION 11.09 Governing Law; Jurisdiction; Consent to Service of Process

       105   

SECTION 11.10 Waiver of Jury Trial

       105   

SECTION 11.11 Headings

       106   

SECTION 11.12 Confidentiality

       106   

SECTION 11.13 Interest Rate Limitation

       107   

SECTION 11.14 Lender Addendum

       107   

SECTION 11.15 Obligations Absolute

       107   

SECTION 11.16 USA PATRIOT Act Notice

       107   

SECTION 11.17 Parties including the Trustees; Bankruptcy Court Proceedings

       108   

EXHIBITS:

Exhibit A: Form of Administrative Questionnaire

Exhibit B: Form of Assignment and Assumption

Exhibit C: Form of Borrowing Request

Exhibit D: Form of Compliance Certificate

Exhibit F: Form of Joinder Agreement

Exhibit H: Form of Lender Addendum

Exhibit I: Form of Note

EXHIBIT J: Form of Intercompany Note

Exhibit K: Form of Non-Bank Certificate

Exhibit L: 13 Week Budget

Exhibit M-1: Form of Monthly Variance Report

Exhibit M-2: Form of Weekly Variance Report

Exhibit M-3: Form of Monthly Forecast

Exhibit N: Form of POS Report

SCHEDULES:

Schedule A-1: First Day Orders

Schedule M: Milestones

Schedule 1.01(c): Subsidiary Guarantors

 

v

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Schedule 3.03: Consents, Approvals

Schedule 3.05(b): Interests in Real Property

Schedule 3.06(c) No Material Violation of Intellectual Property

Schedule 3.07(a): Warrants, Options or Other Rights

Schedule 3.07(c): Organization Chart

Schedule 3.17: ERISA Events and Related Matters

Schedule 3.18: Certain Environmental and Real Property Related Matters

Schedule 3.19: Insurance

Schedule 3.24: Material Contracts

Schedule 6.01(b): Existing Indebtedness

Schedule 6.02(c): Existing Liens

Schedule 6.03(a): Existing Investments

 

vi

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AMENDED AND RESTATED SENIOR SECURED DEBTOR-IN-POSSESSION CREDIT

AGREEMENT

This AMENDED AND RESTATED SENIOR SECURED DEBTOR-IN-POSSESSION CREDIT AGREEMENT
(this “Agreement”) dated as of December 21, 2011 among DELTA PETROLEUM
CORPORATION, a Delaware corporation (the “Borrower”), the Guarantors (such term
and each other capitalized term used but not defined herein having the meaning
given to it in Article I hereto), the Lenders (as defined herein), Whitebox
Advisors LLC, as collateral agent (in such capacity, the “Collateral Agent”) and
as administrative agent for the Lenders (in such capacity, the “Administrative
Agent”).

WITNESSETH:

WHEREAS, on December 16, 2011 (the “Petition Date”), the Borrower and the
Guarantors (collectively, the “Debtors” and each, individually, a “Debtor”)
commenced Chapter 11 Case Nos. 11-14006 through 11-14013 as administratively
consolidated at Chapter 11 Case No. 11-14006 (each a “Chapter 11 Case” and
collectively, the “Chapter 11 Cases”) by filing separate voluntary petitions for
reorganization under Chapter 11, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy
Code”), with the United States Bankruptcy Court for the District of Delaware
(the “Bankruptcy Court”).

WHEREAS, from and after the Petition Date, each Debtor will continue to operate
its business and manage its property as a debtor and a debtor-in-possession
pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.

WHEREAS, prior to the Petition Date, the Prior Lenders (as defined herein)
provided financing to the Borrower pursuant to that certain Third Amended and
Restated Credit Agreement, dated as of December 29, 2010, among the Borrower, as
borrower, the Prior Agents (as defined herein) and the Prior Lenders (as
amended, restated, supplemented or otherwise modified prior to the Petition
Date, the “Pre-Petition Credit Agreement”).

WHEREAS, the Borrower has requested that the Lenders provide a senior secured
debtor-in-possession credit facility to the Borrower in an aggregate principal
amount of $57,500,000 to refinance the loans and other obligations outstanding
under the Pre-Petition Credit Agreement and fund the working capital
requirements and other financing needs of the Borrower and its Subsidiaries
during the pendency of the Chapter 11 Cases and to be used in accordance with
Section 3.12 herein.

WHEREAS, the Lenders are willing to provide such financing subject to the terms
and conditions hereof, including without limitation, that (i) $39,473,419.05 of
such new loans are used to refinance the loans and other obligations outstanding
under the Pre-Petition Credit Agreement in full and (ii) all of the Prior
Agent’s and Prior Lenders’ security interests, Liens and mortgages granted by
Loan Parties under the Pre-Petition Credit Agreement and the other Pre-Petition
Loan Documents are deemed assigned to the Collateral Agent and Lenders,
respectively, to secure the Obligations hereunder;

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WHEREAS, the Administrative Agent, Lenders (via Lender Addendums) and the Loan
Parties entered into that certain Credit Agreement dated as of December 19, 2011
to evidence such financing (“Initial Credit Agreement”);

WHEREAS, the Administrative Agent, Lenders and the Loan Parties have agreed to
amend, restate and replace the Initial Credit Agreement with this Agreement;

NOW, THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms.

“13-Week Budget” shall mean a 13-week cash flow forecast for the Loan Parties
substantially in the form attached hereto as Exhibit L or such other form as
shall be reasonably acceptable to the Administrative Agent. As used herein,
“13-Week Budget” shall initially refer to the “13-Week Budget” delivered by the
Borrower to the Administrative Agent and the Lenders on the Closing Date as
authorized by the Interim Order and, thereafter, the most recent 13-Week Budget
delivered by the Borrower to the Administrative Agent in accordance with
Section 5.01(i).

“363 Sale” shall mean a sale of all or substantially all of the assets of the
Borrower and its Subsidiaries pursuant to Section 363 of the Bankruptcy Code.

“Acceptable Security Interest” in any Property means a Lien which (a) exists in
favor of Collateral Agent for the benefit of the Secured Parties, (b) is
superior to all Liens or rights of any other Person in the Property encumbered
thereby, other than Permitted Liens, (c) secures the Obligations, and (d) is
perfected and enforceable.

“Administrative Agent” shall have the meaning assigned to such term in the
preamble hereto and includes each other person appointed as the successor
pursuant to Article X.

“Administrative Agent Fee” shall have the meaning assigned to such term in
Section 2.05(a).

“Administrative Questionnaire” shall mean an Administrative Questionnaire in the
form of Exhibit A, or such other form as may be supplied from time to time by
the Administrative Agent.

“Advance” shall mean any of the First Advance, the Second Advance or the Third
Advance.

 

2

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“Advisors” shall mean (a) outside legal counsel (including local counsel),
auditors, accountants, consultants, appraisers or other advisors of the
Administrative Agent and (b) outside legal counsel of the Collateral Agent.

“AFE” means an authorization for expenditure representing an estimate of work to
be performed for a specific drilling, completion or other operation; provided
that AFEs will not include COPAS overhead or other similar expenses related to
Borrower’s own overhead expense.

“Affiliate” shall mean, when used with respect to a specified 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;
provided, however, that, for purposes of Section 6.06, the term “Affiliate”
shall also include (i) any person that directly or indirectly owns more than 10%
of any class of Equity Interests of the person specified or (ii) any person that
is an executive officer or director of the person specified.

“Agents” shall mean the Collateral Agent and the Administrative Agent; and
“Agent” shall mean any of them.

“Agreement” shall have the meaning assigned to such term in the preamble hereto.

“Anti-Terrorism Laws” shall mean any requirement of law related to terrorism
financing or money-laundering including the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
(“Patriot Act”) of 2001 (Title III of Pub. L. 107-56), The Currency and Foreign
Transactions Reporting Act (also known as the “Bank Secrecy Act”, 31 U.S.C. §§
5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959), the Trading With the
Enemy Act (50 U.S.C. § 1 et seq., as amended) and Executive Order 13224
(effective September 24, 2001).

“Approved Fund” shall mean 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 Purchase Agreement” shall mean an Asset Purchase Agreement, by and among
purchaser, the Borrower, as seller, and Administrative Agent, in its discretion
for certain limited provisions thereof, evidencing, together with the
corresponding sale order, the terms and conditions of the 363 Sale.

“Asset Sale” shall mean (a) any conveyance, sale, lease, sublease, assignment,
transfer or other disposition (including by way of merger or consolidation and
including any Sale and Leaseback Transaction) of any property (excluding sales
of inventory and dispositions of Cash Equivalents, in each case, in the ordinary
course of business and also excluding sales of receivables made in the ordinary
course of business pursuant to customer initiated discounting programs), by
Borrower or any of its Subsidiaries and (b) any issuance or sale of any Equity
Interests of any Subsidiary of Borrower, in each case, to any person other than
(i) the Borrower or (ii) any Guarantor.

 

3

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“Assignment and Assumption” shall mean an assignment and assumption entered into
by a Lender and an Eligible Assignee (with the consent of each party whose
consent is required by Section 11.04(b)), and accepted by the Administrative
Agent, substantially in the form of Exhibit B, or such other form as shall be
approved by the Administrative Agent.

“Assignment Documentation” has the meaning set forth in Section 4.01(n) hereof.

“Attributable Indebtedness” shall mean, when used with respect to any Sale and
Leaseback Transaction, as at the time of determination, the present value
(discounted at a rate equivalent to Borrower’s then-current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such Sale and Leaseback
Transaction.

“Availability Period” shall mean the period from and including the Closing Date
to but excluding the earlier of: (i) the Stated Maturity Date and (ii) the date
of termination of the Commitments of all Lenders.

“Avoidance Actions” shall mean any and all claims or causes of action arising
under Chapter 5 (other than Section 506(c) or Section 724(a)) of the Bankruptcy
Code to avoid transfers, preserve or transfer liens or otherwise recover
property of the estate and the proceeds thereof and property received thereby
whether by judgment, settlement or otherwise. “Avoidance Actions” do not include
claims or causes of action pursuant to Section 549 of the Bankruptcy Code and
the proceeds thereof, to the extent the transfer avoided was of an asset
otherwise constituting Collateral (as defined in the Pre-Petition Credit
Agreement) or Collateral.

“Bankruptcy Code” shall have the meaning assigned to such term in the recitals
hereto.

“Bankruptcy Court” shall have the meaning assigned to such term in the recitals
hereto.

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States.

“Board of Directors” shall mean, with respect to any person, (i) in the case of
any corporation, the board of directors of such person and (ii) in any other
case, the functional equivalent of the foregoing.

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

“Borrowing” shall mean any Loan permitted to be made hereunder.

“Borrowing Availability” shall mean, as of any date of determination, the Total
Commitment less Loan Exposure less the Carve-Out Reserve, subject to any
limitations contained in the Financing Orders.

 

4

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“Borrowing Request” shall mean a request by the Borrower in accordance with the
terms of Section 2.01 and substantially in the form of Exhibit C, or such other
form as shall be approved by the Administrative Agent.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which banks in New York City are authorized or required by law to close.

“Capital Expenditures” shall mean, for any period, without duplication, all
expenditures (whether paid in cash or accrued as a liability) by Borrower and
its Subsidiaries during such period, that, in conformity with GAAP, are or are
required to be included as additions during such period to property, plant or
equipment reflected in the consolidated balance sheet of Borrower and its
Subsidiaries.

“Capital Lease Obligations” of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

“Carve-Out” shall have the meaning assigned to such term in the Interim Order
or, upon entry of the Final Order, in the Final Order.

“Carve-Out Reserve” shall mean, as of any date of determination, a reserve in an
amount equal to the unpaid portion of the Carve-Out.

“Cash Equivalents” shall mean, as to any person, (a) securities issued, or
directly, unconditionally and fully guaranteed or insured, by the United States
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having maturities of
not more than one year from the date of acquisition by such person; (b) time
deposits and certificates of deposit of any Lender or any commercial bank
having, or which is the principal banking subsidiary of a bank holding company
organized under the laws of the United States, any state thereof or the District
of Columbia having, capital and surplus aggregating in excess of $1.0 billion
with maturities of not more than one year from the date of acquisition by such
person; (c) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the qualifications specified in clause (b) above, which
repurchase obligations are secured by a valid perfected security interest in the
underlying securities; (d) commercial paper issued by any person incorporated in
the United States rated at least A-1 or the equivalent thereof by S&P or at
least P-1 or the equivalent thereof by Moody’s, and in each case maturing not
more than one year after the date of acquisition by such person; (e) investments
in money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (a) through (d) above; and
(f) demand deposit accounts maintained in the ordinary course of business.

 

5

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“Casualty Event” shall mean any loss of title or any loss of or damage to or
destruction of, or any condemnation or other taking (including by any
Governmental Authority) of, any property of Borrower or any of its Subsidiaries.
“Casualty Event” shall include but not be limited to any taking of all or any
part of any Real Property of any person or any part thereof, in or by
condemnation or other eminent domain proceedings pursuant to any law, or by
reason of the temporary requisition of the use or occupancy of all or any part
of any Real Property of any person or any part thereof by any Governmental
Authority, civil or military, or any settlement in lieu thereof.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq.

“Chapter 11 Case” and “Chapter 11 Cases” shall have the meaning assigned to each
such term in the recitals hereto.

“Change in Law” shall mean (a) the adoption of any law, treaty, order, rule or
regulation after the Closing Date, (b) any change in any law, treaty, order,
rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the Closing Date or (c) compliance by any Lender
(or for purposes of Section 2.15(a), by any lending office of such Lender or for
purposes of Section 2.11(b), by such Lender’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the Closing Date.

“Charges” shall have the meaning assigned to such term in Section 11.13.

“Closing Date” shall mean the first date on which all of the conditions set
forth in Section 4.01 were satisfied as specified by the Administrative Agent.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

“Collateral” shall have the meaning ascribed to “Pledged Collateral” in the
Security Agreement, and, for the avoidance of doubt, shall include all real and
personal property of the Loan Parties now owned or hereafter acquired and all
other property of whatever kind and nature, in each case, that is pledged as
collateral under any Security Document, the Financing Orders or any other order
of the Bankruptcy Court in the Chapter 11 Cases; for the avoidance of doubt,
“Collateral” shall include all prepetition real and personal property assets of
the Loan Parties and all post petition real and personal property assets of the
Loan Parties (including, without limitation, the Avoidance Actions).

“Collateral Account” shall mean a collateral account or sub-account in the form
of a deposit account established and maintained by the Administrative Agent for
the benefit of the Secured Parties, in accordance with the provisions of
Section 9.01.

“Collateral Agent” shall have the meaning assigned to such term in the preamble
hereto.

“Commitment” shall mean, with respect to each Lender, the Commitment of such
Lender to fund its Pro Rata Share of the Term Loans in accordance with the
provisions hereof. Each Lender’s Commitment is set forth on Schedule I to the
Lender Addendum executed

 

6

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and delivered by such Lender or in the Assignment and Assumption pursuant to
which such Lender shall have assumed its Commitment, as applicable, as the same
may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 11.04. The initial aggregate amount of the Lenders’
Commitments is $57,500,000.

“Committee” shall mean the official committee of unsecured creditors formed in
the Chapter 11 Cases.

“Communications” shall have the meaning assigned to such term in
Section 11.01(f).

“Companies” shall mean Borrower and its Subsidiaries; and “Company” shall mean
any one of them.

“Compliance Certificate” shall mean a certificate of a Financial Officer
substantially in the form of Exhibit D.

“Confidential Information” shall have the meaning assigned to such term in
Section 11.12.

“Contested Collateral Lien Conditions” shall mean, with respect to any Permitted
Lien of the type described in clauses (a), (b), (e) and (f) of Section 6.02, the
following conditions:

(a) the Borrower shall cause any proceeding instituted contesting such Lien to
stay the sale or forfeiture of any portion of the Collateral on account of such
Lien;

(b) the Borrower shall maintain, to the extent it deems appropriate or is
required by GAAP, cash reserves in an amount sufficient to pay and discharge
such Lien and the Administrative Agent’s reasonable estimate of all interest and
penalties related thereto; and

(c) such Lien shall in all respects be subject and subordinate in priority to
the Lien and security interest created by the Financing Orders and evidenced by
the Financing Orders and/or the Security Documents, except if and to the extent
that the law or regulation creating, permitting or authorizing such Lien
provides that such Lien is or must be superior to the Lien and security interest
created by the Financing Orders and evidenced by the Financing Orders and/or
Security Documents.

“Contingent Obligation” shall mean, as to any person, any obligation, agreement,
understanding or arrangement of such person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other person (the “primary obligor”) in any manner, whether
directly or indirectly, including any obligation of such person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor; (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the

 

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primary obligor; (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; (d) with
respect to bankers’ acceptances, letters of credit and similar credit
arrangements, until a reimbursement obligation arises (which reimbursement
obligation shall constitute Indebtedness); or (e) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term “Contingent Obligation” shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business or any product warranties. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Contingent Obligation is made
(or, if less, the maximum amount of such primary obligation for which such
person may be liable, whether singly or jointly, pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such person is required to perform thereunder) as determined by such
person in good faith.

“Control” shall mean 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 ownership of voting securities, by contract or otherwise, and the
terms “Controlling” and “Controlled” shall have meanings correlative thereto.

“COPAS” means The Council of Petroleum Accountants Societies, Inc.

“Credit Extension” shall mean the making of any Loan by Lenders.

“Debt Issuance” shall mean the incurrence by Borrower or any of its Subsidiaries
of any Indebtedness after the Closing Date (other than as permitted by
Section 6.01).

“Debtor” and “Debtors” shall have the meaning assigned to each such term in the
recitals hereto.

“Default” shall mean any event, occurrence or condition which is, or upon
notice, lapse of time or both would constitute, an Event of Default.

“Default Rate” shall have the meaning assigned to such term in Section 2.06(c).

“Defaulting Lender” shall mean any Lender that (a) has failed to fund any
portion of the Loans required to be funded by it hereunder within one
(1) Business Day of the date required to be funded by it hereunder, (b) has
notified the Administrative Agent, any Lender and/or the Borrower in writing
that it does not intend to comply with any of its funding obligations under this
Agreement or has made a public statement to the effect that it does not intend
to comply with its funding obligations under this Agreement or under other
agreements in which it commits to extend credit, (c) has failed, within three
(3) Business Days after request by the Administrative Agent, to confirm that it
will comply with the terms of this Agreement relating to its obligations to fund
prospective Loans, (d) has failed to pay over to the Administrative Agent or any
other Lender any other amount required to be paid by it hereunder within one
(1) Business Day of the date when due, unless the subject of a good faith
dispute or such failure is subsequently cured or (e) in the case of a Lender
that has a Commitment

 

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outstanding at such time, shall take, or is the Subsidiary of any person that
has taken, any action or be (or is) the subject of any action or proceeding
(i) under the Bankruptcy Code, or any other federal, state or foreign
bankruptcy, insolvency, receivership or similar law; (ii) with respect to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for such Lender (or its direct or indirect parent), or for a
substantial part of the property of such Lender; (iii) with respect to the
winding-up or liquidation of such Lender, (iv) with respect to which such Lender
makes a general assignment for the benefit of its creditors, become unable,
admits in writing its inability or fails generally to pay its debt as they
become due; or (v) takes any action for the purpose of effecting any of the
foregoing.

“Development Plan” means the comprehensive plan or plans in effect from time to
time with respect to the development of the Properties of Borrower and/or Loan
Parties and any other expenditures that have been approved by Administrative
Agent. A Development Plan shall provide for, among other things, the location,
timing and estimated costs of Wells to be drilled or recompleted.

“Disqualified Capital Stock” shall mean any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the first anniversary of the latest Stated Maturity Date, (b) is
convertible into or exchangeable (unless at the sole option of the issuer
thereof) for (i) debt securities or (ii) any Equity Interests referred to in
(a) above, in each case at any time on or prior to the first anniversary of the
latest Stated Maturity Date, or (c) contains any repurchase obligation other
than repurchase obligations with respect to Borrower’s common Equity Interests
issued to employees and directors of Borrower and its Subsidiaries upon death,
disability, retirement, severance or termination of employment or service and
which provide that any repurchase obligation shall not be effective during the
continuance of an Event of Default or if such repurchase of Borrower’s Equity
Interests would not otherwise be permitted by this Agreement or would result in
an Event of Default under this Agreement and customary change of control or
asset sale proceeds repurchase obligations and which may come into effect prior
to payment in full of all Obligations (other than indemnity obligations under
the Loan Documents that are not then due and payable and for which no events or
claims that could give rise thereto are then pending or outstanding).

“Dividend” with respect to any person shall mean that such person has declared
or paid a dividend or returned any equity capital to the holders of its Equity
Interests or authorized or made any other distribution, payment or delivery of
property (other than Qualified Capital Stock of such person) or cash to the
holders of its Equity Interests as such, or redeemed, retired, purchased or
otherwise acquired, directly or indirectly, for consideration any of its Equity
Interests outstanding (or any options or warrants issued by such person with
respect to its Equity Interests), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Subsidiaries to purchase
or otherwise acquire for consideration any of the Equity Interests of such
person outstanding (or any options or warrants issued by such person with
respect to its Equity Interests). Without limiting the foregoing, “Dividends”
with respect to any person shall also include all payments made or required to
be made by such person with respect to any stock appreciation rights, plans,
equity incentive or achievement plans or any similar plans or setting aside of
any funds for the foregoing purposes.

 

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“Dollars” or “$” shall mean lawful money of the United States.

“Domestic Subsidiary” shall mean any Subsidiary that is organized or existing
under the laws of the United States, any state thereof or the District of
Columbia.

“Effect of Bankruptcy” shall mean, with respect to any obligation, contract or
agreement to which the Borrower or any Subsidiary of Borrower is a party, any
default or other legal consequences arising on account of the commencement or
the filing of the Chapter 11 Cases, as applicable (including the implementation
of any stay), or the rejection of any such obligation, contract or agreement
with the approval of the Bankruptcy Court if required under applicable law.

“Eligible Assignee” shall mean (a) a Lender, (b) an Affiliate of a Lender,
(c) an Approved Fund (d) ZCOF and any wholly-owned single purpose subsidiary of
ZCOF formed for the purpose of taking assignments of any Loans hereunder and
(e) any other person (other than a natural person) approved by (i) the
Administrative Agent and (ii) unless a Default or an Event of Default has
occurred and is continuing, the Borrower (each such approval not to be
unreasonably withheld or delayed); provided that notwithstanding the foregoing,
“Eligible Assignee” shall not include (i) the Borrower or any of the Borrower’s
Affiliates or Subsidiaries, (ii) a sponsor or prospective sponsor or any of
their respective Affiliates with respect to a Reorganization Plan (other than
ZCOF and any wholly-owned single purpose subsidiary of ZCOF formed for the
purpose of taking assignments of any Loans hereunder) and (iii) a bidder or
prospective bidder or any of their respective Affiliates with respect to the
sale of substantially all of the Borrower’s assets as contemplated hereunder
(other than ZCOF and any wholly-owned single purpose subsidiary of ZCOF formed
for the purpose of taking assignments of any Loans hereunder).

“Embargoed Person” shall have the meaning assigned to such term in Section 6.19.

“Engineering Report” means either an Independent Engineering Report or an
Internal Engineering Report.

“Environment” shall mean ambient air, surface water and groundwater (including
potable water, navigable water and wetlands), the land surface or subsurface
strata, natural resources, the workplace or as otherwise defined in any
Environmental Law.

“Environmental Claim” shall mean any claim, notice, demand, order, action, suit,
proceeding or other communication alleging liability for investigation,
remediation, removal, cleanup, response, corrective action, damages to natural
resources, personal injury, property damage, fines, penalties or other costs
resulting from, related to or arising out of (i) the presence, Release or
threatened Release in or into the Environment of Hazardous Material at any
location or (ii) any violation of Environmental Law, and shall include any claim
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from, related to or arising out of the presence,
Release or threatened Release of Hazardous Material or alleged injury or threat
of injury to health, safety or the Environment.

 

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“Environmental Law” shall mean any and all applicable present and future
treaties, laws, statutes, ordinances, regulations, rules, decrees, orders,
judgments, consent orders, consent decrees or other binding requirements, and
the common law, relating to protection of public health or the Environment, the
Release or threatened Release of Hazardous Material, natural resources or
natural resource damages, or occupational safety or health.

“Environmental Permit” shall mean any permit, license, approval, consent or
other authorization required by or from a Governmental Authority under
Environmental Law.

“Equipment” shall have the meaning assigned to such term in the UCC.

“Equity Interest” shall mean, with respect to any person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such person,
including, if such person is a partnership, partnership interests (whether
general or limited) and 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 property of, such partnership, whether outstanding on, or
issued after, the Closing Date, but excluding debt securities convertible or
exchangeable into such equity.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

“ERISA Affiliate” shall mean, with respect to any person, any trade or business
(whether or not incorporated) that, together with such person, is treated as a
single employer under Section 414(b) or (c) of the Code, or solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

“ERISA Event” shall mean (a) any “reportable event,” as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Plan (other
than an event for which the 30-day notice period is waived by regulation);
(b) failure by a Plan to satisfy the minimum funding requirements of Sections
412 and 430 of the Code or Section 302 of ERISA), whether or not waived, the
failure to make by its due date a required installment under Section 412(m) of
the Code with respect to any Plan or the failure to make any required
contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d)
of the Code or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (d) the incurrence by Company
or any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by Company or any of its
ERISA Affiliates from the PBGC or a plan administrator (pursuant to
Section 4041(1)(2) of ERISA) of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan, or
the occurrence of any event or condition which could reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (f) the incurrence by Company
or any of its ERISA Affiliates of any liability with respect to the withdrawal
from any Plan or Multiemployer Plan; (g) the receipt by Company or its ERISA
Affiliates of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; (h) the making of
any amendment to any Plan in contravention of Section 206(g) of ERISA; and (i)
the occurrence of a nonexempt prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) with respect to a Plan which
could reasonably be expected to result in liability to Company or any Guarantor.

 

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“Event of Default” shall have the meaning assigned to such term in Article VIII.

“Excluded Taxes” shall mean, 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) income, branch profits or franchise
taxes imposed on (or measured by) its overall net income or overall gross income
(i) by the jurisdiction under the laws of which such recipient is organized or
in which its principal office is located or is otherwise doing business (other
than a business deemed to arise as a result of the transactions contemplated by
this Agreement), (ii) in the case of any Lender, in which its applicable lending
office is located or (iii) as the result of any other present or former
connection between such Recipient and the jurisdiction imposing such Tax (other
than connections arising as a result of the transactions contemplated by this
Agreement), (b) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.15 or a participant pursuant to
Section 2.13(c) upon a Default of the Borrower), any U.S. Federal withholding
tax that is imposed on amounts payable to such Foreign Lender at the time such
Foreign Lender becomes a party to this Agreement or designates a new lending
office, except to the extent that such Foreign Lender was entitled, at the time
of designation of a new lending office, to receive additional amounts from the
Borrower with respect to such withholding tax pursuant to Section 2.14(a),
(c) any Taxes that are attributable to the failure to comply with
Section 2.14(e) or (f) and (d) any Taxes imposed under FATCA (or any amended or
successor version of FATCA that is substantively comparable and not materially
more onerous to comply with). It is understood and agreed, for the avoidance of
doubt, that any U.S. Federal withholding tax imposed on a Foreign Lender
(including an assignee) as a result of a Change in Law or regulation or
interpretation thereof occurring after the time such Foreign Lender became a
party to this Agreement shall not be an Excluded Tax.

“Executive Orders” shall have the meaning assigned to such term in Section 6.17.

“Existing Lien” shall have the meaning assigned to such term in Section 6.02(c).

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement, and any current or future regulations or official interpretations
thereof.

“Federal Funds Effective Rate” shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System of the United States arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for the day for such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.

“Fees” shall mean the Administrative Agent Fee.

 

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“Final Order” shall mean, collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Cases after a formal hearing under Bankruptcy Rule
4001(c)(2) or such other procedures as approved by the Bankruptcy Court which
order shall be substantially in the form of the Interim Order and shall
otherwise be reasonably satisfactory in form and substance to the Administrative
Agent, and from which no appeal or motion to reconsider has been timely filed
(or any such appeal or motion has been conclusively resolved in favor of the
Borrower) and such order in any respect is not subject of a stay or injunction
pending appeal (unless the Administrative Agent and the Required Lenders waive
such requirement), together with all extensions, modifications, amendments or
supplements thereto, in form and substance reasonably satisfactory to the
Administrative Agent, which, among other matters but not by way of limitation,
authorizes the Borrower and/or Guarantors to obtain credit, incur (or guaranty)
Indebtedness, grant Liens under this Agreement and the other Loan Documents, as
the case may be, approves this Agreement and the other Loan Documents, grants
Superpriority Claims to the Lenders and approves the Assignment Documentation
and the assignment evidenced thereby.

“Financial Officer” of any person shall mean the chief financial officer,
principal accounting officer, treasurer or controller of such person.

“Financing Orders” shall mean the Interim Order, the Final Order and any
amendment, modification or supplement thereto in form and substance reasonably
acceptable to the Administrative Agent.

“FIRREA” shall mean the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended.

“First Advance” shall have the meaning set forth in Section 2.02 hereof.

“First Day Orders” shall mean the First Day Orders set forth on Schedule A-1,
which shall be in form and substance reasonably satisfactory to the
Administrative Agent.

“Foreign Lender” shall mean any Administrative Agent or Lender that is not a
“United States person” within the meaning of Section 7701(a) (30) of the Code.

“Foreign Plan” shall mean any employee benefit plan, program, policy,
arrangement or agreement maintained or contributed to by any Loan Party with
respect to employees employed outside the United States.

“Foreign Subsidiary” shall mean a Subsidiary that is not a Domestic Subsidiary.

“Fund” shall mean any person (other than a natural person) that is engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of its business.

“GAAP” shall mean generally accepted accounting principles in the United States
applied on a consistent basis.

 

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“Governmental Authority” shall mean any federal, state, local or foreign court,
central bank or governmental agency, authority, instrumentality or regulatory
body or any subdivision thereof.

“Governmental Real Property Disclosure Requirements” shall mean any Requirement
of Law of any Governmental Authority requiring notification of the buyer,
lessee, mortgagee, assignee or other transferee of any Real Property, or
notification, registration or filing to or with any Governmental Authority, in
connection with the sale, lease, mortgage, assignment or other transfer
(including any transfer of control) of any Real Property, of the actual or
threatened presence or Release in or into the Environment, or the use, disposal
or handling of Hazardous Material on, at, under or near the Real Property, to be
sold, leased, mortgaged, assigned or transferred.

“Guaranteed Obligations” shall have the meaning assigned to such term in
Section 7.01.

“Guarantees” shall mean the guarantees issued pursuant to Article VII by
Guarantors.

“Guarantors” shall mean each Subsidiary listed on Schedule 1.01(c), and each
other Subsidiary that is or that becomes a party to this Agreement as a
Guarantor pursuant to Section 5.11.

“Hazardous Materials” shall mean the following: hazardous substances; hazardous
wastes; polychlorinated biphenyls (“PCBs”) or any substance or compound
containing PCBs; asbestos or any asbestos-containing materials in any form or
condition; radon or any other radioactive materials including any source,
special nuclear or by-product material; petroleum, crude oil or any fraction
thereof; and any other pollutant or contaminant or chemicals, wastes, materials,
compounds, constituents or substances, subject to regulation or which can give
rise to liability under any Environmental Laws.

“Hedging Agreement” shall mean any swap, cap, collar, puts forward purchase or
similar agreements or arrangements dealing with interest rates, currency
exchange rates or commodity prices, either generally or under specific
contingencies.

“Hedging Obligations” shall mean obligations under or with respect to Hedging
Agreements.

“Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, and all other liquid and gaseous
hydrocarbons produced or to be produced in conjunction therewith from a well
bore and all products, by-products, and other substances derived therefrom or
the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores,
or substances of value and the products and proceeds therefrom.

 

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“Indebtedness” of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such person upon which interest charges are customarily paid or
accrued; (d) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person;
(e) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding trade accounts payable and accrued
obligations incurred in the ordinary course of business); (f) all Indebtedness
of others secured by any Lien on property owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, but limited to
the fair market value of such property; (g) all Capital Lease Obligations,
Purchase Money Obligations and synthetic lease obligations of such person;
(h) all Hedging Obligations to the extent required to be reflected on a balance
sheet of such person; (i) all Attributable Indebtedness of such person; (j) all
obligations of such person for the reimbursement of any obligor in respect of
letters of credit, letters of guaranty, bankers’ acceptances and similar credit
transactions; and (k) all Contingent Obligations of such person in respect of
Indebtedness or obligations of others of the kinds referred to in clauses
(a) through (j) above. The Indebtedness of any person shall include the
Indebtedness of any other entity (including any partnership in which such person
is a general partner) to the extent such person is liable therefor as a result
of such person’s ownership interest in or other relationship with such entity,
except (other than in the case of general partner liability) to the extent that
terms of such Indebtedness expressly provide that such person is not liable
therefor. In no event will obligations or liabilities in respect of any
Qualified Capital Stock constitute Indebtedness hereunder.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Indemnitee” shall have the meaning assigned to such term in Section 11.03(b).

“Independent Engineer” shall mean Netherland Sewell and Associates, Inc. (NSAI).

“Independent Engineering Report” means a report, in form and substance
satisfactory to Administrative Agent, prepared by an Independent Engineer,
addressed to Administrative Agent with respect to the Oil and Gas Properties
owned by the Loan Parties (or to be acquired by any Loan Party), which report
shall (a) specify the location, quantity, and type of the estimated Proved
Reserves attributable to such Oil and Gas Properties, (b) contain a projection
of the rate of production of such Oil and Gas Properties, (c) contain an
estimate of the net operating revenues to be derived from the production and
sale of Hydrocarbons from such Proved Reserves based on product price and cost
escalation assumptions specified by Administrative Agent, and (d) contain such
other information as is customarily obtained from and provided in such reports
or is otherwise reasonably requested by Administrative Agent.

“Initial Credit Agreement” has the meaning set forth in the Recitals hereto.

“Insurance Policies” shall mean the insurance policies and coverages required to
be maintained by each Loan Party which is an owner of Mortgaged Property with
respect to the applicable Mortgaged Property pursuant to Section 5.04 and all
renewals and extensions thereof.

 

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“Insurance Requirements” shall mean, collectively, all provisions of the
Insurance Policies, all requirements of the issuer of any of the Insurance
Policies and all orders, rules, regulations and any other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon each Loan Party which is an owner of Mortgaged Property
and applicable to the Mortgaged Property or any use or condition thereof.

“Intellectual Property” shall have the meaning assigned to such term in
Section 3.06(a).

“Intercompany Note” shall mean a promissory note substantially in the form of
Exhibit J or such other form as is agreed to by the Administrative Agent.

“Interest Payment Date” shall mean (i) the last Business Day of the calendar
month to occur during any period in which any portion of the Term Loan is
outstanding and (ii) the Stated Maturity Date.

“Interim Order” shall mean collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Cases after an interim hearing (assuming satisfaction
of the standards prescribed in Section 364 of the Bankruptcy Code and Bankruptcy
Rule 4001 and other applicable law), which, among other matters, but not by way
of limitation, grants a Superpriority Claim to Lenders, approves the Assignment
Documentation and the assignment evidenced thereby, authorizes, on an interim
basis, the Borrower and the other Loan Parties to execute and perform under the
terms of this Agreement and the other Loan Documents and is not be subject to
any stay or injunction or otherwise subject to reversal on appeal as to any
Loans funded hereunder, together with all extensions, modifications, amendments
and supplements thereto, in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders.

“Internal Engineering Report” means a report, in form and substance satisfactory
to Administrative Agent, prepared by Borrower and certified by a Responsible
Officer of Borrower, addressed to Administrative Agent with respect to the Oil
and Gas Properties owned by the Loan Parties (or to be acquired by the Loan
Parties) which report shall (a) specify the location, quantity, and type of the
estimated Proved Reserves attributable to such Oil and Gas Properties,
(b) contain a projection of the rate of production of such Oil and Gas
Properties, (c) contain an estimate of the net operating revenues to be derived
from the production and sale of Hydrocarbons from such Proved Reserves based on
product prices and cost escalation assumptions specified by Administrative
Agent, and (d) contain such other information as is customarily obtained from
and provided in such reports or is otherwise reasonably requested by
Administrative Agent or any Lender.

“Investments” shall have the meaning assigned to such term in Section 6.03.

“Joinder Agreement” shall mean a joinder agreement substantially in the form of
Exhibit F.

“Leases” shall mean any and all leases, subleases, tenancies, options,
concession agreements, rental agreements, occupancy agreements, franchise
agreements, access agreements and any other agreements (including all
amendments, extensions, replacements, renewals, modifications and/or guarantees
thereof), whether or not of record and whether now in existence or hereafter
entered into, affecting the use or occupancy of all or any portion of any Real
Property.

 

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“Lender Addendum” shall mean with respect to any Lender on the Closing Date, a
lender addendum in the form of Exhibit H, to be executed and delivered by such
Lender on the Closing Date as provided in Section 11.14.

“Lenders” shall mean (a) the financial institutions that have become a party
hereto pursuant to a Lender Addendum and (b) any financial institution that has
become a party hereto pursuant to an Assignment and Assumption, other than, in
each case, any such financial institution that has ceased to be a party hereto
pursuant to an Assignment and Assumption.

“Lien” shall mean, with respect to any property, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation,
security interest or encumbrance of any kind or any filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
notice or recording statute of any Governmental Authority, including any
easement, right-of-way or other encumbrance on title to Real Property, in each
of the foregoing cases whether voluntary or imposed by law, and any agreement to
give any of the foregoing; (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such property; and (c) in the case of securities (other
than securities representing an interest in a joint venture), any purchase
option, call or similar right of a third party with respect to such securities.

“Lien Assignment Agreements” shall mean any agreements, documents or instruments
(including without limitation, any amendment or assignment of Mortgage (as
defined in the Pre-Petition Credit Agreement)) executed and/or delivered by
Prior Agents and/or Prior Lenders, on the one hand, and Collateral Agent and
Lenders, on the other hand, to further evidence the assignment to Collateral
Agent and Lenders of the security interests, Liens and mortgages granted by Loan
Parties under the Pre-Petition Credit Agreements and the Pre-Petition Loan
Documents, which assignment was effected pursuant to the Financing Orders and
the Assignment Documentation.

“Loan Documents” shall mean this Agreement, the Notes (if any) and the Security
Documents.

“Loan Exposure” shall mean, (i) with respect to any Lender at any time, the
aggregate principal amount at such time of all outstanding Loans of such Lender
and (ii) with respect to the Lenders, collectively, at any time, the aggregate
principal amount at such time of all outstanding Loans of the Lenders. The
outstanding Loans referenced herein shall include any amounts applied by Lenders
to refinance the loans and other obligations under the Pre-Petition Credit
Agreement.

“Loan Parties” shall mean the Borrower and the Guarantors.

“Loans” shall mean the term loans made by the Lenders to the Borrower pursuant
to Section 2.01.

 

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“Margin Stock” shall have the meaning assigned to such term in Regulation U.

“Material Adverse Change” shall have the same meaning as Material Adverse
Effect.

“Material Adverse Effect” shall mean (a) a material adverse effect on the
business, property, results of operations or condition, financial or otherwise
of Borrower and its Subsidiaries, taken as a whole; (b) material impairment of
the ability of the Loan Parties (taken as a whole) to perform any of their
obligations under any Loan Document; or (c) material impairment of the rights of
or benefits or remedies available to the Lenders, the Collateral Agent or the
Administrative Agent under any Loan Document; provided that a Material Adverse
Effect shall not be deemed to exist as a result of the Chapter 11 Cases, the
events leading to the Chapter 11 Cases or the Effect of Bankruptcy.

“Maturity Date” shall have the same meaning as Stated Maturity Date.

“Maximum Rate” shall have the meaning assigned to such term in Section 11.13.

“Milestones” shall mean certain milestones related to a sponsorship of a plan of
reorganization and subsequent filing of a disclosure statement with respect
thereto or the sale of all or substantially all of the Debtors’ assets pursuant
to Section 363 and/or Section 1123 of the Bankruptcy Code and the Chapter 11
Cases, as set forth on Schedule M (unless extended or modified (but not
shortened) with the consent of the Administrative Agent).

“Monthly Forecast” means a business plan and projected operating budget for the
Borrower and its Subsidiaries for a period of four (4) months after the Petition
Date, broken down by month, including income statements, balance sheets, cash
flow statements, projected capital expenditures, asset sales, cost savings and
head count reductions, targeted facility closures, targeted facility idlings and
other milestones, a line item for total available liquidity for the period
covered thereby and setting forth the anticipated uses of the Loan proceeds for
such period (which shall be consistent with Section 5.08 hereof) and such other
business plan metrics as are mutually agreed by the chief financial officer of
Borrower and the Administrative Agent. As part of the Monthly Forecast, the
chief financial officer of Borrower shall certify that the Monthly Forecast has
been prepared in good faith on the basis of the assumptions stated therein,
which assumptions were believed to be reasonable at the time of preparation. The
Monthly Forecast shall be reasonably acceptable to the Administrative Agent and
the Required Lenders.

“Monthly Variance Report” shall have the meaning assigned to such term in
Section 5.01(i).

“Moody’s” shall mean Moody’s Investors Service Inc. or any successor by merger
or consolidation to its business.

“Mortgaged Property” shall mean (a) the Real Property identified on Schedule
3.05(b) and (b) each Real Property, if any, which shall be required to be
mortgaged after the Closing Date pursuant to Section 5.11(c).

 

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“Mortgage” means each of the mortgages or deeds of trust executed by any one or
more of Borrower, a Guarantor or any of their respective Subsidiaries in favor
of Administrative Agent or Collateral Agent for the ratable benefit of the
Secured Parties in substantially the form of the attached Exhibit D of the
Pre-Petition Credit Agreement or such other form as may be requested by
Administrative Agent, together with any assumptions or assignments of the
obligations thereunder by Borrower, any Guarantor or any of their respective
Subsidiaries, as amended, restated, supplemented and/or modified to date.
“Mortgages” shall mean all of such Mortgages collectively.

“Multiemployer Plan” shall mean a multiemployer plan within the meaning of
Section 4001(a)(3) or Section 3(37) of ERISA (a) to which any Loan Party or any
ERISA Affiliate is then making or accruing an obligation to make contributions;
or (b) to which any Loan Party or any ERISA Affiliate has within the preceding
five plan years made contributions.

“Net Cash Proceeds” shall mean:

(a) with respect to any Asset Sale (other than any issuance or sale of Equity
Interests), the cash proceeds received by Borrower or any of its Subsidiaries
(including cash proceeds subsequently received (as and when received by Borrower
or any of its Subsidiaries) in respect of non-cash consideration initially
received) net of (i) selling expenses (including reasonable brokers’ fees or
commissions, legal, accounting and other professional and transactional fees,
transfer and similar taxes and Borrower’s good faith estimate of income taxes
paid or payable in connection with such sale); (ii) amounts provided as a
reserve, in accordance with GAAP, against any liabilities under any
indemnification obligations associated with such Asset Sale or any other
liabilities retained by Borrower or any of its Subsidiaries associated with the
properties sold in such Asset Sale and, to the extent such amount equals or
exceeds $1,000,000, held in the Collateral Account (provided that, to the extent
and at the time any such amounts are released from such reserve, such amounts
shall constitute Net Cash Proceeds); (iii) Borrower’s good faith estimate of
payments required to be made with respect to unassumed liabilities relating to
the properties sold within two (2) years of such Asset Sale and to the extent
such amount equals or exceeds $1,000,000, held in the Collateral Account
(provided that, to the extent such cash proceeds are not used to make payments
in respect of such unassumed liabilities within two (2) years of such Asset Sale
and placed in the Collateral Account, such cash proceeds shall constitute Net
Cash Proceeds); and (iv) the principal amount, premium or penalty, if any,
interest and other amounts on any Indebtedness for borrowed money which is
secured by a Lien on the properties sold in such Asset Sale (so long as such
Lien was permitted to encumber such properties under the Loan Documents at the
time of such sale) and which is repaid with such proceeds (other than any such
Indebtedness assumed by the purchaser of such properties);

(b) with respect to any Debt Issuance or any issuance of Equity Interests by
Borrower or any of its Subsidiaries, the cash proceeds thereof, net of customary
fees, commissions, costs and other expenses incurred in connection therewith;
and

 

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(c) with respect to any Casualty Event, the insurance proceeds, condemnation
awards and other compensation received in cash in respect thereof, net of all
reasonable costs and expenses incurred in connection with the collection of such
proceeds and the reasonable cost of putting any real property in a safe and
secure condition, awards or other compensation in respect of such Casualty
Event.

“Net Revenue Interest” means means, with respect to any Oil and Gas Property,
the decimal or percentage share of Hydrocarbons produced and saved from or
allocable to that Oil and Gas Property, after deduction of Royalty Interests and
other burdens on or paid out of such production.

“Notes” shall mean any notes evidencing the Loans issued pursuant to this
Agreement, if any, substantially in the form of Exhibit I.

“Obligations” shall mean (a) obligations of the Borrower and the other Loan
Parties from time to time to pay (and otherwise arising under or in respect of
the due and punctual payment of) (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (ii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower and the other
Loan Parties under this Agreement and the other Loan Documents and (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Borrower and the other Loan Parties under or pursuant to this
Agreement and the other Loan Documents.

“OFAC” shall mean the U.S. Treasury Department Office of Foreign Assets Control.

“Officer’s Certificate” shall mean, as to any person, a certificate executed by
the chairman of the Board of Directors (if an officer), the chief executive
officer, the president or any one of the Financial Officers of such person, each
in his or her official (and not individual) capacity.

“Oil and Gas Properties” means fee mineral interests, term mineral interests,
Leases, subleases, farm-outs, royalties, overriding royalties, net profit
interests, carried interests, production payments and similar mineral interests,
and all unsevered and unextracted Hydrocarbons in, under, or attributable to
such oil and gas Properties and interests.

“Operator” means, with respect to the Properties, Borrower and any other
operators, including contract operators, of the Properties approved by
Administrative Agent. The Operators of each of the Properties as of the date of
the Pre-Petition Credit Agreement are identified on Schedule IIL to the
Pre-Petition Credit Agreement.

“Organizational Documents” shall mean, with respect to any person, (i) in the
case of any corporation, the certificate of incorporation and by-laws (or
similar documents) of such person, (ii) in the case of any limited liability
company, the certificate of formation and

 

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operating agreement (or similar documents) of such person, (iii) in the case of
any limited partnership, the certificate of formation and limited partnership
agreement (or similar documents) of such person, (iv) in the case of any general
partnership, the partnership agreement (or similar document) of such person and
(v) in any other case, the functional equivalent of the foregoing.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other List” shall have the meaning assigned to such term in Section 6.17.

“Other Taxes” shall mean any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
(including related interest, fines, penalties and additions to tax) arising from
any payment made or required to be made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document except for any such Taxes that are Other Connection Taxes or that are
imposed with respect to an assignment.

“Participant” shall have the meaning assigned to such term in Section 11.04(e).

“Patriot Act” shall have the meaning assigned to such term in Section 11.16.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

“Permit” means any approval, certificate of occupancy, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
of or from any Governmental Authority, including, without limitation, an
Environmental Permit.

“Permitted Liens” shall have the meaning assigned to such term in Section 6.02.

“Permitted Monthly Variance” shall have the meaning assigned to such term in
Section 5.01(i).

“Permitted Senior Liens” shall mean Permitted Liens, but only to the extent such
Liens are valid, enforceable, non-avoidable Liens and security interests that
are perfected prior to the Petition Date (or perfected after the Petition Date
to the extent permitted by Section 546(b) of the Bankruptcy Code), which are not
subject to avoidance, reduction, disallowance, impairment or subordination
pursuant to the Bankruptcy Code or applicable nonbankruptcy law and which are
senior in priority to the Liens under the Pre-Petition Credit Agreement under
applicable law and after giving effect to any applicable subordination or
intercreditor agreements.

 

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“Permitted Tax Distributions” shall mean, (i) with respect to any period during
which the Borrower or any Subsidiary of Borrower is treated as a disregarded
entity for federal, state and/or local tax purposes, to the extent relating to
the tax liability for such period, the payment of distributions by the Borrower
or such Subsidiary of Borrower to Borrower in respect of Borrower’s tax
liabilities solely as a result of the Borrower (or a Subsidiary of the Borrower)
being a disregarded entity for federal, state and/or local tax purposes, in an
amount not to exceed the amount of the relevant taxes that the Borrower (or a
Subsidiary of the Borrower) would owe if it were filing a separate tax return
with respect to such taxes less any such taxes that are paid or will be paid
directly by the Borrower (or a Subsidiary of the Borrower) (as applicable), and
(ii) for any period in which the Borrower or a Subsidiary of the Borrower is a
member of a group filing consolidated, combined or unitary tax returns for which
it is not the common parent, payments to the parent of such group to be used to
pay the consolidated, combined, unitary or similar federal, state and/or local
taxes attributable to the Borrower or such Subsidiary (as applicable) in an
amount not to exceed the amount of the relevant taxes that the Borrower or such
Subsidiary (as applicable) would owe if it were filing a separate tax return,
taking into account any carryforwards or carrybacks of tax attributes (such as
net operating losses) of the Borrower or such Subsidiary (as applicable) from
other taxable years, less any such taxes that are paid or will be paid directly
by the Borrower or such Subsidiary (as applicable).

“Permitted Variances” shall have the meaning assigned to such term in
Section 5.01(ii).

“Permitted Weekly Variance” shall have the meaning assigned to such term in
Section 5.01(ii).

“Person” or “person” shall mean any natural person, corporation, business trust,
joint venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof, in any case, whether
acting in a personal, fiduciary or other capacity.

“Petition Date” shall have the meaning assigned in the recitals hereto.

“PIK Interest” shall have the meaning assigned to that term in
Section 2.06(a)(ii) hereof.

“Plan” shall mean any employee pension benefit plan (as defined in Section 3.2
of ERISA) (other than a Multiemployer Plan) subject to the provisions of Title
IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is
maintained or contributed to by any Loan Party or its ERISA Affiliate or with
respect to which any Loan Party or any ERISA Affiliate has within the preceding
five (5) plan years been obligated to make contributions.

“Platform” shall have the meaning assigned to such term in Section 11.01.

“Property Operating Statement” or “POS” means a monthly statement substantially
in the form of Exhibit N, and prepared by Borrower in accordance with
Section 5.01(n)

 

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“Pre-Petition” shall mean the time period ending immediately prior to the filing
of the Chapter 11 Cases.

“Pre-Petition Credit Agreement” shall have the meaning assigned in the recitals
hereof.

“Pre-Petition Loan Documents” shall mean the Loan Documents (as defined in the
Pre-Petition Credit Agreement).

“Prior Agents” shall mean the Administrative Agent and the Collateral Agent
(each as defined in the Pre-Petition Credit Agreement).

“Prior Lenders” shall mean the “Lenders” from time to time party to the
Pre-Petition Credit Agreement.

“Pro Rata Share” shall mean as to any Lender, at the relevant date of
determination, the fraction (expressed as a percentage), the numerator of which
is such Lender’s unfunded Commitment (if any) and outstanding Loans and the
denominator of which is the aggregate amount of all of the Lenders’ unfunded
Commitments and all of the outstanding Loans of the Lenders.

“Proceeding” shall mean, with respect to any person, any (a) insolvency,
bankruptcy, receivership, reorganization, readjustment, composition or other
similar proceeding relating to such person or its property or creditors in such
capacity, (b) proceeding for any liquidation, dissolution or other winding-up of
such person, voluntary or involuntary, whether or not involving insolvency or
proceedings under the Bankruptcy Code, whether partial or complete and whether
by operation of law or otherwise, (c) assignment for the benefit of creditors of
such person or (d) other marshalling of the assets of such person.

“Property” or “property” shall mean any right, title or interest in or to
property or assets of any kind whatsoever, whether real, personal or mixed and
whether tangible or intangible and including Equity Interests or other ownership
interests of any person and whether now in existence or owned or hereafter
entered into or acquired, including all Real Property.

“Proved Reserves” has the meaning given to that term in the definitions
promulgated by the Society of Petroleum Evaluation Engineers and the World
Petroleum Congress (the “SPE/WPC Definitions”) in effect from time to time;
“Proved Developed Producing Reserves” or “PDP Reserves” means Proved Reserves
which are categorized as both “Developed” and “Producing” in the SPE/WPC
Definitions; “Proved Developed Non Producing Reserves” or “PDNP Reserves” means
Proved Reserves which are categorized as both “Developed” and “Non Producing” in
the SPE/WPC Definitions; and “Proved Undeveloped Reserves” or “PUD Reserves”
means Proved Reserves which are categorized as “Undeveloped” in the SPE/WPC
Definitions.

“Purchase Money Obligation” shall mean, for any person, the obligations of such
person in respect of Indebtedness (including Capital Lease Obligations) incurred
for the purpose of financing all or any part of the purchase price of any
property (including Equity Interests of any person) or the cost of installation,
construction or improvement of any property

 

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and any refinancing thereof; provided, however, that (i) such Indebtedness is
incurred within ninety (90) days after such acquisition of such property by such
person and (ii) the amount of such Indebtedness does not exceed 100% of the cost
of such acquisition, installation, construction or improvement, as the case may
be.

“Qualified Capital Stock” of any person shall mean any Equity Interests of such
person that are not Disqualified Capital Stock.

“Real Property” shall mean, collectively, all right, title and interest
(including any leasehold estate) in and to any and all parcels of or interests
in real property owned, or leased by any person, whether by lease, license or
other means, together with, in each case, all easements, hereditaments and
appurtenances relating thereto and all improvements and appurtenant futures.

“Reference Rate” with respect to any period, the greater of (i) the prime rate
of interest specified by the Wall Street Journal and (ii) the Federal Funds
Effective Rate plus 0.055 per annum, in each case, from time to time as and when
that rate changes. The Reference Rate is a reference rate and does not
necessarily represent the lowest or best rate actually available.

“Register” shall have the meaning assigned to such term in Section 11.04(c).

“Regulation D” shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation T” shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Release” shall mean any spilling, leaking, seepage, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the Environment.

“Reorganization Plan” shall mean a plan of reorganization in the Chapter 11
Cases of the Debtors.

“Reported Month” shall have the meaning given to such term in Section 5.01(n)
hereof.

“Required Lenders” shall mean, at any time, Lenders having unfunded Commitments
and outstanding Loans representing more than 50% of the sum of all unfunded
Commitments of the Lenders and all of the outstanding Loans of the Lenders ;
provided, that “Required Lenders” shall include not less than two
(2) unaffiliated Lenders; provided, further, that the Loans and unfunded
Commitments held or deemed held by any Defaulting Lender shall

 

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be excluded for purpose of making a determination of Required Lenders; provided,
further, that the Loans and unfunded Commitments held or deemed held by any ZCOF
Lender shall be excluded for purposes of making a determination of Required
Lenders solely to the extent that (i) any determination of satisfaction or
consent of, or direction with respect to, the Required Lenders is required
pursuant to any Loan Documents (other than with respect to any amendment or
modification that shortens the time period for compliance with respect to any
Milestone, in which case, the ZCOF Lender shall be included for purposes of
making a determination of Required Lenders with respect to such amendment or
modification) or (ii) any amendment, waiver or modification of any Loan
Document, does not in each case directly affect. in a disproportionate manner,
any or all ZCOF Lenders as compared to the effect on other Lenders. For the
avoidance of doubt, nothing in this definition or otherwise in the Loan
Documents shall impair or otherwise restrict the rights of any ZCOF Lender, and
each ZCOF Lender expressly retains the right, to consent to a waiver, amendment,
supplement or modification with respect to those matters set forth in clauses
(i) through (vii) of Section 11.02(b) hereof and the proviso following such
clauses.

“Requirements of Law” shall mean, collectively, any and all requirements of any
Governmental Authority including any and all laws, ordinances, rules,
regulations or similar statutes or case law (or official interpretation of any
of the foregoing) of, and terms of any license or permit issued by, any
Governmental Authority, including, but not limited to, Regulations D, T, U and
X, which is applicable to such Person.

“Reserve Report” means the Reserve Report dated September 7, 2011 from NSAI.

“Response” shall mean (a) “response” as such term is defined in CERCLA, 42
U.S.C. § 9601(24), and (b) all other actions required by any Governmental
Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in
any other way address any Hazardous Material in the Environment; (ii) prevent
the Release or threat of Release, or minimize the further Release, of any
Hazardous Material; or (iii) perform studies and investigations in connection
with, or as a precondition to, clause (i) or (ii) above.

“Responsible Officer” of any person shall mean any executive officer or
Financial Officer of such person or any other officer or similar official
thereof with responsibility for the administration of the obligations of such
person in respect of this Agreement.

“Royalty Interest” means (a) an expense-free interest retained by a mineral
lessor in a Lease, (b) an overriding royalty reserved by or conveyed to a
Person, or (c) any other expense¬free right to receive production or revenues
from any Oil and Gas Property.

“S&P” shall mean Standard & Poor’s Rating Services, Inc., a division of the
McGraw-Hill Companies, Inc.

“Sale and Leaseback Transaction” shall mean any arrangement, directly or
indirectly, with any person whereby Borrower or any of its Subsidiaries shall
sell or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred.

 

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“Sales Volumes” means, with respect to any or all of Borrower’s Oil and Gas
Properties, the product of Borrower’s Net Revenue Interest multiplied by the
gross volume of Hydrocarbons produced and saved from those Oil and Gas
Properties

“SDN List” shall have the meaning assigned to such term in Section 6.17.

“Second Advance” shall have the meaning set forth in Section 2.02 hereof.

“Secured Obligations” shall mean the Obligations.

“Secured Parties” shall mean, collectively, the Administrative Agent, the
Collateral Agent, each other Agent and the Lenders.

“Securities Collateral” shall have the meaning assigned to such term in the
applicable Security Agreement.

“Security Agreement” shall mean that certain Security Agreement, dated as of the
Closing Date, among the Loan Parties and Collateral Agent for the benefit of the
Secured Parties.

“Security Documents” shall mean, collectively, the Security Agreement, the
Mortgages, the Financing Orders, Lien Assignment Agreements and each other
security document, mortgage or pledge agreement delivered in accordance with
applicable local or foreign law to grant a valid, perfected security interest in
any property as collateral for the Secured Obligations, and all UCC or other
financing statements or instruments of perfection required by this Agreement,
the Security Agreement, Financing Orders, Lien Assignment Agreements, any
mortgage (including without limitation, any Mortgage) or any other such security
document or pledge agreement filed or to be filed with respect to the security
interests in property and fixtures created pursuant to the Security Agreement,
Financing Orders, Lien Assignment Agreements or any mortgage (including without
limitation, any Mortgage) and any other document or instrument utilized to
pledge or grant or purport to pledge or grant a security interest in or Lien on
any Property as collateral for the Secured Obligations any property.

“Security Instruments” has the same meaning as Security Documents.

“Senior Convertible 3.75% Notes” shall mean the notes issued pursuant to that
certain Indenture dated April 25, 2007 by and among Borrower (as issuer) and
U.S. Bank, N.A. (as trustee).

“Senior 7% Notes” shall mean the notes issued pursuant to that certain Indenture
dated March 15, 2005 by and among Borrower (as issuer) and U.S. Bank, N.A. (as
trustee).

“Stated Maturity Date” shall mean June 30, 2012.

 

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“Strategic Sales Process Information” shall mean (i) material non-public
information regarding any Loan Party, a sponsor or prospective sponsor of a
Reorganization Plan, or a bidder or prospective bidder with respect to the sale
of substantially all of the Borrower’s assets or a potential asset sale or
Reorganization Plan transaction or (ii) any other information that the Borrower
determines in its reasonable and good faith discretion that the disclosure of
which could reasonably be expected to have a material effect upon, or otherwise
be material to, a Reorganization Plan or a sale of substantially all of the
Borrower’s assets (as applicable), which information, in each case, has not
previously been disclosed to (as applicable) any sponsor or prospective sponsor
of a Reorganization Plan or a bidder or prospective bidder with respect to a
sale the Borrower’s assets (or a potential asset sale or Reorganization Plan
transaction).

“Subordinated Indebtedness” shall mean Indebtedness of the Borrower or any
Guarantor that is by its terms subordinated in right of payment to the
Obligations of the Borrower and such Guarantor, as applicable.

“Subsidiary” shall mean, with respect to any person (the “parent”) at any date,
(i) any other corporation, limited liability company, association or other
business entity of which securities or other ownership interests representing
more than 50% of the voting power of all Equity Interests entitled (without
regard to the occurrence of any contingency) to vote in the election of the
Board of Directors thereof are, as of such date, owned, controlled or held by
the parent and/or one or more subsidiaries of the parent, (ii) any partnership
(a) the sole general partner or the managing general partner of which is the
parent and/or one or more subsidiaries of the parent or (b) the only general
partners of which are the parent and/or one or more subsidiaries of the parent
and (iii) any other person that is otherwise Controlled by the parent and/or one
or more subsidiaries of the parent. Unless the context requires otherwise,
“Subsidiary” refers to a Subsidiary of Borrower.

“Superpriority Claim” means a claim against any Debtor which is an
administrative expense claim having priority over any or all administrative
expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy
Code.

“Tax Return” shall mean all returns, statements, filings, attachments and other
documents or certifications required to be filed in respect of Taxes.

“Taxes” shall mean any and all present or future taxes, duties, levies, imposts,
assessments, deductions, withholdings or other similar charges, whether computed
on a separate, consolidated, unitary, combined or other basis and any and all
liabilities (including related interest, fines, penalties or additions to tax)
with respect to the foregoing.

“Third Advance” shall have the meaning set forth in Section 2.02 hereof.

“Total Commitment” shall mean $57,500,000, as reduced on a dollar for dollar
basis by the amount of the Term Loans made from time to time. The Term Loans
shall include the amount of the Lenders’ funds used to refinance the loans and
other obligations under the Pre-Petition Credit Agreement.

“Total Commitment Amount” shall mean $57,500,000.

 

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“Transactions” shall mean, collectively, the transactions to occur on or prior
to the Closing Date pursuant to the Loan Documents and the Chapter 11 Cases,
including (a) the execution, delivery and performance of the Loan Documents; and
(b) the payment of all fees and expenses to be paid on or prior to the Closing
Date and owing in connection with the foregoing.

“Transferred Guarantor” shall have the meaning assigned to such term in
Section 7.09.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
any applicable state or jurisdiction.

“United States” shall mean the United States of America.

“Unsecured Bond Documents” shall mean the indentures, notes, agreements,
documents and instruments that were entered into and/or delivered at any time in
connection with the Unsecured Notes.

“Unsecured Notes” shall mean the Senior Convertible 3.75% Notes and the Senior
7% Notes.

“Weekly Variance Report” shall have the meaning assigned to such term in
Section 5.01(ii).

“Wells” means any existing or future oil or gas well, salt water disposal well,
injection well, water supply well or any other well located on or related to the
Properties, and any facility or equipment in addition to or replacement of any
well

“Wholly Owned Subsidiary” shall mean, as to any person, (a) any corporation 100%
of whose capital stock (other than directors’ qualifying shares) is at the time
owned by such person and/or one or more Wholly Owned Subsidiaries of such person
and (b) any partnership, association, joint venture, limited liability company
or other entity in which such person and/or one or more Wholly Owned
Subsidiaries of such person have a 100% equity interest at such time.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

“Working Interests” means the property interest which entitles the owner to
explore and develop certain land for oil and gas productions purposes, whether
under an oil and gas lease or unit, compulsory pooling order or otherwise.

“ZCOF” means Zell Credit Opportunities Master Fund, L.P.

“ZCOF Lender” means any of ZCOF or any of its Affiliates (including, without
limitation, any wholly-owned single purpose subsidiary of ZCOF formed for the
purpose of taking assignments of any Loans hereunder) that is a Lender.

 

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SECTION 1.02 Intentionally Omitted

SECTION 1.03 Terms Generally.

SECTION 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all financial statements to be delivered pursuant to this Agreement
shall be prepared in accordance with GAAP as in effect from time to time and all
terms of an accounting or financial nature shall be construed and interpreted in
accordance with GAAP, as in effect on the Closing Date, in each case unless
otherwise agreed to by the Borrower and the Required Lenders.

SECTION 1.05 Resolution of Drafting Ambiguities. Each Loan Party acknowledges
and agrees that it was represented by counsel in connection with the execution
and delivery of the Loan Documents to which it is a party, that it and its
counsel reviewed and participated in the preparation and negotiation hereof and
thereof and that any rule of construction to the effect that ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation hereof or thereof.

SECTION 1.06 Timing of Payment and Deliveries. Solely in connection with the
payment of any obligation or the performance of any covenant, duty or
obligation, if stated to be due on a day that is not a Business Day or delivery
of any notice, document, certificate or other writing is stated to be required
on a day that is not a Business Day, the date of such payment, performance or
delivery shall be extended to the immediately succeeding Business Day.

SECTION 1.07 Reaffirmation and Grant of Security Interests. The parties hereby
confirm that the security interests, Liens and mortgages of the Prior Agent and
Prior Lenders have been assigned to Collateral Agent and Lenders, respectively,
pursuant to the Assignment Documentation and the Financing Orders so as to
preserve the perfection and priority of all security interests, Liens and
mortgages granted by the Loan Parties under the Pre-Petition Credit Agreement
and the Pre-Petition Loan Documents for the benefit of securing the Obligations
hereunder.

SECTION 1.08 Reaffirmation and Grant of Security Interests. Each Guarantor,
subject to the terms and conditions contained herein and in the other Loan
Documents, has (i) guarantied the Obligations and (ii) created Liens in favor of
the Collateral Agent for the benefit of the Secured Parties on certain
Collateral to secure its obligations hereunder, under Section 7 hereof and under
each other applicable Loan Document, respectively. Each Loan Party hereby
acknowledges that it has reviewed the terms and provisions of this Agreement,
the Financing Order and the Assignment Documentation and consents to assignment
of security interests, Liens and mortgages set forth in the Assignment
Documentation and agrees to execute and deliver any Lien Assignment Agreements
requested by Collateral Agent to further evidence such assignment of security
interests, Liens and mortgages. Each Loan Party hereby (i) confirms that all
security interests, Liens and mortgages granted under the Pre-Petition Credit
Agreement and the other Pre-Petition Loan Documents will secure the payment and
performance of the Obligations, including, without limitation, the payment and
performance of all such

 

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applicable Obligations that are joint and several obligations of any Loan Party
now or hereafter existing and (ii) in addition thereto, grants to the Collateral
Agent for the benefit of the Secured Parties a continuing Lien on, security
interest and mortgage in, as applicable, such Loan Party’s right, title and
interest in, to and under all Collateral as collateral security for the prompt
payment and performance in full when due of all applicable Obligations subject
to the terms and conditions contained herein and in the Loan Documents (whether
at stated maturity, by acceleration or otherwise). The aforesaid Liens and
mortgages on the Collateral shall have the priorities set forth in the Financing
Orders and shall be deemed automatically perfected without the need for the
Agent or any other Secured Party to take any further action as provided under
the Financing Orders.

SECTION 1.09 Amendment and Restatement. This Agreement amends, restates, and
replaces the Initial Credit Agreement. Each reference to the “Agreement” or the
“Credit Agreement” in the Loan Documents shall mean this Agreement.

ARTICLE II

THE CREDITS

SECTION 2.01 Commitments; Borrowing Procedure.

(a) Subject to the terms and conditions hereof and in reliance upon the
representations and warranties set forth herein, each Lender severally, and not
jointly, agrees to make its Pro Rata Share of the Terms Loans available to the
Borrower in Dollars during the Availability Period in accordance with this
Section 2.01 and Section 2.02 hereof provided, however, (i) with regard to each
Lender individually, the sum of such Lender’s Pro Rata Share of the aggregate
principal amount of the outstanding Term Loans shall not at any time exceed such
Lender’s Commitment, which is set forth in Schedule 4 attached hereto, (ii) with
regard to the Lenders collectively, the sum of the aggregate principal amount of
the outstanding Term Loans made (including, for the avoidance of doubt, all
amounts applied to refinance the loans and obligations under the Pre-Petition
Credit Agreement) shall not at any time exceed the Total Commitment Amount,
(iii) in no event shall Loans be made hereunder in excess of the Borrowing
Availability, (iv) the Lenders shall not be required to make more than three
advances hereunder (and each of such advances shall be made in accordance with
Section 2.02 hereof) and (v) the amount of Loans outstanding shall not exceed at
any time the amount of Loans authorized to be made by the applicable Financing
Orders. Upon any Lender funding its entire Commitment in accordance with the
provisions hereof, such Lender will have no further commitment to fund Term
Loans hereunder. The failure of any Lender to make any Loan shall not in itself
relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such other Lender). Amounts
repaid or prepaid on any Term Loan may not be reborrowed.

 

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(b) Each Lender shall make each Loan to be made by it hereunder on the proposed
date thereof by wire transfer of immediately available funds to such account in
New York City as the Administrative Agent may designate not later than 2:00
p.m., New York City time, and the Administrative Agent shall promptly credit
and/or remit the amounts so received to an account as directed by the Borrower
in the applicable Borrowing Request or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders.

(c) Unless the Administrative Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Administrative Agent such Lender’s portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
paragraph (b) above, and the Administrative Agent may (but shall not be required
to), in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If the Administrative Agent shall have so made
funds available, then, to the extent that such Lender shall not have made such
portion available to the Administrative Agent, each of such Lender and the
Borrower, severally, agrees to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent at (i) in the case of the Borrower,
the interest rate applicable at the time to the Loans and (ii) in the case of
such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount shall constitute such Lender’s Loan
as part of such Borrowing for purposes of this Agreement, and the Borrower’s
obligation to repay the Administrative Agent such corresponding amount pursuant
to this Section 2.01(c) shall cease.

(d) To request a Borrowing, the Borrower shall deliver, by hand delivery or
telecopier, a duly completed and executed Borrowing Request to the
Administrative Agent three (3) Business Days before the date of the proposed
Borrowing (or four (4) Business Days before the date of the proposed Borrowing
if the Borrowing Request is received after 11 am ET by Administrative Agent).
Each Borrowing Request shall be irrevocable and shall specify the following
information in compliance with the foregoing provisions of Section 2.01:

 

  i.

the aggregate amount of such Borrowing;

 

  ii.

the date of such Borrowing, which shall be a Business Day;

 

  iii.

the location and number of Borrower’s account to which funds are to be
disbursed;

 

  iv.

with respect to the First Advance, that the conditions set forth in Sections
4.01 and 4.02 have been satisfied and with respect to the Second Advance and the
Third Advance, that the conditions set forth in Section 4.02 have been
satisfied, in each case, as of the date of the notice; and

 

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  v.

(A) with respect to the First Advance, the First Advance is being requested in
accordance with the 13-Week Budget and the Loan proceeds with respect to such
Advance shall be used consistent with the Monthly Forecast (to be delivered in
accordance with Section 4.03 of this Agreement) and the 13-Week Budget (subject
to Permitted Variances), (B) with respect to the Second Advance, the Second
Advance is being requested in accordance with the Monthly Forecast and the
13-Week Budget and the Loan proceeds with respect to such Advance shall be used
consistent with the Monthly Forecast and the 13-Week Budget (subject to
Permitted Variances) and (C) with respect to the Third Advance, the Third
Advance is being requested in accordance with the Monthly Forecast and the
13-Week Budget and the Loan proceeds with respect to such Advance shall be used
consistent with the Monthly Forecast and the 13-Week Budget (subject to
Permitted Variances).

(e) Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof.

SECTION 2.02 Loans.

(a) Subject to the other terms and conditions set forth herein (including
without limitation, the provisions set forth in Section 2.01 hereof), the Term
Loans shall be advanced to Borrower as follows:

(i) on the Closing Date, an initial Advance of the Term Loan in an amount equal
to $44,973,419.05 provided that (i) the conditions set forth in Section 4.01 and
4.02 have been satisfied, (2) the making of such Advance shall be subject to the
entry of and the applicable terms and conditions set forth in the Interim Order
(if any) and (3) such Advance is consistent with the Monthly Forecast and the
13-Week Budget (subject to Permitted Variances) (“First Advance”);

(ii) after the Closing Date but prior to the expiration of the Availability
Period, a second Advance under the Term Loan in an amount equal to the lesser of
(x) $10,000,000 and (y) the remaining amount of Borrowing Availability provided
that (1) the conditions set forth in Section 4.02 have been satisfied, (2) the
Final Order has been entered, (3) such Advance is consistent with the Monthly
Forecast and the 13-Week Budget (subject to Permitted Variances) and (4) the
making of such Advance shall be subject to the applicable terms and conditions
set forth in the Final Order (if any) (“Second Advance”);

(iii) after the Closing Date but prior to the expiration of the Availability
Period, a third Advance under the Term Loan in an amount equal to the lesser of
(x) $2,526,580.95 and (y) the remaining amount of Borrowing Availability
provided that (1) the conditions set forth in Section 4.02 have been satisfied,
(2) the Final Order has been entered, (3) such Advance is consistent with the
Monthly Forecast and the 13-Week Budget (subject to Permitted Variances) and
(4) the making of such Advance shall be subject to the applicable terms and
conditions set forth in the Final Order (if any) (“Third Advance”).

 

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SECTION 2.03 Funding Limitations. For the avoidance of doubt, Administrative
Agent shall have no Commitments (to make Loans) in its capacity as
Administrative Agent and Administrative Agent’s requirement to make Loans (from
the Loan proceeds received from the Lenders) in accordance with the provisions
hereof shall be limited to the funds that it receives from the Lenders (to fund
such Loans).

SECTION 2.04 Evidence of Debt; Repayment of Loans.

(a) The Borrower hereby unconditionally promises to pay to the Administrative
Agent for the account of each Lender, the unpaid principal amount of each Loan
of such Lender on the Stated Maturity Date (or sooner in accordance with the
provisions hereof). All payments or repayments of Loans made pursuant to this
Section 2.04(a) shall be made in Dollars.

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.

(c) The Administrative Agent shall maintain accounts in which it will record
(i) the amount of each Loan made hereunder; (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder; and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraphs (b) and
(c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms. In the event of a conflict between records
maintained by any Lender and the records of the Administrative Agent in respect
of such matters, the records of the Administrative Agent shall control in the
absence of manifest error.

(e) Any Lender by written notice to the Borrower (with a copy to the
Administrative Agent) may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) in the form
of Exhibit I. Thereafter, the Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 11.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered as signs).

SECTION 2.05 Fees.

(a) Administrative Agent Fee. The Borrower agrees to pay to the Administrative
Agent (for its own account), upon entry of the Final Order in accordance with
the provisions hereof, an administrative agent fee, in an amount equal to
$85,000, which amount shall be fully earned and nonrefundable once paid (the
“Administrative Agent Fee”).

(b) Fees. All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent.

 

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SECTION 2.06 Interest on Loans.

(a) The Loans shall bear interest as follows:

(i) at a rate per annum equal to thirteen percent (13%), payable in cash in
accordance with Section 2.06(d) hereof; plus

(ii) at a rate per annum equal to six percent (6%), which shall be paid in kind
and capitalized (and thereby added to principal, which shall thereafter accrue
interest) on the last day of each month (“PIK Interest”) provided that for
purposes of calculating Borrowing Availability and the amount of unfunded
Commitments, capitalized PIK Interest shall not reduce the amount of Borrowing
Availability, the Total Commitment, the Total Commitment Amount or the amount of
the Lenders’ respective Commitments.

(b) Reserved.

(c) Notwithstanding the foregoing, if an Event of Default shall have occurred
and be continuing, at the request of the Administrative Agent or the Required
Lenders, all Obligations shall, to the extent permitted by applicable law, bear
interest, after as well as before judgment, at a rate per annum equal to, in the
case of principal or premium, if any, of or interest on any Loan (or any other
amount), 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section (in either case, the “Default Rate”).

(d) Accrued interest on the Loans shall be payable in arrears on each Interest
Payment Date; provided that (i) interest accrued pursuant to Section 2.06(c)
shall be payable on demand and (ii) in the event of any repayment or prepayment
of any Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment.

(e) All interest hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

SECTION 2.07 Termination and Reduction of Commitments.

(a) The Commitments shall automatically terminate on the Stated Maturity Date.

(b) At its option, the Borrower may at any time terminate, or from time to time
permanently reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $500,000 and
not less than $1,000,000 and (ii) the Commitments shall not be terminated or
reduced if, after giving effect to such termination or reduction, the aggregate
amount of Loan Exposures would exceed the aggregate amount of Commitments less
the Carve-Out Reserve.

(c) The Borrower shall notify the Administrative Agent in writing of any
election to terminate or reduce the Commitments under Section 2.07(b) at least
three (3) Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall

 

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advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable. Any termination or
reduction of the Commitments shall be permanent. Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with their
respective Commitments. Promptly following any reduction in Commitments in
accordance with this Section 2.07(c), the Administrative Agent shall remit each
Lender’s ratable share of such reduction in Commitments to such Lender.

SECTION 2.08 Reserved.

SECTION 2.09 Optional and Mandatory Prepayments of Loans.

(a) Optional Prepayments. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing, in whole or in part, subject to the
requirements of this Section 2.09; provided that each partial prepayment shall
be in an amount that is an integral multiple of $500,000 and not less than
$500,000 or, if less, the outstanding principal amount of the Obligations.

(b) Loan Prepayments.

(i) In the event of the termination of all the Commitments, the Borrower shall,
on the date of such termination, repay or prepay all its outstanding Loans.

(ii) In the event of any partial reduction of the Commitments, then (x) at or
prior to the effective date of such reduction, the Administrative Agent shall
notify the Borrower and the Lenders of the sum of the Loan Exposures after
giving effect thereto and (y) if the sum of the Loan Exposures would exceed the
aggregate amount of Commitments less the Carve-Out Reserve after giving effect
to such reduction, then the Borrower shall, on the date of such reduction repay
or prepay Loans, in an aggregate amount sufficient to eliminate such excess.

(c) Asset Sales. Subject to the Financing Orders and to the extent the Asset
Sale in question is permitted under Section 6.04, not later than one
(1) Business Day following the receipt of any Net Cash Proceeds of any Asset
Sale (whether issued in accordance with a Reorganization Plan or otherwise) by
Borrower or any of its Subsidiaries, the Borrower shall apply 100% of such Net
Cash Proceeds to make prepayments of the Loans, if any are then outstanding, in
accordance with Sections 2.09(h) and (i); provided that no such prepayment shall
be required under this Section 2.09(c) with respect to (A) the disposition of
property that constitutes a Casualty Event, (B) Asset Sales for fair market
value resulting in no more than $100,000 in Net Cash Proceeds per Asset Sale (or
series of related Asset Sales) and less than $200,000 in Net Cash Proceeds
before the Stated Maturity Date or (C) any Asset Sale to the extent no Loans are
then outstanding on the date of receipt of such Net Cash Proceeds; and

(d) Debt Issuance. Subject to the Financing Orders, not later than one
(1) Business Day following the receipt of any Net Cash Proceeds of any Debt
Issuance (whether issued in accordance with a Reorganization Plan or otherwise)
by Borrower or any of its Subsidiaries, the Borrower shall make prepayments of
the Loans, if any are then outstanding, in accordance with Sections 2.09(h) and
(i) in an aggregate principal amount equal to 100% of such Net Cash Proceeds.

 

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(e) [Reserved].

(f) Casualty Events. Not later than one (1) Business Day following the receipt
of any Net Cash Proceeds from a Casualty Event by Borrower or any of its
Subsidiaries, the Borrower shall apply an amount equal to 100% of such Net Cash
Proceeds to make prepayments in accordance with Sections 2.09(h) and (i);
provided that no such prepayment shall be required under this Section 2.09(f)
with respect to any disposition of property which constitutes a Casualty Event
resulting in no more than $100,000 in Net Cash Proceeds per Casualty Event and
less than $500,000 in Net Cash Proceeds from Casualty Events in any fiscal year;
provided, further:

(i) so long as no Event of Default shall then exist or arise therefrom, such
proceeds shall not be required to be so applied on such date to the extent that
the Borrower shall have delivered a certificate to the Administrative Agent on
or prior to such date stating that such proceeds are expected to be used to
purchase replacement assets or repair such assets and, in each case, otherwise
in compliance with the terms of the Agreement no later than 365 days following
the date of receipt of the entire amount of such proceeds; provided that if the
property subject to such Casualty Event constituted Collateral under the
Security Documents, then all property purchased with the Net Cash Proceeds
thereof pursuant to this subsection shall be made subject to the Lien granted
pursuant to the Financing Orders or the Security Documents in favor of the
Administrative Agent, for its benefit and for the benefit of the other Secured
Parties in accordance with Sections 5.11 and 5.12; and

(ii) if any portion of such Net Cash Proceeds shall not be so applied within
such 365-day period, such unused portion shall be applied on the last day of
such period as a mandatory prepayment as provided in this Section 2.09(f).

(g) [Reserved].

(h) Application of Prepayments.

(i) Subject to the provisions of this Section 2.09(h), prior to any optional or
mandatory prepayment hereunder, the Borrower shall specify the amount of such
prepayment in the notice of such prepayment pursuant to Section 2.09(i).

(ii) Amounts to be applied pursuant to this Section 2.09 to the prepayment of
Loans shall be applied to the outstanding Term Loans without a reduction to the
Commitments.

(i) Notice of Prepayment. The Borrower shall notify the Administrative Agent by
written notice of any prepayment hereunder, not later than 11:00 a.m., New York
City time, one (1) Business Day before the date of prepayment. Each such notice
shall specify the prepayment date, the principal amount of the Term Loan to be
prepaid and, in the case of a mandatory prepayment, a reasonably detailed
calculation of the amount of such prepayment. Promptly following receipt of any
such notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Such notice to the Lenders may be by electronic communication. Each
prepayment of any or all of the Term Loan shall be applied ratably to the Term
Loans. Prepayments shall be accompanied by accrued interest to the extent
required by Section 2.06.

 

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SECTION 2.10 Reserved.

SECTION 2.11 Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against property of, deposits with or for the account of, or credit
extended by, any Lender; or

(ii) impose on any Lender any other condition affecting this Agreement made by
such Lender 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 Term 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 hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender, as the case may be, such additional amount or
amounts as will compensate such Lender, as the case may be, for such additional
costs incurred or reduction suffered, it being understood that this Section 2.11
shall not apply to Taxes.

(b) If any Lender determines (in good faith, but in its sole absolute
discretion) that any Change in Law 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 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, as the case may be, such
additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered.

(c) A certificate of a Lender setting forth in reasonable detail the amount or
amounts necessary to compensate such Lender or its holding company, as the case
may be, as specified in paragraph (a) or (b) of this Section 2.11 shall be
delivered to the Borrower (with a copy to the Administrative Agent) and shall be
conclusive and binding absent manifest error. The Borrower shall pay such
Lender, as the case may be, the amount shown as due on any such certificate
within ten (10) days after receipt thereof.

(d) Failure or delay on the part of any Lender to demand compensation pursuant
to this Section 2.11 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 this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender, 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 intention to claim
compensation therefor; provided, further, that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180-day period
referred to above shall not begin earlier than the date of effectiveness of the
Change in Law.

 

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SECTION 2.12 Breakage Payments. In the event of the failure to borrow or prepay
any Loan on the date specified in any notice delivered pursuant hereto then, in
any such event, the Borrower shall compensate each Lender for the loss, cost and
expense, if any, attributable to such event. A certificate of any Lender setting
forth in reasonable detail any amount or amounts that such Lender is entitled to
receive pursuant to this Section 2.12 shall be delivered to the Borrower (with a
copy to the Administrative Agent) and shall be conclusive and binding absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within five (5) days after receipt thereof.

SECTION 2.13 Payments Generally; Pro Rata Treatment; Sharing of Set Off.

(a) The Borrower shall make each payment required to be made by it hereunder or
under any other Loan Document (whether of principal, interest or fees, or of
amounts payable under Section 2.11, 2.12 or 2.14, or otherwise) on or before the
time expressly required hereunder or under such other Loan Document for such
payment (or, if no such time is expressly required, prior to 2:00 p.m., New York
City time), on the date when due, in immediately available funds, without
setoff, deduction or counterclaim. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices at 3033 Excelsior Blvd., Minneapolis, MN 55416 (or to such deposit
account as directed by Administrative Agent), except that payments pursuant to
Sections 2.11, 2.12, 2.14 and 11.03 shall be made directly to the persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, unless
specified otherwise, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
under each Loan Document shall be made in Dollars, except as expressly specified
otherwise.

(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (subject to the priorities set
forth in Section 9.03 in the case of proceeds received by the Administrative
Agent in respect of any sale of, collection from or realization upon all or any
part of the Collateral pursuant to the exercise by the Administrative Agent of
its remedies) (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such parties. It
is understood that the foregoing does not apply to any adequate protection
payments under any federal, state or foreign bankruptcy, insolvency,
receivership or similar proceeding, and that the Administrative Agent may,
subject to any applicable federal, state or foreign bankruptcy, insolvency,
receivership or similar orders, distribute any adequate protection payments it
receives on behalf of the Lenders to the Lenders in its sole discretion (i.e.,
whether to pay the earliest accrued interest, all accrued interest on a pro rata
basis or otherwise).

 

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(c) If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise (including by exercise of its rights under Section 9.1 of the Security
Agreement), obtain payment in respect of any principal of or interest on any of
its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate amount of its Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
of other Lenders to the extent necessary 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; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be construed to
apply to any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or 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 of its
Subsidiaries or Affiliates (as to which the provisions of this paragraph shall
apply). Each Loan Party 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 such
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation. If under applicable bankruptcy, insolvency or any
similar law any Secured Party receives a secured claim in lieu of a setoff or
counterclaim to which this Section 2.13(c) applies, such Secured Party shall to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights to which the Secured Party is entitled under
this Section 2.13(c) to share in the benefits of the recovery of such secured
claim.

(d) 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 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
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.13(c), 2.13(d) or 11.03(d), then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.

 

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SECTION 2.14 Taxes.

(a) Any and all payments by or on account of any obligation of the Borrower
hereunder or under any other Loan Document shall be made without setoff,
counterclaim or other defense and free and clear of and without deduction or
withholding for any and all Indemnified Taxes; provided that if any Loan Party
shall be required by law to deduct any Indemnified Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions or withholdings applicable to
additional sums payable under this Section 2.14) the Administrative Agent or any
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made, (ii) such Loan Party
shall make such deductions or withholdings and (iii) such Loan Party shall pay
the full amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law and shall indemnify the
Administrative Agent and each Lender, within ten (10) Business Days after
written demand therefor, for the full amount of Other Taxes paid by the
Administrative Agent or such Lender, as the case may be and reasonable expenses
arising therefrom or with respect thereto, whether or not such Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate accompanied by reasonable detail as to the amount of such payment
or liability delivered to the Borrower by a Lender, or by the Administrative
Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error.

(c) The Borrower shall indemnify the Administrative Agent and each Lender,
within ten (10) Business Days after written demand therefor, for the full amount
of any Indemnified Taxes paid by the Administrative Agent or such Lender, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder or under any other Loan Document (including
Indemnified Taxes imposed or asserted on or attributable to amounts payable
under this Section 2.14 and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate
accompanied by reasonable detail as to the amount of such payment or liability
delivered to the Borrower by a Lender, or by the Administrative Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
and in any event within thirty (30) days of any such payment being due, by a
Loan Party to a Governmental Authority, such Loan Party 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 the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement 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, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower or the

 

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Administrative Agent as will permit such payments under this Agreement to be
made without withholding or at a reduced rate. Each Foreign Lender, on or before
the date it becomes a Foreign Lender, shall to the extent it is legally entitled
to do so (i) furnish two copies (which shall be accurate and complete, and
originally executed) of either (a) U.S. Internal Revenue Service Form W-8BEN (or
successor form), (b) U.S. Internal Revenue Service Form W-8ECI (or successor
form), certifying, in the case of (a) or (b), to such Foreign Lender’s legal
entitlement to an exemption or reduction from U.S. federal withholding tax with
respect to payments hereunder, or (c), to the extent it does not act or ceases
to act for its own account with respect to any portion of any sums paid or
payable to such Foreign Lender, U.S. Internal Revenue Service Form W-8IMY (or
any successor forms), together with any information, if any, such party chooses
to transmit with such form, and any other certificate or statement of exemption
required under the Code or the regulations issued thereunder, to establish that
such party is not acting for its own account with respect to a portion of any
such sums payable to such party, and (ii) to the extent it may lawfully do so at
such times, upon reasonable request by the Borrower or the Administrative Agent,
provide a new Form W¬8BEN (or successor form), Form W-8ECI (or successor form)
or Form W-8IMY (or successor form) upon the expiration or obsolescence of any
previously delivered form to confirm any complete exemption from, or any
entitlement to a reduction in, U.S. federal withholding tax with respect to any
payments hereunder, or to establish that such party is not acting for its own
account with respect to a portion of any such sums payable to such party;
provided that any Foreign Lender that is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code that is relying on the “portfolio interest
exception” under Section 881(c) of the Code shall also furnish a “Non-Bank
Certificate” in the form of Exhibit K if it is furnishing a Form W-8BEN. Each
Foreign Lender that does not furnish Internal Revenue Service Form W-8ECI (or
successor form) represents that, to its knowledge, any Fees paid hereunder are
not attributable to services performed by such Lender in the United States.

(f) Any Administrative Agent or Lender that is not a Foreign Lender and is not
an exempt recipient (as defined in Section 6049(b)(4) of the Code and the
regulations issued thereunder) shall deliver to the Borrower (with a copy to the
Administrative Agent), on or prior to the date it become a party hereto, and at
such other times as may be necessary in the determination of the Borrower in its
reasonable discretion, two U.S. Internal Revenue Service Form W-9 (or any
successor forms) properly completed and duly executed by such party.

(g) If a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent such documentation prescribed by applicable law
(including or prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
clause (D), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.

 

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(h) If the Administrative Agent or a Lender (or an assignee) determines in its
reasonable discretion that it has received a refund of any Indemnified Taxes or
Other Taxes as to which it has been indemnified by any Loan Party or with
respect to which a Loan Party has paid additional amounts pursuant to this
Section 2.14, it shall pay over such refund to such Loan Party (but only to the
extent of indemnity payments made, or additional amounts paid, by such Loan
Party under this Section 2.14 with respect to the Indemnified Taxes or the Other
Taxes giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent or such Lender (or assignee) and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund); provided, however, that such Loan Party, upon the request of the
Administrative Agent or such Lender (or assignee), 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 (or assignee) within a reasonable time (not to exceed twenty (20) days)
after receipt of written notice that the Administrative Agent or such Lender (or
assignee) is required to repay such refund to such Governmental Authority.
Nothing contained in this Section 2.14(h) shall require the Administrative Agent
or any Lender (or assignee) to make available its Tax Returns or any other
information which it deems confidential to the Borrower or any other person.
Notwithstanding anything to the contrary, in no event will any Lender be
required to pay any amount to any Loan Party the payment of which would place
such Lender in a less favorable net after-tax position than such Lender would
have been in if the Indemnified Taxes or Other Taxes giving rise to such refund
had never been paid in the first instance.

SECTION 2.15 Mitigation Obligations; Replacement of Lenders.

(a) Mitigation of Obligations. If any Lender requests compensation under
Section 2.11, 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 2.14, 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 reasonable judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to
Section 2.11 or 2.14, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous in any material respect to such Lender. The Borrower hereby
agrees to pay all reasonable out-of-pocket costs and expenses incurred by any
Lender in connection with any such designation or assignment. A certificate
setting forth such costs and expenses in reasonable detail submitted by such
Lender to the Administrative Agent shall be conclusive absent manifest error.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 2.11, 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 2.14, or if any Lender defaults in its obligation to fund Loans
hereunder, 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 Section 11.04), all of its interests, rights and obligations under
this Agreement to an assignee selected by the Borrower that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received

 

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the prior written consent of the Administrative Agent, which consents shall not
unreasonably be withheld, (ii) 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 (assuming
for this purpose that the Loans of such Lender were being prepaid) 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) and (iii) in the case
of any such assignment resulting from a claim for compensation under
Section 2.11 or payments required to be made pursuant to Section 2.14, such
assignment will result in a reduction in such compensation or payments. A Lender
shall not be required to make any such assignment and 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.

SECTION 2.16 Reserved.

SECTION 2.17 Defaulting Lenders. Notwithstanding any provision of this Agreement
to the contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:

(a) any amount payable to such Defaulting Lender hereunder (whether on account
of principal, interest, fees or otherwise and including any amount that would
otherwise be payable to such Defaulting Lender pursuant to Section 2.13(c) but
excluding Section 2.15(b)) may, in lieu of being distributed to such Defaulting
Lender, be retained by the Administrative Agent in a segregated non-interest
bearing account and, subject to any applicable Requirements of Law, be applied
at such time or times as may be determined by the Administrative Agent
(i) first, to the payment of any amounts owing by such Defaulting Lender to the
Administrative Agent hereunder, (ii) second, to the funding of any Loan in
respect of which such Defaulting Lender has failed to fund its portion thereof
as required by this Agreement, as determined by the Administrative Agent,
(iv) third, if so determined by the Administrative Agent and the Borrower, held
in such account as cash collateral for future funding obligations of the
Defaulting Lender under this Agreement, (v) fourth, pro rata, to the payment of
any amounts owing to Borrower or the Lenders as a result of any judgment of a
court of competent jurisdiction obtained by the Borrower or any Lender against
such Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement and (vi) fifth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided, that if such
payment is (x) a payment of the principal amount of any Loans and (y) made at a
time when the conditions set forth in Section 4.02 are satisfied, such payment
shall be applied solely to prepay the Loans of, owed to, all non-Defaulting
Lenders pro rata prior to being applied to the prepayment of any Loans owed to
any Defaulting Lender.

In the event that each of the Administrative Agent and the Borrower, each agrees
in writing that a Defaulting Lender has adequately remedied all matters that
caused such Lender to be a Defaulting Lender, then on such date such Lender
shall purchase at par such of the Loans of the other Lenders as the
Administrative Agent shall determine may be necessary in order for such Lender
to hold such Loans in accordance with its Pro Rata Share. The rights and
remedies against a Defaulting Lender under this Section 2.17 are in addition to
other rights and remedies that the Borrower, the Administrative Agent, and the
non-Defaulting Lenders may have against such Defaulting Lender. The arrangements
permitted or required by this Section 2.17 shall be permitted under this
Agreement, notwithstanding any limitations on Liens or the pro rata sharing
provisions or otherwise.

 

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SECTION 2.18 Reserved.

SECTION 2.19 Payment of Obligations. Upon the Stated Maturity Date, the Lenders
shall be entitled to immediate payment of such Obligations then due and owing
without further application to or order of the Bankruptcy Court, subject to the
terms of the Loan Documents and the Financing Orders.

SECTION 2.20 No Discharge; Survival of Claims. Each Loan Party agrees that
(a) the Obligations hereunder shall not be discharged by the entry of an order
confirming a Reorganization Plan the Chapter 11 Cases (and each Loan Party
pursuant to Section 1141(d)(4) of the Bankruptcy Code hereby waives any such
discharge) and (b) the Superpriority Claim granted to the Agents and the Lenders
pursuant to the Financing Orders and the Liens granted to the Agents pursuant to
the Financing Orders shall not be affected in any manner by the entry of an
order confirming a Reorganization Plan in the Chapter 11 Cases.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants to the Administrative Agent and each of
the Lenders that:

SECTION 3.01 Organization; Powers. Each Loan Party (a) is duly organized and
validly existing under the laws of the jurisdiction of its organization,
(b) has, upon the entry of the Financing Orders by the Bankruptcy Court, all
requisite power and authority to carry on its business as now conducted and to
own and lease its property and (c) is qualified and in good standing (to the
extent such concept is applicable in the applicable jurisdiction) to do business
in every jurisdiction where such qualification is required, except in such
jurisdictions where the failure to so qualify or be in good standing,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. On the Closing Date, there is no existing default
under any Organizational Document of any Loan Party or any event which, with the
giving of notice or passage of time or both, would constitute a default by any
party thereunder.

SECTION 3.02 Authorization; Enforceability. Upon the entry of the Financing
Orders by the Bankruptcy Court, the Transactions to be entered into by each Loan
Party, including any Loans hereunder, are within such Loan Party’s powers and
have been duly authorized by all necessary action on the part of such Loan
Party. Subject to the entry of the Financing Orders by the Bankruptcy Court,
this Agreement has been duly executed and delivered by each Loan Party and
constitutes, and each other Loan Document to which any Loan Party is to be a
party, when executed and delivered by such Loan Party, will constitute, a legal,
valid and binding obligation of such Loan Party, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

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SECTION 3.03 No Conflicts. Except as set forth on Schedule 3.03, upon entry of
the Financing Orders by the Bankruptcy Court, the Transactions, including any
Loans hereunder, (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except (i) such
as have been obtained or made and are in full force and effect, (ii) filings
necessary or desirable to perfect Liens created by the Loan Documents and
(iii) consents, approvals, registrations, filings, permits or actions the
failure to obtain or perform which could not reasonably be expected to result in
a Material Adverse Effect or to the extent such noncompliance is permitted by
the Bankruptcy Court, (b) will not violate the Organizational Documents of any
Loan Party or any judgment, decree or order of any Governmental Authority that
is binding on any Loan Party, (c) will not violate or result in a default
(except in respect of the Unsecured Bond Documents) or require any consent or
approval under any indenture, agreement, Organizational Document or other
instrument binding upon any Loan Party or its property, or give rise to a right
thereunder to require any payment to be made by any Loan Party, except for
violations, defaults or the creation of such rights that could not reasonably be
expected to result in a Material Adverse Effect, and (d) will not result in the
creation or imposition of any Lien on any property of any Loan Party, except
Liens created by the Loan Documents and Permitted Liens (including pursuant to
the Financing Orders).

SECTION 3.04 Financial Statements; Projections.

(a) The Borrower has heretofore delivered to the Lenders (i) the unaudited
consolidated balance sheet as of October 31, 2011 and related statements of
income and cash flows of Borrower and its consolidated Subsidiaries for the 10
months ended October 31, 2011 and (ii) the consolidated balance sheets and
related statements of income and cash flows of the Borrower as of and for the
fiscal year ended December 31, 2011 and the consolidated balance sheets and
related statements of income and cash flows of Borrower and its consolidated
Subsidiaries for the fiscal years ended December 31, 2008, December 31, 2009 and
December 31, 2010, audited by and accompanied by the opinion of KPMG LLP,
independent public accountants, and certified by the chief financial officer of
the Borrower. Such financial statements and all financial statements delivered
pursuant to Sections 5.01(a), (b) and (c) have been prepared in accordance with
GAAP (in the case of financial statements delivered pursuant to Sections
5.01(c), subject to normal year-end audit adjustments and the absence of
footnotes) and present fairly and in all material respects the financial
condition and results of operations and cash flows of the Borrower as of the
dates and for the periods to which they relate. Except as set forth in such
financial statements and other than the commencement of the Chapter 11 Cases,
there are no post-Petition Date liabilities of any Loan Party of any kind,
whether accrued, contingent, absolute, determined, determinable or otherwise,
which could reasonably be expected to result in a Material Adverse Effect, and
there is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a post-Petition Date liability, other
than liabilities under the Loan Documents.

(b) [Reserved].

(c) The forecasts of financial performance of the Borrower, including the
13-Week Budget delivered on the Closing Date (and the Monthly Forecast delivered
in accordance with Section 4.03 hereof), projected income statements, statements
of cash flows and balance sheets, and its subsidiaries furnished to the Lenders
have been prepared in good faith by the Borrower

 

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and based on assumptions believed by the Borrower to be reasonable (it being
understood that forecasts are subject to uncertainties and contingencies and
that no representation or warranty is given that any forecast will be realized).

(d) [Reserved].

SECTION 3.05 Properties.

(a) Each Loan Party has good and indefeasible title to, or valid leasehold
interests in all its Oil and Gas Properties as is customary in the oil and gas
industry in all material respects , free and clear of all Liens except for
Permitted Liens (including pursuant to the Financing Orders). Each Loan Party
has good title to, or valid leasehold interest in, all of its other material
Properties and any other property, or licenses or other rights to use, free and
clear of all Liens except Permitted Liens (including pursuant to the Financing
Orders) and minor irregularities or deficiencies in title or the chain of title
that, individually or in the aggregate, do not in any material respect interfere
with its ability to conduct its business as currently conducted or to utilize
such property for its intended purpose. The property of the Loan Parties, taken
as a whole, (i) is in good operating order, condition and repair (ordinary wear
and tear excepted) and (ii) constitutes all the property which is required for
the business and operations of the Loan Parties as presently conducted. Since
December 31, 2009, neither the business nor the material Properties of each of
the Loan Parties, taken as a whole, has been materially and adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property or cancellation of contracts, Permits, or concessions by a Governmental
Authority, riot, activities of armed forces, or acts of God or of any public
enemy.

(b) Schedule 3.5(b) contains a true and complete list of each interest in Real
Property (i) owned by any Loan Parties as of the Closing Date and describes the
type of interest therein held by such Loan Party and (ii) leased or subleased by
any Loan Party, as lessee or sublessee as of the Closing Date and describes the
type of interest therein held by such Loan Party.

(c) As of the Closing Date, no Loan Party has received any notice of, nor has
any knowledge of, the occurrence or pendency or contemplation of any Casualty
Event currently affecting all or any portion of its property.

(d) Each Loan Party owns or has rights to use all of the Collateral and all
rights with respect to any of the foregoing used in, necessary for or material
to each Loan Party’s business as currently conducted. The use by each Loan Party
of such Collateral and all such rights with respect to the foregoing does not
infringe on the rights of any person other than such infringement which could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. No claim has been made and remains outstanding that any
Loan Party’s use of any Collateral does or may violate the rights of any third
party that could, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

(e) As far as each Loan Party is aware, the Equipment of each Loan Party is in
good repair, working order and condition, reasonable wear and tear excepted.
Each Loan Party shall use reasonable endeavors to cause the Equipment to be
maintained and preserved in good repair,

 

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working order and condition, reasonable wear and tear excepted, and shall as
quickly as commercially practicable make or cause to be made all repairs,
replacements and other improvements which are necessary or appropriate in the
conduct of each Loan Party’s business except in each case as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

SECTION 3.06 Intellectual Property.

(a) Ownership/No Claims. Each Loan Party owns, or is licensed to use, all
patents, patent applications, trademarks, trade names, servicemarks, copyrights,
technology, trade secrets, proprietary information, domain names, know-how and
processes necessary for the conduct of its business as currently conducted (the
“Intellectual Property”), except for those the failure to own or license which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No written claim has been asserted and is pending by
any person challenging or questioning the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property, nor does any
Loan Party know of any valid basis for any such claim. The use of such
Intellectual Property by each Loan Party does not infringe the rights of any
person, except for such claims and infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

(b) Registrations. Except pursuant to licenses and other user agreements entered
into by each Loan Party in the ordinary course of business , on and as of the
Closing Date (i) each Loan Party owns and possesses the right to use, and has
done nothing to authorize or enable any other person to use, any copyright,
patent or trademark (as such terms are defined in the Security Agreement) that
is necessary to the conduct of its business as currently conducted and (ii) all
of the Loan Parties’ copyright registrations, patent registrations and trademark
registrations are valid and in full force and effect.

(c) No Violations or Proceedings. To each Loan Party’s knowledge, on and as of
the Closing Date, there is no material violation by others of any right of such
Loan Party with respect to any copyright, patent or trademark , respectively,
pledged by it under the name of such Loan Party except as may be set forth on
Schedule 3.6(c).

SECTION 3.07 Equity Interests and Subsidiaries.

(a) Equity Interests. Schedule 3.07(c) sets forth a list of (i) all the
Subsidiaries of Borrower and their jurisdiction of organization as of the
Closing Date and (ii) the number of each class of its Equity Interests
authorized, and the number outstanding, on the Closing Date. All Equity
Interests of each Loan Party are duly and validly issued and are fully paid and
non-assessable. Each Loan Party is the record and beneficial owner of, and has
good and marketable title to, the Equity Interests pledged by it pursuant to the
Financing Orders or under the Security Agreement, free of any and all Liens,
rights or claims of other persons, except the security interest created pursuant
to the Financing Orders and by the Security Agreement and Permitted Liens
(including pursuant to the Financing Orders), and except as set forth on
Schedule 3.7(a), on the Closing Date there are no outstanding warrants, options
or other rights to purchase with respect to, or property that is convertible
into, or that requires the issuance or sale of, any such Equity Interests.

 

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(b) No Consent of Third Parties Required. Upon the entry of the Financing Orders
by the Bankruptcy Court, no consent of any person including any Governmental
Authority, any general or limited partner, any other member of a limited
liability company, any other shareholder or any other trust beneficiary is
necessary or reasonably desirable (from the perspective of a secured party) in
connection with the creation, perfection or first priority status of the
security interest of the Administrative Agent in any Equity Interests pledged to
the Administrative Agent for the benefit of the Secured Parties pursuant to the
Financing Orders or under the Security Agreement or the exercise by the
Administrative Agent of the voting or other rights provided for in the Security
Agreement or the exercise of remedies in respect thereof.

(c) Organizational Chart. An accurate organization chart, showing the ownership
structure of the Borrower and each Subsidiary on the Closing Date, and after
giving effect to the Transactions, is set forth on Schedule 3.07(c).

SECTION 3.08 Litigation; Compliance with Laws.

(a) Except for the Chapter 11 Cases and for litigation that is stayed by the
commencement and continuation of the Chapter 11 Cases, there are no actions,
suits or proceedings at law or in equity by or before any Governmental Authority
now pending or, to the knowledge of any Loan Party, threatened against or
affecting any Loan Party or any business, property or rights of any Loan Party
(i) that challenge the enforceability or validity of any Loan Document or any of
the Transactions or (ii) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.

(b) Except for matters covered by Section 3.18, no Loan Party or any of its
property is in violation of, nor will the continued operation of its property as
currently conducted violate, any Requirements of Law (including any zoning or
building ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting any Loan Party’s Real Property or
is in default with respect to any judgment, writ, injunction, decree, rule or
order of any Governmental Authority, in each case where such violation or
default, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.

SECTION 3.09 [Reserved].

SECTION 3.10 Federal Reserve Regulations.

(a) No Loan Party is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of buying or carrying Margin
Stock.

(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, for any purpose
that entails a violation of, or that is inconsistent with, the provisions of the
regulations of the Board, including Regulation T, U or X. The pledge of the
Securities Collateral pursuant to the Financing Orders or the Security Agreement
does not violate such regulations.

SECTION 3.11 Investment Company Act; Public Utility Holding Company Act. No Loan
Party is an “investment company” or a company “controlled” by an “investment
company,” as defined in, or subject to registration under, the Investment
Company Act of 1940, as amended.

 

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SECTION 3.12 Use of Proceeds. The Borrower will use the proceeds of the Loans to
refinance all loans and obligations outstanding under the Pre-Petition Credit
Agreement and otherwise in a manner consistent with the Monthly Forecast, the
13-Week Budget (subject to Permitted Variances) and the Financing Orders for
payment of (i) post-petition operating expenses and other working capital and
financing requirements of the Borrower and the Guarantors, (ii) certain
transaction and bankruptcy related fees, costs and expenses, (iii) the Carve-Out
and (iv) Pre-Petition claims permitted by the Bankruptcy Court.

SECTION 3.13 Taxes. Except as would not, individually or in the aggregate, have
a Material Adverse Effect, each Loan Party has (a) timely filed or caused to be
timely filed all federal, state, local and foreign Tax Returns required to have
been filed by it and all such Tax Returns are true and correct in all respects
and (b) duly and timely paid or caused to be duly and timely paid all Taxes
(whether or not shown as due on any Tax Return) and all assessments received by
it, except (i) Taxes that are being contested in good faith by appropriate
proceedings and for which such Company has set aside on its books adequate
reserves in accordance with GAAP and (ii) any taxes, fees, or other charges, the
nonpayment of which is required or permitted by the Bankruptcy Code. Each
Company has made adequate provision in accordance with GAAP on its pro forma
financial statements referred to in Section 3.04(b) for all material Taxes not
yet due and payable as of the date of such financial statements. Each Loan Party
is unaware of any proposed or pending tax assessments, deficiencies or audits
that could be reasonably expected to, individually or in the aggregate, result
in a Material Adverse Effect.

SECTION 3.14 No Material Misstatements. No information, report, financial
statement, certificate, Borrowing Request, exhibit or schedule furnished by or
on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the negotiation of any Loan Document or included therein or
delivered pursuant thereto, taken as a whole, contained or contains any material
misstatement of fact or omitted or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were or are made, not misleading as of the date such information is dated or
certified; provided that to the extent any such information, report, financial
statement, exhibit or schedule was based upon or constitutes a forecast or
projection or pro forma adjustment, each Loan Party represents only that it
acted in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule (it being understood that forecasts are subject to uncertainties and
contingencies and that no representation or warranty is given that any forecast
will be realized).

SECTION 3.15 Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against any Loan Party pending or, to the knowledge of any
Loan Party, threatened. The hours worked by and payments made to employees of
any Loan Party have not been in violation of the Fair Labor Standards Act of
1938, as amended, or any other applicable federal, state, local or foreign law
dealing with such matters in any manner which could reasonably be expected to
result in a Material Adverse Effect. All payments due from any Loan Party, or
for which any claim may be made against any Loan Party, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a

 

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liability on the books of such Company except where the failure to do so could
not reasonably be expected to result in a Material Adverse Effect. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which any Loan Party is bound where such termination or
right of renegotiation could reasonably be expected to result in a Material
Adverse Effect.

SECTION 3.16 [Reserved].

SECTION 3.17 Employee Benefit Plans.

(a) Except as could not reasonably be expected to have a Material Adverse
Effect, each Loan Party and its ERISA Affiliates is in compliance in all
material respects with the applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder. Except as disclosed on
Schedule 3.17, no ERISA Event (other than the commencement of the Chapter 11
Cases) has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events, could reasonably be expected to result in a
Material Adverse Effect. Except as disclosed on Schedule 3.17, the present value
of all accumulated benefit obligations of all Plans (based on the assumptions
used for purposes of Borrower’s annual audited financial statements, as
applicable) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of all such
Plans by an amount that could reasonably be expected to have a Material Adverse
Effect. The aggregate liabilities of each Loan Party or its ERISA Affiliates to
all Multiemployer Plans in the event of a complete withdrawal therefrom, as of
the close of the most recent fiscal year of each such Multiemployer Plan, could
not reasonably be expected to result in a Material Adverse Effect.

(b) To the extent applicable, except as could not reasonably be expected to have
a Material Adverse Effect, each Foreign Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities.

SECTION 3.18 Environmental Matters.

(a) Except as, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect:

(i) The Loan Parties and their businesses, operations and Real Property are and
in the last three years have been in compliance with, and the Loan Parties have
no liability under, Environmental Law;

(ii) The Loan Parties have obtained all Environmental Permits required for the
conduct of their businesses and operations, and the ownership, operation and use
of their property, under Environmental Law, all such Environmental Permits are
valid and in good standing and, under the currently effective business plan of
the Loan Parties, no expenditures or operational adjustments will be required in
order to renew or modify such Environmental Permits during the next five
(5) years;

 

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(iii) There has been no Release or threatened Release of Hazardous Material on,
at, under or from any Real Property or facility presently or formerly owned,
leased or operated by the Loan Parties or their predecessors in interest that
could result in liability by the Loan Parties under Environmental Law;

(iv) There is no Environmental Claim pending or, to the knowledge of the Loan
Parties, threatened against the Loan Parties, or relating to the Real Property
currently or formerly owned, leased or operated by the Loan Parties or relating
to the operations of the Loan Parties, and there are no actions, activities,
circumstances, conditions, events or incidents that could form the basis of such
an Environmental Claim; and

(v) No person with an indemnity or contribution obligation to the Loan Parties
relating to compliance with or liability under Environmental Law is in default
with respect to such obligation.

(b) Except as set forth in Schedule 3.18:

(i) No Loan Party is obligated to perform any material action or otherwise incur
any material expense under Environmental Law pursuant to any order, decree,
judgment or agreement by which it is bound or has assumed by contract or
agreement, and no Loan Party is conducting or financing any material Response
pursuant to any Environmental Law with respect to any Real Property or any other
location;

(ii) No Real Property or facility owned, operated or leased by the Loan Parties
and, to the knowledge of the Loan Parties, no Real Property or facility formerly
owned, operated or leased by the Loan Parties or any of their predecessors in
interest is (i) listed or proposed for listing on the National Priorities List
promulgated pursuant to CERCLA or (ii) listed on the Comprehensive Environmental
Response, Compensation and Liability Information System promulgated pursuant to
CERCLA or (iii) included on any similar list maintained by any Governmental
Authority including any such list relating to petroleum;

(iii) No Lien has been recorded or, to the knowledge of any Loan Party,
threatened under any Environmental Law with respect to any Real Property or
property of the Loan Parties;

(iv) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not require any
notification, registration, filing, reporting, disclosure, investigation,
remediation or cleanup pursuant to any Governmental Real Property Disclosure
Requirements or any other Environmental Law; and

(v) The Loan Parties have made available to the Lenders all material records and
files in the possession, custody or control of, or otherwise reasonably
available to, the Loan Parties concerning compliance with or liability under
Environmental Law, including those concerning the existence of Hazardous
Material at Real Property or facilities currently or formerly owned, operated,
leased or used by the Loan Parties.

 

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SECTION 3.19 Insurance. Schedule 3.19 sets forth a true, complete and correct
summary description of all insurance maintained by the Loan Parties as of the
Closing Date. All insurance maintained by the Loan Parties is in full force and
effect, all premiums have been duly paid and no Loan Party has received notice
of violation or cancellation thereof except, in such case, where the failure to
do so could not reasonably be expected to have a Material Adverse Effect. The
Mortgaged Property, and the use, occupancy and operation thereof, comply in all
respects with all Insurance Requirements, and there exists no default under any
material Insurance Requirement, except in each case to the extent the same could
not reasonably be expected to have a Material Adverse Effect. Each Loan Party
has insurance in such amounts and covering such risks and liabilities as are
customary for companies of a similar size engaged in similar businesses in
similar locations.

SECTION 3.20 Legality; Validity and Enforceability of Liens. Upon entry of the
Financing Orders by the Bankruptcy Court, the Secured Parties will have legal,
valid and enforceable Liens having the priority specified in the Financing
Orders on, and security interests in, all of the Loan Parties’ right, title and
interest in and to the Collateral and the proceeds thereof.

SECTION 3.21 Foreign Assets Control Regulations. No Loan Party is, or will be
after the consummation of the Transactions and the application of the proceeds
of the Loans, by reason of being a “national” of a “designated foreign country”
or a “specially designated national” within the meaning of the Regulations of
the Office of Foreign Assets Control, United States Treasury Department (31
C.F.R., Subtitle B, Chapter V), or for any other reason, in violation in any
material respect of, any United States Federal statute or Presidential Executive
Order concerning trade or other relations with any foreign country or any
citizen or national thereof or the ownership or operation of any property.

SECTION 3.22 Anti-Terrorism Law.

(a) No Loan Party and, to the knowledge of the Loan Parties, none of its
Affiliates is in violation of any Anti-Terrorism Laws.

(b) No Loan Party and to the knowledge of the Loan Parties, no Affiliate or
broker or other agent of any Loan Party acting or benefiting in any capacity in
connection with the Loans is any of the following:

(i) a person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Orders;

(ii) a person owned or controlled by, or acting for or on behalf of, any person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Orders;

(iii) a person with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;

(iv) a person that commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Orders; or

 

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(v) a person that is named as a “specially designated national and blocked
person” on the most current list published by OFAC at its official website or
any replacement website or other replacement official publication of such list.

(c) No Loan Party and, to the knowledge of the Loan Parties, no broker or other
agent of any Loan Party acting in any capacity in connection with the Loans
(i) conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any person described in
paragraph (b) above, (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Orders, or (iii) engages in or conspires to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.

SECTION 3.23 Gas Contracts. No Loan Party (a) is obligated in any material
respect by virtue of any prepayment made under any contract containing “take or
pay” or “prepayment” provision or under any similar agreement to deliver
Hydrocarbons produced from or allocated to any Loan Party’s Oil and Gas
Properties at some future date without receiving full payment therefor at the
time of delivery or (b) except as has been disclosed to the Administrative
Agent, has produced gas, in any material amount, subject to balancing rights of
third parties or subject to balancing duties under Requirements of Law.

SECTION 3.24 Material Agreements. Schedule 3.24 sets forth a complete and
correct list of all material agreements, leases, indentures, purchase
agreements, obligations in respect of letters of credit, guarantees, joint
venture agreements, and other instruments in effect or to be in effect as of the
date hereof providing for, evidencing, securing or otherwise relating to any
Indebtedness of any Loan Party, and all obligations of any Loan Party to issuers
of surety or appeal bonds issued for account of any Loan Party, and such list
correctly sets forth the names of the debtor or lessee and creditor or lessor
with respect to the Indebtedness or lease obligations outstanding or to be
outstanding and the Property subject to any Lien securing such Inbdebtedness or
lease obligation. Also set forth on Schedule 3.24 is a complete and correct
list, as of the date of this Agreement, of all material agreements of any Loan
Party relating to the purchase, transportation by pipeline, gas processing,
marketing, sale and supply of natural gas and other Hydrocarbons and which
either (a) has a term longer than 6 months or (b) provides for liabilities of
any Loan Party in excess of $100,000 over any 12 month period. To the extent
requested, Borrower has heretofore delivered to Administrative Agent a complete
and correct copy of all such material credit agreements, indentures, purchase
agreements, contracts, letters of credit, guarantees, joint venture agreements,
or other instruments, including any modifications or supplements thereto, as in
effect on the date hereof.

ARTICLE IV

CONDITIONS TO CREDIT EXTENSIONS

SECTION 4.01 Conditions to the Making of the First Advance. The obligation of
each Lender to fund its Pro Rata Share of the First Advance shall be subject to
the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 4.01.

 

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(a) Loan Documents. All legal matters incident to this Agreement, the Loans
available hereunder and the other Loan Documents shall be satisfactory to the
Lenders and to the Administrative Agent and there shall have been delivered to
the Administrative Agent an executed counterpart of each of the Loan Documents.

(b) Corporate Documents. The Administrative Agent shall have received:

(i) a certificate of the secretary or assistant secretary of each Loan Party
dated as of the Closing Date, certifying (A) that attached thereto is a true and
complete copy of each Organizational Document of such Loan Party certified (to
the extent applicable) as of a recent date by the Secretary of State of the
state of its organization, (B) that attached thereto is a true and complete copy
of resolutions duly adopted by the Board of Directors of such Loan Party
authorizing the execution, delivery and performance of the Loan Documents to
which such person is a party and, in the case of Borrower, the Borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect and (C) as to the incumbency and
specimen signature of each officer executing any Loan Document or any other
document delivered in connection herewith on behalf of such Loan Party (together
with a certificate of another officer as to the incumbency and specimen
signature of the secretary or assistant secretary executing the certificate in
this clause (i)); and

(ii) a certificate as to the good standing of each Loan Party (in so-called
“long-form” if available) as of a recent date, from such Secretary of State of
its jurisdiction of incorporation or organization, as applicable.

(c) Officer’s Certificate. The Administrative Agent shall have received a
certificate, dated as of the Closing Date and signed by the executive vice
president of Borrower, confirming compliance with the conditions precedent set
forth in this Section 4.01 and Sections 4.02(b), (c) and (d).

(d) Opinions of Counsel. The Administrative Agent shall have received, on behalf
of itself and the Lenders, a favorable written opinion of Davis Graham & Stubbs
LLP, counsel for the Loan Parties.

(e) Fees. The Administrative Agent shall have received all Fees and other
amounts due and payable on the Closing Date and, to the extent invoiced on or
before the Closing Date, reimbursement or payment of all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of Brown
Rudnick LLP, counsel to the Administrative Agent, and the reasonable fees and
expenses of any local counsel, appraisers, consultants and other advisors)
incurred by the Agents prior to the Closing Date (for which the Borrower is
required to reimburse Agents under the Loan Documents).

(f) Personal Property Requirements. To the extent requested by Administrative
Agent, the Borrower shall have delivered to the Administrative Agent (except, in
each case, if such item was previously delivered to the Prior Agent):

(i) all certificates, agreements or instruments representing or evidencing the
Securities Collateral accompanied by instruments of transfer and stock powers
undated and endorsed in blank;

 

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(ii) the Intercompany Note;

(iii) UCC financing statements in appropriate form for filing under the UCC,
filings with the United States Patent and Trademark Office and United States
Copyright Office and such other documents under applicable Requirements of Law
in each jurisdiction as may be necessary or appropriate or, in the opinion of
the Administrative Agent, desirable to perfect the Liens created, or purported
to be created, by the Financing Orders or the Security Documents;

(iv) certified copies of UCC, tax and judgment lien searches, bankruptcy and
pending lawsuit searches or equivalent reports or searches, each of a recent
date listing all effective financing statements, lien notices or comparable
documents that name any Loan Party as debtor and that are filed in those state
and county jurisdictions in which any property of any Loan Party is located and
the state and county jurisdictions in which any Loan Party is organized or
maintains its principal place of business and such other searches that the
Administrative Agent deems necessary or appropriate, none of which encumber the
Collateral covered or intended to be covered by the Security Documents (other
than Permitted Liens or any other Liens acceptable to the Administrative Agent).

(g) Insurance. The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.04 and the applicable provisions of the Security Documents, each of
which shall be endorsed or otherwise amended to include a “standard” or “New
York” lender’s loss payable or mortgagee endorsement (as applicable) and shall
name the Administrative Agent, on behalf of the Secured Parties, as additional
insured, in form and substance satisfactory to the Administrative Agent.

(h) USA Patriot Act Information. The Lenders shall have received, sufficiently
in advance of the Closing Date, all documentation and other information that may
be required by the Lenders in order to enable compliance with applicable “know
your customer” and anti-money laundering rules and regulations, including the
United States PATRIOT Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) including the information described in Section 11.16.

(i) Budget & Monthly Forecast. The Administrative Agent shall have received a
copy of the 13-Week Budget, in form and substance acceptable to the
Administrative Agent.

(j) Chapter 11 Case Administration. Entry by the Bankruptcy Court of the Interim
Order, by no later than five (5) days after the Petition Date in form and
substance reasonably satisfactory to the Administrative Agent and the Required
Lenders, which date, at the request of the Borrower and with the consent of the
Administrative Agent, may be extended up to an additional ten (10) Business
Days.

(k) First Day Orders. All first day orders described on Schedule A-1 that are
filed in the Chapter 11 Cases entered by the Bankruptcy Court shall be in form
and substance reasonably satisfactory to the Administrative Agent.

(l) No Excess Cash. The Borrower shall have delivered an Officer’s Certificate
to the Administrative Agent certifying that to the extent that the Loan Parties
have any cash on hand on the Petition Date not subject to a Lien in favor of the
Agent, such unencumbered cash is

 

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intended to be utilized or deemed utilized prior to the utilization of the
proceeds from the First Advance (or any other Advance) in accordance with the
Interim Order other than up to $1,000,000 held as cash collateral to secure
letters of credit and other credit assessments.

(m) Reserved.

(n) Assignment Documentation. Prior Agents and Prior Lenders shall have executed
and delivered assignment documents, in form and substance satisfactory to
Administrative Agent, evidencing the assignment by Prior Agents and Prior
Lenders to Collateral Agent and Lenders, respectively, of all security
interests, Liens and mortgages granted by Loan Parties to Prior Agents and Prior
Lenders under the Pre-Petition Credit Agreement and the other Pre-Petition Loan
Documents (“Assignment Documentation”).

(o) Real Property. Administrative Agent shall have received a title report from
Greenberg Traurig, LLP regarding the status of Borrower’s title to certain of
the Mortgaged Properties in form and substance satisfactory to the
Administrative Agent.

All obligations of the Agents and Lenders under this Agreement shall
automatically terminate without any further action if the conditions required
under this Section 4.01 (including, without limitation, Section 4.01(k)) have
not been satisfied on or before December 31, 2011.

SECTION 4.02 Conditions to All Credit Extensions. The obligation of each Lender
to fund its Pro Rata Share of the Advances shall be subject to the prior or
concurrent satisfaction of, each of the conditions precedent set forth below.

(a) Notice. The Administrative Agent shall have received a Borrowing Request as
required by Section 2.01.

(b) No Default. The Borrower and each other Loan Party shall be in compliance in
all material respects with all the terms and provisions set forth herein and in
each other Loan Document on its part to be observed or performed, and, at the
time of and immediately after giving effect to such Loan and the application of
the proceeds thereof, no Default shall have occurred and be continuing on such
date.

(c) Representations and Warranties. Each of the representations and warranties
made by any Loan Party set forth in Article III hereof or in any other Loan
Document shall be true and correct in all material respects (except that any
representation and warranty that is qualified as to “materiality” or “Material
Adverse Effect” shall be true and correct in all respects) on and as of the date
on which the Loan is made (after giving effect thereto) with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.

(d) No Legal Bar. No order, judgment or decree of any Governmental Authority
shall purport to restrain any Lender from making any Loans to be made by it and
no approvals from any Governmental Authority or third party approvals are
necessary in connection with the making of the Advances.

 

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(e) Bankruptcy Matters. At the time of the making of any Loan hereunder, (i) if
such Loan is prior to the entry and effectiveness of the Final Order, the
Interim Order shall not have terminated or expired, and the date of such Loan
shall not be more than thirty (30) days from the entry and effectiveness of the
Interim Order or more than thirty-five (35) days from the Petition Date, (ii) if
such Loan is after the entry and effectiveness of the Final Order, the Final
Order shall be effective, and shall not have been terminated or expired,
(iii) no Financing Order shall have been vacated, reversed, stayed, amended,
supplemented or otherwise modified (without the consent of the Administrative
Agent), (iv) no motion for reconsideration of any Financing Order shall be
pending, and (v) no appeal of any Financing Order shall be pending and no
Financing Order shall be the subject of a stay pending appeal or a motion for a
stay pending appeal.

(f) Budget. At the time of the making of a Loan, the amount of such Loan shall
not be in excess of the amounts necessary to fund disbursements (in the
aggregate) permitted under the most recently delivered 13-Week Budget in effect
at such time, subject to any Permitted Variance under Section 6.07.

(g) Commitment. After giving effect to such Loan, the aggregate then outstanding
principal amount of the Loans then outstanding shall not exceed the Commitment
less the Carve-Out Reserve at such time.

Each of the delivery of a Borrowing Request and the acceptance by the Borrower
of the proceeds of the corresponding Loan shall constitute a representation and
warranty by the Borrower and each other Loan Party that on the date of such Loan
(both immediately before and after giving effect to such Loan and the
application of the proceeds thereof) the conditions contained in this
Section 4.02 have been satisfied. The Borrower shall provide such information
(including calculations in reasonable detail of the covenants in Section 6.07)
as the Administrative Agent may reasonably request to confirm that the
conditions in this Section 4.02 have been satisfied.

SECTION 4.03 Condition Subsequent. By January 13, 2012, Borrower shall deliver
to Administrative Agent the Monthly Forecast for the four (4) month period
immediately following the Petition Date, which Monthly Forecast shall be in form
and substance reasonably satisfactory to Administrative Agent and shall include
at least the detail referenced in the attached in Exhibit M-3. Borrower’s
failure to so deliver such Monthly Forecast shall constitute an Event of Default
without notice or grace.

ARTICLE V

AFFIRMATIVE COVENANTS

Each Loan Party agrees with each Lender that so long as this Agreement shall
remain in effect and until the Commitments have been terminated and the
principal of and interest on each Loan, all Fees and all other expenses or
amounts due and payable under any Loan Document shall have been paid in full,
each Loan Party will, and will cause each of its Subsidiaries to:

 

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SECTION 5.01 Financial Statements, Reports, etc. Furnish to the Administrative
Agent and, upon the request of the Administrative Agent or any Lender, to each
such Lender making the request to the Borrower or the Administrative Agent:

(a) Annual Reports. Within ninety (90) days after the end of each fiscal year,
(i) the consolidated balance sheet of Borrower as of the end of such fiscal year
and related consolidated statements of income, cash flows for such fiscal year,
in comparative form with such financial statements as of the end of, and for,
the preceding fiscal year, and notes thereto, all prepared in accordance with
GAAP and accompanied by an opinion of KPMG LLP or other independent public
accountants of recognized national standing satisfactory to the Administrative
Agent, stating that such financial statements fairly present, in all material
respects, the consolidated financial condition, results of operations and cash
flows of Borrower as of the dates and for the periods specified in accordance
with GAAP, (ii) a management’s discussion and analysis of the financial
condition and results of operations for such fiscal year, as compared to the
previous fiscal year and (iii) a consolidating balance sheet and statements of
income separating out Borrower and the Subsidiaries, which shall be accompanied
by a certificate of a Financial Officer stating that such financial statements
fairly present, in all material respects, the consolidated financial condition,
results of operations and cash flows of Borrower as of the date and for the
periods specified on a basis consistent with audited financial statements in
clause (i) above;

(b) [Reserved];

(c) Monthly Reports. Within thirty (30) days after the end of each fiscal month,
the consolidated balance sheet of Borrower as of the end of such month and the
related consolidated statements of income and cash flows of Borrower for such
month and for the then elapsed portion of the fiscal year, in comparative form
with the consolidated statements of income and cash flows for the comparable
periods in the previous fiscal year, accompanied by a certificate of a Financial
Officer stating that such financial statements fairly present, in all material
respects, the consolidated financial position, results of operations and cash
flows of Borrower as of the date and for the periods specified in accordance
with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;

(d) Financial Officer’s Certificate. (i) Concurrently with any delivery of
financial statements under Section 5.01(a) or (c) above, a Compliance
Certificate certifying that no Default has occurred or, if such a Default has
occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto; and (ii) in the case of
Section 5.01(a) above, a report of the accounting firm opining on or certifying
such financial statements stating that in the course of its regular audit of the
financial statements of Borrower and its Subsidiaries, which audit was conducted
in accordance with GAAP, such accounting firm obtained no knowledge that any
Default under Section 6.07 has occurred or, if in the opinion of such accounting
firm such a Default has occurred, specifying the nature and extent thereof;

(e) Financial Officer’s Certificate Regarding Collateral. Concurrently with any
delivery of financial statements under Section 5.01(a) above, a certificate of a
Financial Officer (i) updating, to the extent necessary, to reflect (A) any
changes to the names or locations of any Loan Party or (B) any other information
reasonably required by the Administrative Agent with

 

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respect to the Collateral or (ii) confirming that there has been no change in
such information since the Closing Date or the latest supplement to the
schedules to this Agreement or Security Agreement, as applicable.

(f) Public Reports. As soon as reasonably practicable after the same become
publicly available, copies of all periodic and other reports, proxy statements
and other materials filed by any Loan Party with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other
representative therefor), as the case may be;

(g) Management Letters. As soon as reasonably practicable after the receipt
thereof by any Loan Party, a copy of any “management letter” received by any
such person from its certified public accountants and the management’s responses
thereto;

(h) Reserved.

(i) 13-Week Budget; Operating Forecasts.

(i) Commencing on December 22, 2011 and on each Wednesday thereafter, furnish on
or before 5:00 p.m., New York City time, to the Administrative Agent for prompt
further distribution to each Lender, (A) an updated 13-Week Budget (covering the
period beginning on the Monday immediately preceding the Wednesday that such
13-Week Budget is delivered), in form and substance acceptable to the
Administrative Agent and the Required Lenders, and (B) a report of net aggregate
unfavorable variances of Net Operating Cash Flow (as defined in the 13-Week
Budget) (the “Monthly Variance Report”) in the form attached hereto as Exhibit
M-1 evidencing net unfavorable variances from budget for the prior four (4) week
period as set forth in the prior 13-Week Budget (the “Permitted Monthly
Variance”). It is hereby understood and agreed by the parties hereto and the
Required Lenders that (x) the Required Lenders shall be deemed to have consented
to such 13-Week Budget if the Required Lenders fail to submit to the
Administrative Agent a written objection to such 13-Week Budget by 5:00 p.m.,
New York City time, on Monday of the following week; provided, that the Borrower
delivers the 13-Week Budget in a timely manner in accordance with the first
sentence of this clause (i) and (y) such 13-Week Budget shall not become the
applicable 13-Week Budget until the Administrative Agent shall have delivered a
notice of approval of such 13-Week Budget to the Borrower; provided, that if the
Administrative Agent does not deliver a notice of approval to the Borrower, the
previously delivered 13-Week Budget shall continue to constitute the applicable
13-Week Budget until a 13-Week Budget is agreed to among the Borrower and the
Administrative Agent in accordance with this Section.

(ii) Commencing on December 22, 2011 and on each Wednesday thereafter, furnish
to the Administrative Agent for prompt further distribution to each Lender (A) a
comparison of actual to budgeted weekly results of operation for each prior four
(4) week period, as applicable, (B) a report of weekly net aggregate unfavorable
variances of Net Operating Cash Flow (the “Weekly Variance Report”) in the form
attached hereto as Exhibit M-2 evidencing net aggregate unfavorable variances
from budget per week (the “Permitted Weekly Variance”

 

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and, together with the Permitted Monthly Variance, the “Permitted Variances”)
and (C) a report containing a summary of accrued, but unpaid, professional fees
and expenses of the Borrower, the Guarantors and the Committee incurred in the
Chapter 11 Cases as of such date.

(j) Organization. Within sixty (60) days after the close of each fiscal year of
Borrower, Borrower shall deliver an accurate organization chart as required by
Section 3.07(c), or confirm that there are no changes to Schedule 3.07(c);

(k) Organizational Documents. As soon as reasonably practicable, provide copies
of any Organizational Documents that have been amended or modified in accordance
with the terms hereof and deliver a copy of any notice of default given or
received by any Loan Party under any Organizational Document within fifteen
(15) days after such Loan Party gives or receives such notice;

(l) Documents filed with the Bankruptcy Court or Delivered to the U.S. Trustee
or Committee. Promptly, upon their being filed with the Bankruptcy Court,
provide copies of all monthly reports as well as all pleadings, motions,
applications, judicial information or other information with respect to each
Loan Party’s financial condition filed by or on behalf of each Loan Party with
the Bankruptcy Court or served by a Loan Party to or upon the United States
Trustee (or any monitor or interim receiver, if any, appointed in the Chapter 11
Cases) or any Committee, at the time such document is filed with the Bankruptcy
Court or served by a Loan Party to or upon the United States Trustee (or any
monitor or interim receiver, if any, appointed in the Chapter 11 Cases) or any
Committee, to the extent such document has not otherwise been served pursuant to
an order of the Bankruptcy Court establishing notice procedures in the Chapter
11 Cases or otherwise.

(m) Oil and Gas Reserve Reports.

(i) As soon as available but in any event on or before April 1 of each year
thereafter, an Independent Engineering Report dated effective as of the
immediately preceding January 1st;

(ii) As soon as available but in any event on or before October 1 of each year
an Internal Engineering Report dated effective as of the immediately preceding
July 1st;

(iii) Such other information as may be reasonably requested by Administrative
Agent or any Lender with respect to the Oil and Gas Properties ;

(iv) With the delivery of each Engineering Report, a certificate from a
Responsible Officer of Borrower certifying that, to his knowledge and in all
material respects:

(A) the information contained in the Engineering Report and any other
information delivered in connection therewith is true and correct, (B) except as
set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to the Oil and Gas
Properties evaluated in such Engineering Report which would require any Loan
Party to deliver Hydrocarbons produced from such Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor, (C) none
of its Oil and Gas Properties have been sold except as set

 

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forth on an exhibit to the certificate, which certificate shall list all of its
Oil and Gas Properties sold and in such detail as reasonably required by the
Required Lenders, (D) attached to the certificate is a list of its Oil and Gas
Properties added to and deleted from the immediately prior Engineering Report
and a list showing any change in working interest or net revenue interest in its
Oil and Gas Properties occurring and the reason for such change, (E) attached to
the certificate is a list of all Persons disbursing proceeds to any Loan Party
from its Oil and Gas Properties, and (F) except as set forth on a schedule
attached to the certificate, at least 90% (by value) of the Proved Reserves (and
associated Oil and Gas Properties) evaluated by such Engineering Report are
pledged as Collateral for the Obligations.

(n) Property Operating Statement. On the twenty-fifth (25th) day of the month
immediately following the Closing Date and continuing thereafter, within
twenty-five (25) days after the end of each calendar month (such month being the
“Reported Month”), a POS including attachments prepared by the Loan Parties
detailing (A) Sales Volumes associated with cash payments received during the
Reported Month, (B) all cash payments received during the Reported Month in
respect of the Properties, and (C) Borrower’s aged accounts payable at the end
of the Reported Month, and accompanied by a certification of a Responsible
Officer, dated as of the date on which Administrative Agent receives the POS,
and certifying that, to the knowledge of the Responsible Officer, no Event of
Default exists under any of the Loan Documents.

(o) Production. As soon as available and in any event within 45 days after the
end of each quarter, commencing with the quarter ending December 31, 2011, a
report certified by a Responsible Officer of Borrower in form and substance
satisfactory to Administrative Agent prepared by Borrower covering each of the
Oil and Gas Properties of Loan Parties and detailing on a quarterly basis
(A) the production, revenue, and price information and associated operating
expenses for each such quarter, (B) any changes to any producing reservoir,
production equipment, or producing well during each such quarter, which changes
could reasonably be expected to cause a Material Adverse Change, and (C) any
sales of any Loan Parties’ Oil and Gas Properties during each such quarter.

(p) Updated Development Plan. As long as there are outstanding Term Loans,
contemporaneous with the delivery of each Reserve Report bearing an effective
date as of January 1st of any year, Borrower will prepare and deliver to
Administrative Agent a revised, proposed Development Plan covering at least the
next twelve (12) months and setting forth all capital expenditure development
projects proposed for that period, the anticipated timing of those projects, the
net cost of each of those projects to Borrower and any other information that
Administrative Agent may request. Each proposed modification to the Development
Plan will be subject to the approval of Administrative Agent, and Borrower
acknowledges that Administrative Agent is not required to approve any proposed
modification to the Development Plan. Until Administrative Agent has approved a
revised Development Plan, the most recent approved Development Plan (and all
AFEs approved in connection with that most recently approved Development Plan)
will remain in effect.

 

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(q) Sale Process/Reorganization Plan. Borrower shall (i) keep Administrative
Agent updated with respect to any developments with respect to the bankruptcy
sale process, (ii) not later than three days prior to filing an asset purchase
agreement and the corresponding motions and sale order with the Bankruptcy
Court, Borrower shall deliver a draft of such asset purchase agreement, motion
and sale order to Administrative Agent, (iii) keep Administrative Agent updated
with respect to any developments with respect to the preparation and/or filing
of a Reorganization Plan (if any) and (iv) not later than three days prior to
filing a Reorganization Plan with the Bankruptcy Court, Borrower shall deliver a
draft of such Reorganization Plan to Administrative Agent.

(r) Other Information. As soon as reasonably practicable, from time to time,
such other information regarding the operations, business affairs and financial
condition of any Loan Party, or compliance with the terms of any Loan Document,
as the Administrative Agent or any Lender may reasonably request, or that is
provided to trustee and/or holders of the Unsecured Notes pursuant to any
requirement substantially the same as this Section 5.01(m).

(s) Limitation on Information Disseminated. Notwithstanding anything herein to
the contrary, to the extent that any ZCOF Lender shall be entitled in its
capacity as a Lender to receive or request any information pursuant to the
provisions hereof or any other Loan Document, the ZCOF Lenders shall not receive
nor shall have a right to request such information to the extent that such
information constitutes Strategic Sales Process Information unless the other
bidders, prospective bidders, sponsor or prospective sponsor have also received
such information as part of the sale process or Reorganization Plan. For the
avoidance of doubt, nothing in this Section 5.01(s) or in any other provision of
the Loan Documents shall limit or restrict the rights of ZCOF or any of its
Affiliates, in their respective capacities as a sponsor or prospective sponsor
of a Reorganization Plan, or a bidder or prospective bidder with respect to the
sale of substantially all of the Borrower’s assets or a potential asset sale or
Reorganization Plan transaction, to request and receive any information that a
sponsor or prospective sponsor or bidder or prospective bidder is entitled to
receive.

SECTION 5.02 Litigation and Other Notices. Furnish to the Administrative Agent,
and upon the request of the Administrative Agent or any Lender, to each such
Lender making the request to the Borrower or the Administrative Agent, written
notice of the following as soon as reasonably practicable (and, in any event,
within five Business Days of the occurrence thereof):

(a) any Event of Default, specifying the nature and extent thereof and the
corrective action (if any) taken or proposed to be taken with respect thereto
provided that if such Event of Default is cured before the expiration of the
five (5) Business Day period described above, the Borrower shall not be required
to provide notice thereof to the Administrative Agent;

(b) the filing or commencement of, or any threat or notice of intention of any
person to file or commence, any action, suit, litigation or proceeding, whether
at law or in equity by or before any Governmental Authority, (i) against any
Loan Party that could reasonably be expected to result in a Material Adverse
Effect or (ii) with respect to any Loan Document;

(c) the occurrence of a Casualty Event;

 

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(d) the incurrence of any material Lien (other than Permitted Liens and the
Carve-Out) on, or claim asserted against any of the Collateral (other than as a
result of the filing of proofs of claims in the Chapter 11 Cases); and

(e) a copy of any notice, summons, citation, or proceeding seeking to modify in
any material respect or revoke or suspend any material contract, license, permit
or agreement with any Governmental Authority.

SECTION 5.03 Existence; Businesses and Properties. Except as resulting from the
Chapter 11 Cases, continue to:

(a) do or cause to be done all things reasonably necessary to preserve, renew
and maintain in full force and effect its legal existence, except as otherwise
expressly permitted under Section 6.04 or, in the case of any Subsidiary, where
the failure to perform such obligations, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect; and

(b) do or cause to be done all things reasonably necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
privileges, franchises, authorizations, patents, copyrights, trademarks and
trade names material to the conduct of its business; comply with all applicable
Requirements of Law (including any and all zoning, building, Environmental Law,
ordinance, code or approval or any building permits or any restrictions of
record or agreements affecting the Real Property) and decrees and orders of any
Governmental Authority, whether now in effect or hereafter enacted, except in
all cases where the failure to comply, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect; pay and
perform its obligations under all Loan Documents; and at all times maintain,
preserve and protect all property material to the conduct of such business and
keep such property in good repair, working order and condition (other than wear
and tear occurring in the ordinary course of business subject to condemnation
and casualty events) and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times, except in all cases where the failure to
comply, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect; provided that nothing in this
Section 5.03(b) shall prevent (i) sales of property, consolidations or mergers
by or involving any Loan Party in accordance with Section 6.04; (ii) the
withdrawal by any Loan Party of its qualification as a foreign corporation in
any jurisdiction where such withdrawal, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect; or (iii) the
abandonment by any Loan Party of any property, rights, franchises, licenses,
trademarks, trade names, copyrights or patents that such person reasonably
determines are not useful to its business or no longer commercially desirable.

SECTION 5.04 Insurance.

(a) Keep its insurable property adequately insured at all times by financially
sound and reputable insurers; maintain such other insurance, to such extent and
against such risks as is customary with companies in the same or similar
businesses operating in the same or similar

 

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locations, including insurance with respect to Mortgaged Properties and other
properties material to the business of the Loan Parties against such casualties
and contingencies and of such types and in such amounts with such deductibles as
is customary in the case of similar businesses operating in the same or similar
locations, including (i) physical hazard insurance on an “all risk” basis,
(ii) commercial general liability against claims for bodily injury, death or
property damage covering any and all insurable claims, (iii) explosion insurance
in respect of any boilers, machinery or similar apparatus constituting
Collateral, (iv) business interruption insurance, (v) worker’s compensation
insurance and such other insurance as may be required by any Requirement of Law
and (vi) such other insurance against risks as the Administrative Agent may from
time to time require (acting reasonably) (such policies to be in such form and
amounts and having such coverage as may be reasonably satisfactory to the
Administrative Agent); provided that if and so long as an Event of Default has
occurred and is continuing with respect to physical hazard insurance, neither
the Administrative Agent nor the applicable Loan Party shall agree to the
adjustment of any claim thereunder in excess of $1,000,000 without the consent
of the other (such consent not to be unreasonably withheld or delayed).

(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof (except with respect to cancellation as a result of a payment
default, such cancellation shall not be effective until at least 10 days after
receipt by Administrative Agent of written notice thereof) and if an endorsement
providing such notice is commercially impracticable by the Borrower’s carrier,
the Borrower will use its commercially reasonable efforts to provide thirty
(30) days or ten (10) days, as applicable, notice to the Administrative Agent
prior to the cancellation, material reduction in amount or material change in
coverage, (ii) name the Administrative Agent as mortgagee (in the case of
property insurance) or additional insured on behalf of the Secured Parties (in
the case of liability insurance) or loss payee (in the case of property
insurance), as applicable and (iii) be reasonably satisfactory in all other
respects to the Administrative Agent.

(c) Notify the Administrative Agent immediately whenever any separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 5.04 is taken out by any Loan Party; and as soon
as practicable deliver to the Administrative Agent a duplicate original copy of
such policy or policies.

(d) With respect to Mortgaged Property, obtain flood insurance in such total
amount as the Administrative Agent or the Required Lenders may from time to time
reasonably require, if at any time the area in which any improvements located on
any Mortgaged Property is designated a “flood hazard area” in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), and otherwise comply with the National Flood Insurance
Program as set forth in the Flood Disaster Protection Act of 1973, as amended
from time to time.

(e) Deliver to the Administrative Agent and the Lenders a report of a reputable
insurance broker with respect to such insurance and such supplemental reports
with respect thereto as the Administrative Agent may from time to time
reasonably request.

 

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(f) No Loan Party that is an owner of Mortgaged Property shall knowingly take
any action that is reasonably likely to be the basis for termination, revocation
or denial of any insurance coverage required to be maintained under such Loan
Party’s respective Mortgage or that could be the basis for a defense to any
claim under any Insurance Policy maintained in respect of the Mortgaged
Property, and each Loan Party shall otherwise comply in all material respects
with all Insurance Requirements in respect of the premises; provided, however,
that each Loan Party may, at its own expense and after written notice to the
Administrative Agent, (i) contest the applicability or enforceability of any
such Insurance Requirements by appropriate legal proceedings, the prosecution of
which does not constitute a basis for cancellation or revocation of any
insurance coverage required under this Section 5.04 or (ii) cause the Insurance
Policy containing any such Insurance Requirement to be replaced by a new policy
complying with the provisions of this Section 5.04.

SECTION 5.05 Obligations and Taxes.

(a) Except where the failure to do so would not reasonably be expected to result
in a Material Adverse Effect, subject to the approval of the Bankruptcy Court in
the Chapter 11 Cases and to the restrictions set forth in this Agreement, pay
its Indebtedness and other obligations in accordance with their terms and pay
and discharge promptly when due and payable all Taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, services, materials and
supplies or otherwise that, if unpaid, might give rise to a Lien other than a
Permitted Lien upon such properties or any part thereof.

(b) Timely and correctly file all Tax Returns required to be filed by it, except
where the failure to do so would not reasonably be expected to result in a
Material Adverse Effect.

(c) The Borrower does not intend to treat the Loans as being a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4. In the
event the Borrower determines to take any action inconsistent with such
intention, it will promptly notify the Administrative Agent thereof.

SECTION 5.06 Employee Benefits. Subject to the applicable provisions of the
Bankruptcy Code and except as a result of the Chapter 11 Cases (including the
effects of the Chapter 11 Cases on the funding of the Plans), (a) except as
could not reasonably be expected to have a Material Adverse Effect, with respect
to any Plan, comply in all respects with the applicable provisions of ERISA and
the Code and (b) furnish to the Administrative Agent (x) as soon as possible
after, and in any event within ten (10) days after any Responsible Officer of
any Company knows or has reason to know, that any ERISA Event has occurred that,
alone or together with any other ERISA Event, could reasonably be expected to
result in liability of the Loan Parties or any of their ERISA Affiliates in an
aggregate amount exceeding $1,000,000, a statement of a Financial Officer of the
Borrower setting forth details as to such ERISA Event and the action, if any,
that the Loan Parties propose to take with respect thereto, and (y) upon request
by the Administrative Agent, copies of (i) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Loan Party or
any ERISA Affiliate with the Internal Revenue Service with respect to each Plan;
(ii) the most recent actuarial valuation report for each Plan; (iii) all notices
received by any Loan Party or any ERISA Affiliate from a Multiemployer

 

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Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such
other documents or governmental reports or filings relating to any Plan or the
Multiemployer Plan as the Administrative Agent shall reasonably request.

SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Annual
Meetings. Keep proper books of record and account (i) in which full, true and
correct entries are made in conformity with all Requirements of Law (ii) in form
permitting financial statements conforming with GAAP to be derived therefrom and
(iii) in which all dealings and transactions in relation to its business and
activities are recorded. Each Loan Party will permit any representatives
designated by the Administrative Agent or any Lender (in the case of any Lender
only, during the continuance of a Default or an Event of Default) to visit and
inspect the financial records and, subject to the rights of tenants, the
property of such Loan Party upon reasonable prior notice during regular business
hours and to make extracts from and copies of such financial records, and permit
any representatives designated by the Administrative Agent or any Lender (in the
case of any Lender only, during the continuance of an Event of Default) to
discuss the affairs, finances, accounts and condition of any Loan Party with and
be advised as to the same by the officers and employees thereof and the
independent accountants therefor, all at such reasonable times and intervals and
to such reasonable extent as the Administrative Agent or any Lender (in the case
of any Lender only, during the continuance of an Event of Default) may request;
provided, that unless a Default or an Event of Default is continuing, the
Borrower shall not be required to pay the expenses of more than one such visit
per calendar year; provided further, notwithstanding anything to the contrary
herein but subject to and without limiting the provisions of Section 5.01(s)
hereof, no ZCOF Lender shall be entitled in its capacity as a Lender to the
rights of a Lender under this Section 5.07 to the extent the information
available or provided hereunder constitutes Strategic Sales Process Information.
The Borrower shall be permitted to reasonably coordinate the visits and
inspections of individual Lenders to minimize inconvenience.

SECTION 5.08 Use of Proceeds. Use the proceeds of the Loans only for the
purposes set forth in Section 3.12.

SECTION 5.09 Compliance with Environmental Laws; Environmental Reports.

(a) Comply, and cause all lessees and other persons occupying Real Property
owned, operated or leased by any Loan Party to comply, in all material respects
with all Environmental Laws and Environmental Permits applicable to its
operations and Real Property; obtain and renew all material Environmental
Permits applicable to its operations and Real Property; and conduct all
Responses required by, and in accordance with, Environmental Laws; provided that
no Loan Party shall be required to undertake any Response to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such circumstances
in accordance with GAAP.

(b) If a Default caused by reason of a breach of Section 3.18 or Section 5.09(a)
shall have occurred and be continuing for more than 20 days without the Loan
Parties commencing activities reasonably likely to cure such Default, at the
written request of the Administrative Agent or the Required Lenders through the
Administrative Agent, provide to the Lenders within

 

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forty-five (45) days after such request, at the expense of the Borrower, an
environmental assessment report regarding the matters which are the subject of
such Default, including, where appropriate, any soil and/or groundwater
sampling, prepared by an environmental consulting firm and, in the form and
substance, reasonably acceptable to the Administrative Agent and indicating the
presence or absence of Hazardous Materials and the estimated cost of any
compliance or Response to address them.

(c) Each Loan Party that is an owner of Mortgaged Property shall not install nor
permit to be installed in the Mortgaged Property any Hazardous Materials, other
than in compliance with applicable Environmental Laws.

SECTION 5.10 Meetings with Lenders. On a bi-weekly basis, or otherwise at the
reasonable request of the Administrative Agent, hold, or be available to hold, a
meeting (at a mutually agreeable location and time or telephonically) with the
Lenders (each, in its capacity as a lender) and management of the Borrower
regarding the financial results and operations of the Loan Parties and
monitoring any developments in the Chapter 11 Cases; provided that,
notwithstanding anything to the contrary herein, no ZCOF Lender or
representative or advisor thereof shall be permitted to attend any of such
meetings.

SECTION 5.11 Additional Collateral; Additional Guarantors.

(a) Subject to this Section 5.11, with respect to any property acquired after
the Closing Date by any Loan Party that is intended to be subject to the Lien
created by any of the Security Documents or the Financing Orders but is not so
subject (but in any event excluding any assets described in the last sentence of
paragraph (b) of this Section 5.11), promptly (and in any event within thirty
(30) days after the acquisition thereof) (i) execute and deliver to the
Administrative Agent such amendments or supplements to the relevant Security
Documents or such other documents as the Administrative Agent shall reasonably
deem necessary to grant to the Collateral Agent, for its benefit and for the
benefit of the other applicable Secured Parties, a Lien on such property having
the priority specified in the Financing Orders, and (ii) to the extent not
already created and/or perfected, take all actions necessary to cause such Lien
to be duly perfected to the extent required by such Security Document or the
Financing Orders and not already perfected in accordance with all applicable
Requirements of Law, including the filing of financing statements in such
jurisdictions as may be reasonably requested by the Administrative Agent. The
Borrower shall otherwise take such actions and execute and/or deliver to the
Collateral Agent such documents as the Collateral Agent shall reasonably require
to confirm the validity, perfection and priority of the Lien under the Financing
Orders or the Security Documents against such after-acquired properties.

(b) With respect to any person that is or becomes a Subsidiary after the Closing
Date (other than (i) any Foreign Subsidiary that is not a direct Subsidiary of a
Loan Party and (ii) any Subsidiary of any Foreign Subsidiary), promptly (and in
any event within 30 days after such person becomes a Subsidiary) (A) deliver to
the Administrative Agent the certificates, if any, representing all of the
Equity Interests of such Subsidiary that are owned by any Loan Party, together
with undated stock powers or other appropriate instruments of transfer executed
and delivered in blank by a duly authorized officer of the relevant Loan Party,
and all intercompany notes owing from such Subsidiary to any Loan Party together
with instruments of transfer

 

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executed and delivered in blank by a duly authorized officer of such Loan Party
and (B) cause such new Subsidiary (other than a Foreign Subsidiary or Subsidiary
of a Foreign Subsidiary) (1) to execute a Joinder Agreement or such comparable
documentation to become a Guarantor, a joinder agreement to the applicable
Security Document or Financing Order, substantially in the form annexed thereto,
and a joinder agreement to the Intercompany Note and (2) to the extent not
already created and/or perfected, to take all actions reasonably necessary or
advisable in the opinion of the Collateral Agent to cause the Lien created by
the applicable Security Agreement to be duly perfected to the extent required by
such agreement in accordance with all applicable Requirements of Law, including
the filing of financing statements in such jurisdictions as may be reasonably
requested by the Collateral Agent.

(c) At the request of the Administrative Agent or Collateral Agent, as soon as
practicable, grant to the Collateral Agent, within sixty (60) days of the
acquisition thereof, a first priority (subject only to the Permitted Senior
Liens and the Carve-Out) security interest in and Mortgage on (i) each Real
Property owned in fee by such Loan Party as is acquired by such Loan Party after
the Closing Date, and (ii) each leased Real Property of such Loan Party, in each
case, as additional security for the Secured Obligations (unless the subject
property is already mortgaged to a third party to the extent permitted by
Section 6.02). At the request of the Administrative Agent, the applicable Loan
Party shall execute such Mortgages and documentation reasonably satisfactory in
form and substance to the Collateral Agent and shall constitute valid and
enforceable perfected Liens having the priority specified in the Financing
Orders. The Mortgages or instruments related thereto shall be duly recorded or
filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the respective Liens in favor of the Collateral
Agent required to be granted pursuant to the Mortgages and all applicable taxes,
fees and other charges payable in connection therewith shall be paid in full
when due and payable. Such Loan Party shall otherwise take such actions and
execute and/or deliver to the Collateral Agent such documents as the Collateral
Agent shall reasonably require to confirm the validity, perfection and priority
of the Liens of any existing Mortgages or new Mortgages against such
after-acquired Real Property.

SECTION 5.12 Security Interests; Further Assurances. The Interim Order shall be
sufficient and conclusive evidence of the validity, perfection, and priority of
the Liens securing the Obligations without the necessity of filing or recording
any financing statement, deed of trust, mortgage, assignment or other instrument
or document which may otherwise be required under the law of any jurisdiction or
the taking of any other action (including, for the avoidance of doubt, entering
into any deposit account control agreement or securities account control
agreements) to validate or perfect the Liens or to entitle the Liens to the
priorities granted herein. Notwithstanding the foregoing, as soon as reasonably
practicable, upon the reasonable request of the Collateral Agent, at the
Borrower’s expense, execute, acknowledge and deliver, or cause the execution,
acknowledgment and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Security Documents, the Financing Orders, the Lien Assignment Agreements or
otherwise deemed by the Collateral Agent reasonably necessary or desirable for
the continued validity, perfection and priority of the Liens on the Collateral
covered thereby subject to no other Liens except Permitted Liens as permitted by
the applicable Security Document or the Financing Orders, or use commercially
reasonable efforts to obtain any consents or waivers as may be necessary or
appropriate in connection therewith.

 

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Deliver or cause to be delivered to the Collateral Agent from time to time such
other documentation, consents, authorizations, approvals and orders in form and
substance reasonably satisfactory to the Collateral Agent as the Collateral
Agent shall reasonably deem necessary to perfect or maintain the Liens on the
Collateral pursuant to the Security Documents or the Financing Orders. Upon the
exercise by the Collateral Agent or Administrative Agent of any power, right,
privilege or remedy pursuant to any Loan Document which requires any consent,
approval, registration, qualification or authorization of any Governmental
Authority execute and deliver all applications, certifications, instruments and
other documents and papers that the Administrative Agent or Collateral Agent may
reasonably require. If the Administrative Agent or the Required Lenders
determine that they are required by law or regulation to have appraisals
prepared in respect of the Real Property of any Loan Party constituting
Collateral, the Borrower shall provide to the Administrative Agent appraisals
that satisfy the applicable requirements of the Real Estate Appraisal Reform
Amendments of FIRREA and are otherwise in form and substance reasonably
satisfactory to the Administrative Agent. Further, each Loan Party shall cure
promptly any defects in the creation and issuance of the Notes and the execution
and delivery of the Security Documents and this Agreement. Within 30 days after
(a) a request by Administrative Agent or Lenders to cure any title defects or
exceptions which are not Permitted Liens raised by such information or (b) a
notice by Administrative Agent that Borrower has failed to comply with
Section 5.15, Borrower shall (i) cure such title defects or exceptions which are
not Permitted Liens or substitute acceptable Oil and Gas Properties with no
title defects or exceptions except for Permitted Liens covering Collateral of an
equivalent value and (ii) deliver to Administrative Agent satisfactory title
evidence (including supplemental or new title opinions meeting the foregoing
requirements) in form and substance acceptable to Administrative Agent in its
reasonable business judgment as to Loan Parties’ ownership of such Oil and Gas
Properties and Collateral Agent’s Liens and security interests therein as are
required to maintain compliance with Section 5.15.

SECTION 5.13 Information Regarding Collateral.

(a) Not effect any change (i) in any Loan Party’s legal name, (ii) in the
location of any Loan Party’s chief executive office, (iii) in any Loan Party’s
identity or organizational structure, (iv) in any Loan Party’s Federal Taxpayer
Identification Number or organizational identification number, if any, or (v) in
any Loan Party’s jurisdiction of organization (in each case, including by
merging with or into any other entity, reorganizing, dissolving, liquidating,
reorganizing or organizing in any other jurisdiction), until (A) it shall have
given the Administrative Agent not less than 10 days’ prior written notice (in
the form of an Officers’ Certificate), or such lesser notice period agreed to by
the Administrative Agent, of its intention so to do, clearly describing such
change and providing such other information in connection therewith as the
Administrative Agent may reasonably request and (B) it shall have taken all
action reasonably satisfactory to the Administrative Agent or Collateral Agent
to maintain the perfection and priority of the security interest of the
Collateral Agent for the benefit of the applicable Secured Parties in the
Collateral, if applicable. Each Loan Party agrees, as soon as practicable, to
provide the Administrative Agent with certified Organizational Documents
reflecting any of the changes described in the preceding sentence. Each Loan
Party also agrees to promptly notify the Administrative Agent of any change in
the location of any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral is located
(including the establishment of any such new office or facility), other than

 

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changes in location to a Mortgaged Property or a leased property, in each case
if different than the location relating to such Collateral set forth in the
schedules to the Security Agreement or the most recent supplement thereto.

(b) Concurrently with the delivery of financial statements pursuant to
Section 5.01(a), deliver to the Administrative Agent a supplement to the
schedules to the Security Agreement or confirmation that there have been no
changes to the information set forth in such schedules since the date of the
Security Agreement or the last supplement thereto provided pursuant to this
Section 5.13(b).

SECTION 5.14 Subordination of Loans. Each Loan Party covenants and agrees that
any existing and future loans or notes owing by a Loan Party to a Subsidiary
that is not a Loan Party shall be Subordinated Indebtedness.

SECTION 5.15 Title Evidence and Opinions. Borrower shall from time to time upon
the reasonable request of Administrative Agent, take such actions and execute
and deliver such documents and instruments as Administrative Agent shall require
to ensure that Administrative Agent shall, at all times, have received
satisfactory title evidence, which title evidence shall be in form and substance
acceptable to Administrative Agent in its sole discretion and shall include
information regarding the before payout and after payout ownership interests
held by the Loan Parties, for all Wells located on the Oil and Gas Properties,
covering at least 90% of the present value of the Proved Reserves of Borrower as
determined by Administrative Agent.

SECTION 5.16 Maintenance of Property. Each Loan Party shall maintain their owned
or leased Property in good condition and repair, normal wear and tear excepted
and maintain their operated Property, as a reasonably prudent operator would, in
good condition and repair, normal wear and tear excepted; provided that no item
of equipment needs to be repaired, renewed, replaced, or improved, if Borrower
shall in good faith determine that such action is not necessary or desirable for
the continued efficient and profitable operation of the business of Borrower;
and, further each Loan Party shall abstain from, knowingly or willfully
permitting the Release of any Hazardous Material in, on or about the owned,
leased or operated Property except in compliance with applicable Environmental
Law, the Release of which could reasonably be expected to result in Response
activities and that could reasonably be expected to cause a Material Adverse
Change.

SECTION 5.17 Cooperation with Advisors. Each of the Loan Parties will use
commercially reasonable efforts to cooperate and assist Advisors hired by or at
the discretion of the Administrative Agent to enable such Advisors to perform
the services for which they were engaged, including, without limitation,
promptly providing such information and documents as such Advisors may
reasonably request.

SECTION 5.18 Compliance with Laws. Each Loan Party shall comply, in all material
respects, with all applicable Requirements of Law. Without limiting the
foregoing, each Loan Party shall obtain, as soon as practicable, all consents or
approvals required from any states of the United States (or other Governmental
Authorities) necessary to grant Collateral Agent an Acceptable Security Interest
in at least 90% by value (or if an Event of Default exists and is continuing, at
least 100% by value of at the request of the Collateral Agent) of the Proved
Reserves attributable to the Loan Parties’ Oil and Gas Properties.

 

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SECTION 5.19 Leases; Development and Maintenance. Borrower shall (a) pay and
discharge promptly, or cause to be paid and discharged promptly, all rentals,
delay rentals, royalties, overriding royalties, payments out of production and
other indebtedness or obligations accruing under, and perform or cause to be
performed each and every act, matter or thing required by each and all of, the
oil and gas leases and all other agreements and contracts constituting or
affecting the Oil and Gas Properties of Borrower (except where the amount
thereof is being contested in good faith by appropriate proceedings and except
where the non-payment or non-performance of which could not reasonably be
expected to result in a diminution in the aggregate value of Borrower’s Oil and
Gas Properties by more than 1%), (b) in all material respects, do all other
things necessary to keep unimpaired its rights thereunder and prevent any
forfeiture thereof or default thereunder, and operate or cause to be operated
such Properties as a prudent operator would in accordance with industry standard
practices and in compliance with all applicable proration and conservation
Requirement of Law and any other Requirement of Law of every Governmental
Authority, whether state, federal, municipal or other jurisdiction, from time to
time constituted to regulate the development and operations of oil and gas
properties and the production and sale of oil, gas and other Hydrocarbons
therefrom, and (c) maintain (or cause to be maintained) the Leases, wells, units
and acreage to which the Oil and Gas Properties of Borrower pertain in a prudent
manner consistent with industry standard practices.

ARTICLE VI

NEGATIVE COVENANTS

Each Loan Party agrees with each Lender that, so long as this Agreement shall
remain in effect and until the Commitments have been terminated and the
principal of and interest on each Loan, all Fees and all other expenses or
amounts due and payable under any Loan Document have been paid in full, no Loan
Party will, nor will they cause or permit any Subsidiaries to:

SECTION 6.01 Indebtedness. Incur, create, assume or permit to exist, directly or
indirectly, any Indebtedness, except, upon Loan Parties obtaining all requisite
approvals from the Bankruptcy Court and solely to the extent contemplated under
the Monthly Forecast and 13-Week Projection (with the exception of clauses
(a)(ii), (b), (g) and (h) of Section 6.01):

(a) Indebtedness incurred under (i) this Agreement and the other Loan Documents
and (ii) the Indebtedness under the Unsecured Notes and the related Unsecured
Bond Documents;

(b) (i) Indebtedness outstanding on the Petition Date and listed on Schedule
6.01(b) and (ii) refinancings or renewals thereof; provided that (A) any such
refinancing Indebtedness is in an aggregate principal amount not greater than
the aggregate principal amount of the Indebtedness being renewed or refinanced,
plus the amount of any premiums required to be paid thereon and reasonable fees
and expenses associated therewith, (B) such refinancing Indebtedness has a later
or equal final maturity and longer or equal weighted average life than

 

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the Indebtedness being renewed or refinanced and (C) the covenants, events of
default, subordination and other provisions thereof (including any guarantees
thereof) shall be, in the aggregate, no less favorable to the Lenders than those
contained in the Indebtedness being renewed or refinanced;

(c) Indebtedness permitted by Section 6.03(e);

(d) Indebtedness incurred after the Petition Date in respect of Purchase Money
Obligations and Capital Lease Obligations, in an aggregate amount not to exceed
$1,000,000 at any time outstanding;

(e) Indebtedness in respect of bid, performance or surety, appeal or similar
bonds issued for the account of and completion guarantees provided by any
Company assuring payment of contingent liabilities of the Borrower in connection
with the operation of the Oil and Gas Properties, including, with respect to
plugging, facility removal and abandonment of its Oil and Gas Properties;

(f) Contingent Obligations of any Loan Party in respect of Indebtedness
otherwise permitted under this Section 6.01;

(g) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of daylight overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such Indebtedness is extinguished
within five (5) Business Days of incurrence;

(h) Indebtedness arising in connection with endorsement of instruments for
deposit in the ordinary course of business; Indebtedness in respect of letters
of credit, surety bonds and other credit assurances and similar obligations of a
like nature and assuring payment of contingent liabilities of the Borrower in
connection with the operation of Properties, including with respect to plugging
and abandonment of its Properties; provided, that the then maximum obligations
owing with respect to such Indebtedness shall not exceed $1,500,000 in the
aggregate at any time; and

(i) Indebtedness under Hedging Agreements so long as such Hedging Agreement(s)
are used solely as part of its normal business operations as a risk management
strategy or hedge against changes resulting from market operations (and not as a
means to speculate for investments purposes and trends and shifts in financial
or commodities markets).

Notwithstanding the foregoing, no Indebtedness permitted in this Sections 6.01
shall be permitted to have an administrative expense claim status under the
Bankruptcy Code senior to or pari passu with the super priority administrative
expense claims of the Administrative Agent and Lenders except as specifically
set forth herein or in the Financing Orders.

SECTION 6.02 Liens. Create, incur, assume or permit to exist, directly or
indirectly, any Lien on any property now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except, upon Loan
Parties obtaining all requisite approvals from the Bankruptcy Court and solely
to the extent that the Indebtedness and other obligations or liabilities secured
by such security interest, mortgage, pledge, lien, charge or other

 

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encumbrance are contemplated under the Monthly Forecast and 13-Week Projection
(with the exception of clauses (a),(b),(c), (d), (f), (h), (j), (m) and (n) of
this Section 6.02) (collectively, the “Permitted Liens”):

(a) Liens for taxes, assessments or governmental charges or levies not yet due
and payable or delinquent and Liens for taxes, assessments or governmental
charges or levies, which (i) are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP, which proceedings (or orders entered in connection with such proceedings)
have the effect of preventing the forfeiture or sale of the property subject to
any such Lien or (ii) in the case of any such charge or claim which has or may
become a Lien against any of the Collateral, such Lien and the contest thereof
shall satisfy the Contested Collateral Lien Conditions;

(b) Liens in respect of property of any Company imposed by law, which were
incurred in the ordinary course of business and do not secure Indebtedness for
borrowed money, including, without limitation, carriers’, warehousemen’s,
materialmen’s, landlords’, workmen’s, suppliers’, repairmen’s and mechanics’
Liens and other similar Liens arising in the ordinary course of the business of
any Loan Party, and (i) which do not in the aggregate materially detract from
the value of the property of the Loan Parties, taken as a whole, and do not
materially impair the use thereof in the operation of the business of the Loan
Parties, taken as a whole, (ii) which, if they secure obligations that are then
due and unpaid, are being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, which
proceedings (or orders entered in connection with such proceedings) have the
effect of preventing the forfeiture or sale of the property subject to any such
Lien, and (iii) in the case of any such Lien which has or may become a Lien
against any of the Collateral, such Lien and the contest thereof shall satisfy
the Contested Collateral Lien Conditions;

(c) any Lien in existence on the Petition Date and set forth on Schedule 6.02(c)
and any Lien granted as a replacement or substitute therefor; provided that any
such replacement or substitute Lien (i) except as permitted by
Section 6.01(b)(ii)(A), does not secure an aggregate amount of Indebtedness, if
any, greater than that secured on the Closing Date and (ii) does not encumber
any property other than the property subject thereto on the Closing Date (any
such Lien, an “Existing Lien”);

(d) easements, rights-of-way, restrictions (including zoning restrictions),
covenants, licenses, encroachments, protrusions and other similar charges or
encumbrances, and minor defects in the chain of title that are customarily
accepted in the oil and gas financing industry on or with respect to any Real
Property, in each case whether now or hereafter in existence, not (i) securing
Indebtedness or (ii) interfering with the ordinary conduct of the business of
the Companies at such Real Property or materially detract from the value or use
of the Real Property to which they apply;

(e) Liens arising out of judgments, attachments or awards not resulting in an
Event of Default;

 

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(f) Liens arising by virtue of deposits made in connection therewith in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security legislation, incurred
in the ordinary course of business to secure the performance of tenders,
statutory obligations (other than excise taxes), surety, stay, customs and
appeal bonds, statutory bonds, bids, leases, government contracts, trade
contracts, performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or arising by
virtue of deposits made in the ordinary course of business to secure liability
for premiums to insurance carriers; provided that such Liens shall in no event
encumber any property other than cash and Cash Equivalents and the aggregate
amount of deposits at any time pursuant to this paragraph (f) shall not exceed
$500,000 in the aggregate;

(g) Leases of the properties of any Loan Party, in each case entered into in the
ordinary course of such Loan Party’s business; provided, however, with respect
to any properties acquired by a Loan Party after the Closing Date which are
mortgaged under Section 5.11(c), and which are encumbered by existing Lease(s)
on the date of such acquisition, such Lease(s) shall be Permitted Liens so long
as (i) such Lease(s) are subordinate by their terms to the Administrative
Agent’s Liens with respect to such Mortgaged Property, or (ii) the applicable
Loan Party obtains a subordination non-disturbance and attornment agreement from
each tenant thereunder in form and substance reasonably satisfactory to
Administrative Agent or (iii) the applicable Loan Party is unable to obtain such
subordination, non-disturbance and attornment agreement despite its commercially
reasonable efforts to do so and the Lease is otherwise reasonably satisfactory
to Administrative Agent;

(h) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by any Loan Party in the
ordinary course of business in accordance with the past practices of such Loan
Party;

(i) Liens securing Indebtedness incurred pursuant to Section 6.01(d); provided
that any such Liens attach only to the property being financed pursuant to such
Indebtedness and do not encumber any other property of any Company;

(j) bankers’ Liens, rights of setoff and other similar Liens existing solely
with respect to cash and Cash Equivalents on deposit in one or more accounts
maintained by any Loan Party, in each case granted in the ordinary course of
business in favor of the bank or banks with which such accounts are maintained,
securing amounts owing to such bank with respect to cash management and other
account arrangements, including those involving pooled accounts and netting
arrangements; provided that, unless such Liens are non-consensual and arise by
operation of law, in no case shall any such Liens secure (either directly or
indirectly) the repayment of any Indebtedness;

(k) the Carve-Out;

(l) Liens granted pursuant to the Financing Orders or the Security Documents to
secure the Secured Obligations;

(m) licenses of Intellectual Property granted by any Loan Party in the ordinary
course of business and not interfering in any material respect with the ordinary
conduct of business of the Loan Parties;

 

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(n) the filing of UCC financing statements solely as a precautionary measure in
connection with operating leases or consignment of goods;

(o) royalties, overriding royalties, net profits interests, production payments,
reversionary interests, calls on production, preferential purchase rights and
other burdens on or deductions from the proceeds of production, that do not
secure Indebtedness for borrowed money and that are taken into account in
computing the Net Revenue Interests and Working Interests of Borrower set forth
in any Reserve Report warranted in the Security Documents or in this Agreement;

(p) Liens arising under operating agreements, unitization and pooling agreements
and orders, farmout agreements, gas balancing agreements, and other agreements,
in each case that are customary in the oil, gas and mineral production business
and that are entered into by Borrower, or any Guarantor, in the ordinary course
of business provided that (i) such Liens are taken into account in computing the
Net Revenue Interests and Working Interests of Borrower set forth in any Reserve
Report warranted in the Security Documents or this Agreement, (ii) such Liens do
not secure borrowed money, (iii) such Liens secure amounts that are not yet due,
or not yet delinquent, or if delinquent, are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall have
been made therefor and (iv) such Liens are limited to the Properties that are
the subject of such agreements; and

(q) Liens on cash collateral which secures Indebtedness permitted under
Section 6.01(i) hereof;

provided, however, that no consensual Liens shall be permitted to exist,
directly or indirectly, on any Securities Collateral, other than Liens granted
pursuant to the Financing Orders or the Security Documents. Notwithstanding the
foregoing, Liens permitted under Sections 6.02(a) through (n) shall at all times
be junior and subordinate to the Liens under the Loan Documents and the
Financing Orders, other than the Carve-Out and the Permitted Senior Liens. The
prohibition provided for in this Section 6.02 specifically includes, without
limitation, the Borrower, any Loan Party, any Committee, or any other
party-in-interest in the Chapter 11 Case or any successor case to priming or
creating pari passu to any claims, Liens or interests of the Administrative
Agent and the Lenders any Lien (other than for the Carve-Out and the Permitted
Senior Liens) irrespective of whether such claims, Liens or interests may be
“adequately protected” (unless the Obligations and adequate protection claims
will be paid in full in cash upon the granting of any such Lien and the
Commitments terminated).

SECTION 6.03 Investments, Loans and Advances. Directly or indirectly, lend money
or credit (by way of guarantee or otherwise) or make advances to any person, or
purchase or acquire any stock, bonds, notes, debentures or other obligations or
securities of, or any other interest in, or make any capital contribution to,
any other person or any Oil and Gas Properties or activities related to Oil and
Gas Properties, or purchase or own a futures contract or otherwise become liable
for the purchase or sale of currency or other commodities at a future date in
the nature of a futures contract except, upon Credit Parties obtaining all
requisite approvals from the Bankruptcy Court and to the extent contemplated
under the Monthly Forecast and 13-Week Projection (with the exception of clauses
(a)(i), (a)(ii), (a)(iii), (a)(iv), (d), (e) (all of the foregoing,
collectively, “Investments”), the following shall be permitted:

 

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(a) Investments outstanding on the Petition Date and identified on Schedule
6.03(a);

(b) the Loan Parties may (i) acquire and hold accounts receivable owing to any
of them if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary terms and historical practice,
(ii) invest in, acquire and hold cash and Cash Equivalents, (iii) endorse
negotiable instruments held for collection in the ordinary course of business or
(iv) make lease, utility and other similar deposits in the ordinary course of
business;

(c) loans and advances to directors, employees and officers of the Borrower and
the other Subsidiaries for bona fide business purposes, in an aggregate amount
not to exceed $1,000,000 at any time outstanding;

(d) Investments (i) by the Borrower in any Guarantor, (ii) by a Guarantor in
another Guarantor and (iv) by a Subsidiary that is not a Guarantor in any other
Subsidiary that is not a Guarantor; provided that any Investment in the form of
a loan or advance shall be evidenced by the Intercompany Note;

(e) Investments in securities of trade creditors or customers in the ordinary
course of business and consistent with such Loan Party’s past practices that are
received in settlement of bona fide disputes or pursuant to any plan of
reorganization or liquidation or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers;

(f) Investments made by the Borrower or any other Subsidiary as a result of
consideration received in connection with an Asset Sale made in compliance with
Section 6.04;

(g) other investments in an aggregate amount not to exceed the amounts set forth
in, and for the purposes set forth in the 13-Week Budget; provided, however,
that it shall not be deemed a breach of this clause (g) if the amount of any
such investments exceed the limits set forth in the 13-Week Budget by amounts
less than the Permitted Variance;

(h) by a Loan Party consisting of Contingent Obligations permitted under
Section 6.01(f); and

(i) Investments made by the Borrower or any Subsidiary in Hedging Agreements
permitted hereunder.

SECTION 6.04 Mergers;Consolidations; Acquisitions; Dispositions. Each Loan Party
shall not, and shall not permit any Subsidiary to, directly or indirectly,
purchase or otherwise acquire (in one or a series of related transactions any
part of the property (whether tangible or intangible) of any person, dissolve,
liquidate or wind up its affairs, sell, transfer, lease or otherwise dispose of
its property or assets (other than in the ordinary course) or agree to do so at
a future time except to the extent contemplated and expressly authorized under
the Monthly Forecast and 13-Week Projection and, as applicable, upon Loan
Parties obtaining all requisite approvals from the Bankruptcy Court except to
the extent that such sale is contemplated under a Reorganization Plan or the
Asset Purchase Agreement and, in each case, consented to by the Administrative
Agent and Required Lenders and only to the extent that Loan Parties have
obtained all requisite approvals from the Bankruptcy Court with respect to such
sale.

 

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SECTION 6.05 Dividends. Authorize, declare or pay, directly or indirectly, any
Dividends with respect to any Loan Party, except that the following shall be
permitted:

(a) any Subsidiary of Borrower (i) may pay cash Dividends to the Borrower or any
Wholly Owned Subsidiary of the Borrower and (ii) if such Subsidiary is not a
Wholly Owned Subsidiary of Borrower, may pay cash Dividends to its shareholders
generally so long as the Borrower or its Subsidiary which owns the equity
interest or interests in the Subsidiary paying such Dividends receives at least
its proportionate share thereof (based upon its relative holdings of equity
interests in the Subsidiary paying such Dividends and taking into account the
relative preferences, if any, of the various classes of Equity Interests in such
Subsidiary);

(b) (i) to the extent actually used by Borrower to pay such taxes, costs and
expenses, (ii) payments by the Subsidiaries of Borrower to or on behalf of
Borrower in an amount sufficient to pay out-of-pocket legal, accounting and
filing costs, incidental expenses and other expenses in the nature of corporate
overhead in the ordinary course of business of Borrower and (iii) payments by
the Subsidiaries of Borrower to or on behalf of Borrower in an amount sufficient
to pay trustee’s fees and other fees, costs and expenses incurred by Borrower
associated with the Chapter 11 Cases in accordance with the 13-Week Budget;
provided that the aggregate amount of all Dividends and distributions made
pursuant to Section 6.05(b)(i) and (ii) shall not exceed $200,000 during the
term of this Agreement; and

(c) Permitted Tax Distributions by the Borrower, so long as such amounts are
(i) used to pay Taxes attributable to such entity (or any Subsidiary of such
entity) or are to be distributed to the payor of such Taxes and (ii) in
accordance with the 13-Week Budget.

SECTION 6.06 Transactions with Affiliates. Enter into, directly or indirectly,
any transaction or series of related transactions, whether or not in the
ordinary course of business, with any Affiliate of any Loan Party (other than
between or among the Borrower and one or more Guarantors), other than on terms
and conditions at least as favorable to such Loan Party as would reasonably be
obtained by such Loan Party at that time in a comparable arm’s-length
transaction with a person other than an Affiliate, except that the following
shall be permitted to the extent contemplated under the Monthly Forecast and
13-Week Projection:

(a) Dividends permitted by Section 6.05;

(b) Investments permitted by Sections 6.03(d) and (e);

(c) reasonable director, officer and employee compensation (including bonuses)
and other benefits (including retirement, health, stock option and other benefit
plans) and indemnification and reimbursement arrangements, in each case approved
by the Board of Directors and consistent with the historical practice of the
Loan Parties;

(d) transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods and services, in each case in the ordinary course
of business and otherwise not prohibited by the Loan Documents;

 

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(e) The Borrower or any of its Subsidiaries may enter into employment,
non-competition or confidentiality agreements with their employees in the
ordinary course of business; and

(f) transactions conducted in the ordinary course of business on a basis
consistent with past practices with Borrower and its Subsidiaries or with joint
ventures to which Borrower or any Subsidiary is a party relating to the purchase
or sale of inventory and equipment and operational, management and technical
services.

SECTION 6.07 Compliance with 13-Week Budget. Permit unfavorable variances from
the 13-Week Budget that could have the effect of materially impairing (i) the
Loan Parties’ operations or (ii) the Borrower’s ability to confirm a
Reorganization Plan or consummate a sale of substantially all of its assets, in
each case, as contemplated hereunder.

SECTION 6.08 Prepayments of Indebtedness; Modifications of Organizational
Documents and Other Documents, etc. Directly or indirectly:

(a) except as specifically set forth in the Financing Orders and contemplated
under the Monthly Forecast and 13-Week Projection or permitted by the Bankruptcy
Court after a notice and hearing, make (or give any notice in respect thereof)
any voluntary or optional payment or mandatory prepayment on or redemption or
acquisition for value of, or any prepayment or redemption as a result of any
asset sale, Change in Control or otherwise, of, (i) any Subordinated
Indebtedness, (ii) the Unsecured Notes, except, in any such case in connection
with the refinancing thereof as permitted pursuant to Section 6.01;

(b) amend or modify, or permit the amendment or modification of, any provision
of any Subordinated Indebtedness, in any manner that is adverse in any material
respect to the interests of the Lenders;

(c) terminate, amend, modify (including electing to treat any Pledged Interests
(as defined in the Security Agreement) as a “security” under Section 8-103 of
the UCC) or change any of its Organizational Documents (including by the filing
or modification of any certificate of designation) and, in each case, other than
any such amendments, modifications or changes or such new agreements which are
not adverse in any material respect to the interests of the Lenders;

(d) make any payments or transfer, or agree to any setoff or recoupment, with
respect to any Pre-Petition claim, Pre-Petition Lien or Pre-Petition
Indebtedness, except as approved by order of the Bankruptcy Court; or

(e) amend or modify, or permit the amendment or modification of, (i) any
Financing Order without the prior written consent of the Administrative Agent or
(ii) any First Day Order except for amendments or modifications which are not in
any way adverse in any material respect to the interests of the Agents or
Lenders in such capacities.

SECTION 6.09 Limitation on Certain Restrictions on Subsidiaries. Directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends
or make any other distributions

 

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on its capital stock or any other interest or participation in its profits owned
by the Borrower or any of its Subsidiaries, or pay any Indebtedness owed to the
Borrower or any Subsidiary, (b) make loans or advances to the Borrower or any of
its Subsidiaries or (c) transfer any of its properties to Borrower or any
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law; (ii) this Agreement, the other Loan Documents, the
Unsecured Bond Documents; (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest; (iv) customary
provisions restricting assignment of any agreement entered into in the ordinary
course of business; (v) any holder of a Lien permitted by Section 6.02
restricting the transfer of the property subject thereto; (vi) customary
restrictions and conditions contained in any agreement relating to the sale of
any property permitted under Section 6.04 pending the consummation of such sale;
(vii) in the case of any joint venture which is not a Loan Party in respect of
any matters referred to in clauses (b) and (c) above, restrictions in such
person’s Organizational Documents or pursuant to any joint venture agreement or
stockholders agreements solely to the extent of the Equity Interests of or
property held in the subject joint venture or other entity.

SECTION 6.10 Limitation on Issuance of Capital Stock. With respect to the
Borrower or any Subsidiary, issue any Equity Interest (including by way of sales
of treasury stock) or any options or warrants to purchase, or securities
convertible into, any Equity Interest.

SECTION 6.11 Limitation on Creation of Subsidiaries. Establish, create or
acquire any additional Subsidiaries without the prior written consent of the
Administrative Agent.

SECTION 6.12 Business. With respect to the Borrower and its Subsidiaries, engage
(directly or indirectly) in any business other than those businesses in which
the Borrower and its Subsidiaries are engaged on the Petition Date and
businesses that are similar, complementary or reasonably related to or are
reasonable extensions thereof.

SECTION 6.13 Limitation on Accounting Changes. Make or permit, any change in
accounting policies or reporting practices, without the consent of the Required
Lenders, which consent shall not be unreasonably withheld, except changes that,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect or are required by GAAP.

SECTION 6.14 Fiscal Year. Change its fiscal year-end to a date other than
December 31.

SECTION 6.15 No Further Negative Pledge. Enter into any agreement, instrument,
deed or lease which prohibits or limits the ability of any Loan Party to create,
incur, assume or suffer to exist any Lien upon any of their respective
properties or revenues, whether now owned or hereafter acquired, or which
requires the grant of any security for an obligation if security is granted for
another obligation, except the following: (1) this Agreement and the other Loan
Documents; (2) covenants in documents creating Liens permitted by Section 6.02
prohibiting further Liens on the properties encumbered thereby; (3) the
Unsecured Bond Documents, as in effect on the Closing Date; and (4) any other
agreement that does not restrict in any manner (directly or indirectly) Liens
created pursuant to the Loan Documents on any Collateral securing the
Obligations and does not require the direct or indirect granting of any Lien
securing any Indebtedness or other obligation by virtue of the granting of Liens
on or pledge of property of any Loan Party to secure the Obligations.

 

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SECTION 6.16 Anti-Terrorism Law; Anti-Money Laundering.

(a) Directly or indirectly, (i) knowingly conduct any business or engage in
making or receiving any contribution of funds, goods or services to or for the
benefit of any person described in Section 3.21, (ii) knowingly deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order or any other Anti-Terrorism
Law, or (iii) knowingly engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the
Loan Parties shall deliver to the Lenders any certification or other evidence
requested from time to time by any Lender in its reasonable discretion,
confirming the Loan Parties’ compliance with this Section 6.16).

(b) Cause or permit any of the funds of such Loan Party that are used to repay
the Loans to be derived from any unlawful activity with the result that the
making of the Loans would be in violation of law.

SECTION 6.17 Embargoed Person. Cause or permit (a) any of the funds or
properties of the Loan Parties that are used to repay the Loans to constitute
property of, or be beneficially owned directly or indirectly by, any person
subject to sanctions or trade restrictions under United States law (“Embargoed
Person” or “Embargoed Persons”) that is identified on the “List of Specially
Designated Nationals and Blocked Persons” (the “SDN List”) maintained by OFAC
and/or on any other similar list (“Other List”) maintained by OFAC pursuant to
any authorizing statute including, but not limited to, the International
Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the
Enemy Act, 50 U.S.C. App. 1 et seq., and any executive order or regulation
promulgated thereunder with the result that the investment in the Loan Parties
(whether directly or indirectly) is prohibited by law, or the Loans made by the
Lenders would be in violation of law, the executive order, any related enabling
legislation or any other similar executive orders (collectively, “Executive
Orders”), or (2) any Embargoed Person to have any direct or indirect interest,
of any nature whatsoever in the Loan Parties, with the result that the
investment in the Loan Parties (whether directly or indirectly) is prohibited by
law or the Loans are in violation of law.

SECTION 6.18 Gas Imbalances, Take-or-Pay or Other Prepayments. No Loan Party
shall allow gas imbalances, take-or-pay or other prepayments with respect to the
Oil and Gas Properties of Loan Parties which would require such Loan Party to
deliver their respective Hydrocarbons produced on a monthly basis from such Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor other than that which do not result in the Loan Parties having
net aggregate liability in excess of $250,000.

SECTION 6.19 Critical Vendor and Other Payments. The Loan Parties shall not make
or agree to make (a) any Pre-Petition “critical vendor” payments or other
payments on account of any creditor’s Pre-Petition unsecured claims,
(b) payments on account of claims or expenses arising under Section 503(b)(9) of
the Bankruptcy Code, or (c) payments under any plan or on account of any claim
that requires approval pursuant to Section 503(c) of the

 

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Bankruptcy Code, except in each case in amounts and on terms and conditions that
(y) are approved by order of the Bankruptcy Court and (z) are expressly
permitted by the terms of the Loan Documents and the 13-Week Budget or as
otherwise expressly permitted under the First Day Orders.

SECTION 6.20 Pre-Petition Indebtedness. Except as provided in the Financing
Orders or other orders entered by the Bankruptcy Court or permitted by the
Bankruptcy Court after a notice and hearing, the Loan Parties shall not make any
adequate protection payments on account of any Pre-Petition Indebtedness.

ARTICLE VII

GUARANTEE

SECTION 7.01 The Guarantee. The Guarantors hereby, jointly and severally
guarantee, as a primary obligor and not as a surety to each Secured Party and
their respective successors and assigns, the prompt payment in full when due
(whether at stated maturity, by required prepayment, declaration, demand, by
acceleration or otherwise) of the principal of and interest (including any
interest, fees, costs or charges that would accrue but for the provisions of the
Title 11 of the United States Code after any bankruptcy or insolvency petition
under Title 11 of the United States Code) on the Loans made by the Lenders to,
and the Notes held by each Lender of, the Borrower, and all other Obligations
from time to time owing to the Secured Parties by any Loan Party under any Loan
Document in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the “Guaranteed Obligations”). The
Guarantors hereby, jointly and severally, agree that if the Borrower or other
Guarantors shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors
will promptly pay the same in cash, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.

SECTION 7.02 Obligations Unconditional. The obligations of the Guarantors under
Section 7.01 shall constitute a guaranty of payment and to the fullest extent
permitted by applicable law, are absolute, irrevocable and unconditional, joint
and several, irrespective of the value, genuineness, validity, regularity or
enforceability of the Guaranteed Obligations of the Borrower under this
Agreement, the Notes, if any, or any other agreement or instrument referred to
herein or therein, or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or Guarantor
(except for payment in full). Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Guarantors hereunder which shall remain
absolute, irrevocable and unconditional under any and all circumstances as
described above:

 

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(i) at any time or from time to time, without notice to the Guarantors, the time
for any performance of or compliance with any of the Guaranteed Obligations
shall be extended, or such performance or compliance shall be waived;

(ii) any of the acts mentioned in any of the provisions of this Agreement or the
Notes, if any, or any other agreement or instrument referred to herein or
therein shall be done or omitted;

(iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or
any of the Guaranteed Obligations shall be amended in any respect, or any right
under the Loan Documents or any other agreement or instrument referred to herein
or therein shall be amended or waived in any respect or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;

(iv) any Lien or security interest granted to, or in favor of any Lender or
Agent as security for any of the Guaranteed Obligations shall fail to be
perfected; or

(v) the release of any other Guarantor.

To the extent permitted by law, the Guarantors hereby expressly waive diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that any Secured Party exhaust any right, power or remedy or proceed
against the Borrower under this Agreement or the Notes, if any, or any other
agreement or instrument referred to herein or therein, or against any other
person under any other guarantee of, or security for, any of the Guaranteed
Obligations. To the extent permitted by law, the Guarantors waive any and all
notice of the creation, renewal, extension, waiver, termination or accrual of
any of the Guaranteed Obligations and notice of or proof of reliance by any
Secured Party upon this Guarantee or acceptance of this Guarantee, and the
Guaranteed Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this Guarantee, and all
dealings between the Borrower and the Secured Parties shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. This Guarantee shall be construed as a continuing, absolute,
irrevocable and unconditional guarantee of payment without regard to any right
of offset with respect to the Guaranteed Obligations at any time or from time to
time held by Secured Parties, and the obligations and liabilities of the
Guarantors hereunder shall not be conditioned or contingent upon the pursuit by
the Secured Parties or any other person at any time of any right or remedy
against Borrower or against any other person which may be or become liable in
respect of all or any part of the Guaranteed Obligations or against any
collateral security or guarantee therefor or right of offset with respect
thereto. This Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantors and the
successors and assigns thereof, and shall inure to the benefit of the Lenders,
and their respective successors and assigns, notwithstanding that from time to
time during the term of this Agreement there may be no Guaranteed Obligations
outstanding.

 

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SECTION 7.03 Reinstatement. The obligations of the Guarantors under this Article
VII shall be automatically reinstated if and to the extent that for any reason
any payment by or on behalf of the Borrower or any other Loan Party in respect
of the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise.

SECTION 7.04 Subrogation; Subordination. Each Guarantor hereby agrees that until
the payment and satisfaction in full in cash of all Guaranteed Obligations and
the expiration and termination of the Commitments of the Lenders under this
Agreement, it shall not exercise any right or remedy, direct or indirect,
arising by reason of any performance by it of its guarantee in Section 7.01,
whether by subrogation or otherwise, against the Borrower or any other Guarantor
of any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations. Any Indebtedness of any Loan Party to another Loan Party permitted
pursuant to Section 6.01(c) shall be subordinated to such Loan Party’s
Obligations in the manner set forth in the Intercompany Note.

SECTION 7.05 Remedies. The Guarantors jointly and severally agree that, subject
to the terms of the Financing Orders, as between the Guarantors and the Lenders,
the obligations of Borrower under this Agreement and the Notes, if any, may be
declared to be forthwith due and payable as provided in Article VIII (and shall
be deemed to have become automatically due and payable in the circumstances
provided in said Article VIII) for purposes of Section 7.01, notwithstanding any
stay, injunction or other prohibition preventing such declaration (or such
obligations from becoming automatically due and payable) as against the Borrower
and that, in the event of such declaration (or such obligations being deemed to
have become automatically due and payable), such obligations (whether or not due
and payable by the Borrower) shall forthwith become due and payable by the
Guarantors for purposes of Section 7.01.

SECTION 7.06 Instrument for the Payment of Money. Each Guarantor hereby
acknowledges that the guarantee in this Article VII constitutes an instrument
for the payment of money, and consents and agrees that any Lender or Agent, at
its sole option, in the event of a dispute by such Guarantor in the payment of
any moneys due hereunder, shall have the right to bring a motion-action under
New York CPLR Section 3213 to the extent permitted thereunder.

SECTION 7.07 Continuing Guarantee. The guarantee in this Article VII is a
continuing guarantee of payment, and shall apply to all Guaranteed Obligations
whenever arising.

SECTION 7.08 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state corporate limited partnership or limited
liability company law, or any applicable state, federal or foreign bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Guarantor under Section 7.01 would
otherwise be held or determined to be void, voidable, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under Section 7.01, then, notwithstanding any other provision
to the contrary, the amount of such liability shall, without any further action
by such Guarantor, any Loan Party or any other person, be automatically limited
and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.

 

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SECTION 7.09 Release of Guarantors. If, in compliance with the terms and
provisions of the Loan Documents, all or substantially all of the Equity
Interests of any Guarantor owned by a Loan Party or property of any Guarantor
are sold or otherwise transferred (a “Transferred Guarantor”) to a person or
persons, none of which is a Borrower or a Subsidiary, such Transferred Guarantor
shall, upon the consummation of such sale or transfer, be released from its
obligations under this Agreement (including under Section 11.03 hereof) and its
obligations to pledge and grant any Collateral owned by it pursuant to any
Security Document or the Financing Orders and, in the case of a sale of all or
substantially all of the Equity Interests of the Transferred Guarantor owed by a
Loan Party, the pledge of such Equity Interests to the Administrative Agent
pursuant to the Security Agreement and the Financing Orders shall be released,
and the Administrative Agent shall take such actions as are necessary to effect
each release described in this Section 7.09 in accordance with the relevant
provisions of the Security Documents and the Financing Orders.

SECTION 7.10 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor’s right of contribution
shall be subject to the terms and conditions of Section 7.04. The provisions of
this Section 7.10 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent, and the Lenders and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.01 Events of Default. Upon the occurrence and during the continuance
of the following events (“Events of Default”):

(a) default shall be made in the payment of any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment (whether voluntary or mandatory) thereof or by
acceleration thereof or otherwise;

(b) default shall be made in the payment of any interest on any Loan or any Fee
or any other amount (other than an amount referred to in paragraph (a) above)
due under any Loan Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of five (5) Business
Days;

(c) any representation or warranty made or deemed made in or in connection with
any Loan Document or the Borrowings, or any representation, warranty, statement
or information contained in any, certificate, or other document furnished in
connection with or pursuant to any Loan Document, shall prove to have been false
or misleading in any material respect when so made, deemed made or furnished;

 

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(d) default shall be made in the due observance or performance by any Loan Party
of any covenant, condition or agreement contained in Section 5.02, 5.03(a),
5.08, or in Article VI;

(e) default shall be made in the due observance or performance by any Loan Party
of any covenant, condition or agreement contained in any Loan Document (other
than those specified in paragraphs (a), (b) or (d) immediately above) and such
default shall continue unremedied or shall not be waived for a period of thirty
(30) days after written notice thereof from the Administrative Agent or any
Lender to the Borrower;

(f) any Loan Party shall (i) fail to pay any principal or interest, regardless
of amount, due in respect of any Indebtedness (other than the Obligations)
incurred or entered into after the Petition Date, when and as the same shall
become due and payable beyond any applicable grace period, or (ii) fail to
observe or perform any other term, covenant, condition or agreement contained in
any agreement or instrument evidencing or governing any such Indebtedness
entered into after the Petition Date if the effect of any failure referred to in
this clause (ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee or other representative on its or their behalf (with
or without the giving of notice, the lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity; provided that, it shall
not constitute an Event of Default pursuant to this paragraph (f) unless the
aggregate amount of all such Indebtedness referred to in clauses (i) and
(ii) exceeds $5,000,000 at any one time;

(g) Reserve;

(h) the title of the Loan Parties to any of the Oil and Gas Properties that is a
Mortgaged Property, or any material part thereof, shall become the subject
matter of litigation before any Governmental Authority or arbitrator which could
be reasonably be expected to have a Material Adverse Effect with respect to such
Loan Party’s title to such Oil and Gas Properties;

(i) one or more judgments, orders or decrees for the payment of money in an
aggregate amount in excess of $5,000,000 (exclusive of amounts covered by
insurance for which coverage is not denied) in respect of obligations arising
after the Petition Date shall be rendered against any Loan Party or any
combination thereof and the same shall remain undischarged, unvacated or
unbonded for a period of thirty (30) consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon properties of any Loan Party to enforce any such
judgment;

(j) one or more ERISA Events arising after the Petition Date shall have occurred
(other than any ERISA Event that arises out of (i) any Loan Party’s seeking of a
funding waiver under Code Section 412(c), (ii) failing to satisfy the minimum
funding standard prior to or during the pendency of any funding waiver request
or (iii) attempting to terminate any of the pension plans listed on Schedule
3.17, each such event arising out of (i)-(iii), hereinafter called an “Excluded
ERISA Event”) that, when taken together with all other such ERISA Events that
have occurred after the Petition Date (other than an Excluded ERISA Event),
could reasonably be expected to result in liability for any Loan Party and its
ERISA Affiliates or the imposition of a Lien on any properties of any Loan Party
, in either event in an amount which could reasonably be expected to have a
Material Adverse Effect;

 

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(k) any security interest and Lien purported to be created by any Security
Document shall cease to be in full force and effect, or shall cease to give the
Collateral Agent, for the benefit of the Secured Parties, the Liens, rights,
powers and privileges purported to be created and granted under such Security
Documents or the Financing Orders (including a perfected first priority security
interest in and Lien on, all of the Collateral thereunder (except as otherwise
expressly provided in such Security Document or the Financing Orders)) in favor
of the Collateral Agent, or shall be asserted by the Borrower or any other Loan
Party not to be, a valid, perfected, first priority (except as otherwise
expressly provided in this Agreement, such Security Document or the Financing
Orders) security interest in or Lien on the Collateral covered thereby;

(l) any Loan Document or any material provisions thereof shall at any time and
for any reason be declared by a court of competent jurisdiction to be null and
void, or a proceeding shall be commenced by any Loan Party or any other person,
or by any Governmental Authority, seeking to establish the invalidity or
unenforceability thereof (exclusive of questions of interpretation of any
provision thereof), or any Loan Party shall repudiate or deny any portion of its
liability or obligation for the payment of Obligations;

(m) the Loan Parties shall fail to achieve the Milestones set forth in Schedule
M by the dates specified therein (or such later date as may be agreed to by the
Administrative Agent in its sole discretion);

(n) a termination of the Asset Purchase Agreement shall have occurred except as
the result of the Borrower entering into a replacement asset purchase agreement
in accordance with the Borrower’s bidding procedures motion; or

(o) the occurrence of any of the following in the Chapter 11 Cases:

(i) the entry of an order or ruling (which has not been withdrawn, dismissed or
reversed): (w) to obtain additional financing under Section 364(c) or (d) of the
Bankruptcy Code not otherwise permitted pursuant to this Agreement (unless such
financing is proposed to refinance and pay in full the Obligations due under
this Agreement with the termination of all related lending commitments
thereunder; (x) to grant any Lien other than Permitted Liens and the Carve-Out
upon or affecting any Collateral without the prior written consent of the
Administrative Agent and the Required Lenders (unless the granting of such Lien
is simultaneous with a refinancing to pay in full in cash all Obligations due
under this Agreement); or (y) except as provided in the Financing Orders, to use
cash collateral of Administrative Agent under Section 363(c) of the Bankruptcy
Code without the prior written consent of the Administrative Agent;

(ii) the filing of any Reorganization Plan or disclosure statement attendant
thereto, or any direct or indirect amendment to such plan or disclosure
statement, by any Loan Party (y) which plan does not propose to provide for the
payment in full in cash of all Obligations under this Agreement or is not
otherwise satisfactory to Administrative Agent and Required Lenders, or (b) if
such plan does not propose payment in full in cash of all Obligations under this
Agreement, in each case to which the Administrative Agent and the Required
Lenders do not consent or otherwise agree to the treatment of their claims
hereunder;

 

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(iii) the entry of an order in the Chapter 11 Cases confirming a Reorganization
Plan that does not contain a provision for termination of the Commitments and
repayment in full in cash of all of the Obligations under this Agreement, to
which the Administrative Agent and the Required Lenders do not consent or
otherwise agree to the treatment of their claims;

(iv) the entry of an order amending, supplementing, staying, vacating or
otherwise modifying the Loan Documents, the Interim Order or the Final Order
(except with respect to ministerial changes) without the written consent of the
Administrative Agent and the Required Lenders or the filing of a motion for
reconsideration with respect to the Interim Order or the Final Order;

(v) the Final Order is not entered on or before the date that is thirty-five
(35) days after the Petition Date (which date, at the request of the Borrower
and with the consent of the Administrative Agent and the Required Lenders, may
be extended for another five (5) Business Days), or prior to or immediately
following the expiration of the Interim Order;

(vi) the entry of an order allowing any claim or claims under Section 506(c) of
the Bankruptcy Code or otherwise against any Agent, any Lender or any of the
Collateral;

(vii) the appointment of an interim or permanent trustee in the Chapter 11 Cases
or the appointment of a receiver or an examiner in the Chapter 11 Cases with
expanded powers to operate or manage the financial affairs, the business, the
reorganization of such Loan Party (or any Loan Party seeks or acquiesces in such
relief);

(viii) the sale without the Administrative Agent’s and the Required Lenders’
consent, of all or substantially all of the assets of the Loan Parties through a
sale under Section 363 of the Bankruptcy Code, through a confirmed
Reorganization Plan in the Chapter 11 Cases, or otherwise (or any Loan Party
seeks or acquiesces in such relief) that does not provide for payment in full in
cash of the Obligations and termination of Lenders’ Commitments;

(ix) the dismissal of the Chapter 11 Cases, or the conversion of the Chapter 11
Cases from cases under Chapter 11 to cases under Chapter 7 of the Bankruptcy
Code (except as consented to by the Administrative Agent and the Required
Lenders) or any Loan Party shall file a motion or other pleading seeking the
dismissal of the Chapter 11 Cases under Section 1112 of the Bankruptcy Code,
conversion of the Chapter 11 Cases or otherwise;

(x) other than pursuant to the First Day Orders or the Financing Orders, the
entry of a final order by the Bankruptcy Court granting relief from or modifying
the automatic stay of Section 362 of the Bankruptcy Code (x) to allow any
creditor to execute upon or enforce a Lien on any Collateral having value in
excess of $2,500,000, or (y) with respect to any Lien on or the granting of any
Lien on any Collateral to any state or local environmental or regulatory agency
or authority, which in either case would have a Material Adverse Effect;

(xi) Reserved;

(xii) the entry of an order in the Chapter 11 Cases avoiding or requiring
disgorgement of any portion of the payments made on account of the Obligations
owing under this Agreement or the other Loan Documents;

 

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(xiii) the failure of any Loan Party to perform any of its material obligations
under the Interim Order or the Final Order, which materially and adversely
affects the interests of any of the Lenders, taken as a whole, the
Administrative Agent as reasonably determined by the Administrative Agent and
the Required Lenders, as the case may be;

(xiv) except as otherwise provided by the Financing Orders, the entry of an
order in the Chapter 11 Cases granting any other super priority administrative
claim or Lien equal or superior to that granted to Administrative Agent, on
behalf of itself and/or the Secured Parties;

(xv) termination of the exclusive period for the Loan Parties to file a plan of
reorganization in the Chapter 11 Cases; or

(xvi) any of the Loan Parties’ return of goods constituting Collateral pursuant
to Section 546(g) of the Bankruptcy Code other than in accordance with any such
program (y) approved pursuant to a First Day Order, or (b) otherwise approved by
the Bankruptcy Court.

then, and in every such event, and at any time thereafter during the continuance
of such event, the Administrative Agent may, and at the request of the Required
Lenders shall, notwithstanding the provisions of Section 362 of the Bankruptcy
Code, without any application, motion or notice to, hearing before, or order
from the Bankruptcy Court (but subject to any applicable provisions of the Loan
Documents and the Financing Orders) by notice to the Borrower, take any or all
of the following actions, at the same or different times:

(A) terminate the Commitments whereupon the obligation of each Lender to make
any Loan shall immediately terminate;

(B) declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate;

(C) increase the rate of interest applicable to the Loans to the interest rate
specified in Section 2.06(c);

(D) declare the Loans then outstanding to be forthwith due and payable in whole
or in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without presentment, demand,
protest or any other notice of any kind (except as provided in the Loan
Documents and the Financing Orders), all of which are hereby expressly waived by
the Borrower and the Guarantors, anything contained herein or in any other Loan
Document to the contrary notwithstanding;

(E) direct any or all of the Loan Parties to sell or otherwise dispose of any or
all of the Collateral on terms and conditions reasonably acceptable to the
Agents and the Required Lenders pursuant to Sections 363, 365 and other
applicable provisions of the Bankruptcy Code and the Administrative Agent (on
behalf of the Lenders) shall have the right to “credit bid” the allowed amount
of the Lenders’ claims during any sale of all or substantially all of the
Collateral, including, without limitation, sales occurring pursuant

 

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to section 363 of the Bankruptcy Code or included as part of any Reorganization
Plan subject to confirmation under section 1129(b)(2)(A)(iii) of the Bankruptcy
Code (and, without limiting the foregoing, direct any Loan Party to assume and
assign any lease or executory contract included in the Collateral to the
Administrative Agent’s designees in accordance with and subject to Section 365
of the Bankruptcy Code,

(F) enter onto the premises of any Loan Party in connection with an orderly
liquidation of the Collateral, and/or

(G) exercise any rights and remedies provided to such Agent under the Loan
Documents or at law or in equity, including all remedies provided for under the
UCC and, pursuant to the Interim Order and the Final Order.

Upon the occurrence and during the continuance of an Event of Default and the
exercise by the Administrative Agent, on behalf of the Lenders, of their rights
and remedies under this Agreement and the other Loan Documents, the Borrower
shall use commercially reasonably efforts to assist the Administrative Agent and
the Lenders in effecting a sale or other disposition of the Collateral upon such
terms as are reasonably acceptable to the Administrative Agent and the Required
Lenders.

ARTICLE IX

COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS

SECTION 9.01 Collateral Account.

(a) The Administrative Agent is hereby authorized to establish and maintain a
restricted deposit account at a depository institution, in Administrative
Agent’s discretion, in the name of the Administrative Agent, designated “Delta
Petroleum Collateral Account” and shall, promptly upon opening or so designating
such deposit account, notify Loan Parties of the name of the depository
institution and the account number. Each Loan Party shall deposit into the
Collateral Account from time to time (i) the cash proceeds of any of the
Collateral (including pursuant to any disposition thereof) to the extent
contemplated herein or in any other Loan Document, (ii) the cash proceeds of any
Casualty Event with respect to Collateral, to the extent contemplated herein or
in any other Loan Document, and (iii) any cash such Loan Party is required to
pledge as additional collateral security hereunder pursuant to the Loan
Documents.

(b) The balance from time to time in the Collateral Account shall constitute
part of the Collateral and shall not constitute payment of the Obligations until
applied as hereinafter provided. So long as no Event of Default has occurred and
is continuing or will result therefrom, the Administrative Agent shall within
one (1) Business Day of receiving a request of the applicable Loan Party for
release of cash proceeds from the Collateral Account constituting Net Cash
Proceeds relating to any Casualty Event or Asset Sale remit such cash proceeds
on deposit in the Collateral Account to or upon the order of such Loan Party, so
long as such Loan Party has delivered to Administrative Agent a certificate from
the chief financial officer of Borrower certifying that such disbursement is
permitted hereunder. At any time following the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if

 

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instructed by the Required Lenders as specified herein, shall) in its (or their)
discretion apply or cause to be applied (subject to collection) the balance from
time to time outstanding to the credit of the Collateral Account to the payment
of the Obligations in the manner specified in Section 9.03 hereof and shall
provide written notice of any such application. The Loan Parties shall have no
right to withdraw, transfer or otherwise receive any funds deposited in the
Collateral Account except to the extent specifically provided herein.

(c) Amounts on deposit in the Collateral Account shall be invested and
reinvested from time to time in Cash Equivalents as the applicable Loan Party
(or, after the occurrence and during the continuance of an Event of Default, the
Administrative Agent) shall determine by written instruction to the
Administrative Agent, or if no such instructions are given, then as the
Administrative Agent, in its sole discretion, shall determine which Cash
Equivalents shall be held in the name and be under the control of the
Administrative Agent (or any sub-agent); provided that at any time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Required Lenders as specified herein,
shall) in its (or their) discretion at any time and from time to time elect to
liquidate any such Cash Equivalents and to apply or cause to be applied the
proceeds thereof to the payment of the Obligations in the manner specified in
Section 9.03 hereof.

SECTION 9.02 Reserved.

SECTION 9.03 Application of Proceeds. The proceeds received by the
Administrative Agent or Collateral Agent in respect of any sale of, collection
from or other realization upon all or any part of the Collateral pursuant to the
exercise by the Administrative Agent or the Collateral Agent of its remedies
shall be applied, in full or in part, together with any other sums then held by
Administrative Agent or the Collateral Agent pursuant to this Agreement,
promptly by the Administrative Agent or the Collateral Agent as follows:

(a) First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization including
compensation to the Administrative Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by the Administrative Agent
in connection therewith and all amounts for which the Administrative Agent is
entitled to indemnification pursuant to the provisions of any Loan Document,
together with interest on each such amount at the highest rate then in effect
under this Agreement from and after the date such amount is due, owing or unpaid
until paid in full;

(b) Second, to the payment of all other reasonable costs and expenses of such
sale, collection or other realization including compensation to the other
Secured Parties and their agents and counsel and all costs, liabilities and
advances made or incurred by the other Secured Parties in connection therewith,
together with interest on each such amount at the highest rate then in effect
under this Agreement from and after the date such amount is due, owing or unpaid
until paid in full;

(c) Third, without duplication of amounts applied pursuant to clauses (a) and
(b) above, to the payment in full in cash, pro rata, of interest and other
amounts constituting Obligations (other than principal) and any fees, premiums
and any interest accrued thereon, in each case equally and ratably in accordance
with the respective amounts thereof then due and owing;

 

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(d) Fourth, to the payment in full in cash, pro rata, of principal amount of the
Obligations and any premium thereon and any interest accrued thereon; and

(e) Fifth, the balance, if any, to the person lawfully entitled thereto
(including the applicable Loan Party or its successors or assigns) or as a court
of competent jurisdiction may direct.

In the event that any such proceeds are insufficient to pay in full the items
described in clauses (a) through (e) of this Section 9.03, the Loan Parties
shall remain liable, jointly and severally, for any deficiency.

ARTICLE X

THE ADMINISTRATIVE AGENT

SECTION 10.01 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent and Collateral Agent as an agent of such
Lender under this Agreement and the other Loan Documents. Each Lender that holds
Loans or has Commitments hereby irrevocably designates and appoints the
Administrative Agent and Collateral Agent as an agent of such person under this
Agreement. Each Lender irrevocably authorizes each Agent, in such capacity,
through its agents or employees, to take such actions on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to such Agent by the
terms of this Agreement and the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto. Without limiting the generality
of the foregoing, each Lender hereby authorizes the Administrative Agent to
consent, on behalf of each Lender, to the Interim Order (to the extent that the
Administrative Agent and Required Lenders have consented to such Interim Order
in accordance with the provisions hereof) and the Final Order.

SECTION 10.02 Agent in Its Individual Capacity. Each person serving as an 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 an Agent, and
such person and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent hereunder.

SECTION 10.03 Exculpatory Provisions. No Agent shall have any duties or
obligations except those expressly set forth in the Loan Documents. Without
limiting the generality of the foregoing, (a) no Agent shall be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) no Agent shall have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated by the Loan Documents that such Agent is required
to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.02), and (c) except as

 

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expressly set forth in the Loan Documents, no Agent shall have any duty to
disclose or shall be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the Agent or any of its Affiliates in any capacity. No Agent shall
be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 11.02) or in the absence of its own gross negligence or willful
misconduct. No Agent shall be deemed to have knowledge of any Default unless and
until written notice thereof is given to such Agent by the Borrower or a Lender,
and no Agent shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
any Loan Document, (ii) the contents of any certificate, report or other
document delivered thereunder or in connection therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth in any Loan Document, (iv) the validity, enforceability, effectiveness
or genuineness of any Loan Document or any other agreement, instrument or
document or (v) the satisfaction of any condition set forth in Article IV or
elsewhere in any Loan Document.

SECTION 10.04 Reliance by Agent. Each 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 or sent by a
proper person. Each Agent also may rely upon any statement made to it orally and
believed by it to be made by a proper person, and shall not incur any liability
for relying thereon. Each Agent may consult with legal counsel (who may be
counsel for the Borrower), independent accountants and other advisors 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 advisors.

SECTION 10.05 Delegation of Duties. Each 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 or delegate any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Affiliates. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Affiliates of each 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 Agent.

SECTION 10.06 Successor Agent.

(a) Each Agent may at any time give notice of its resignation to the Lenders and
the Borrower. Upon receipt of any such notice, the Required Lenders shall have
the right to appoint a successor to such Agent from among the Lenders; and so
long as no Default has occurred and is continuing, with the consent of the
Borrower (such approval not to be unreasonably withheld). If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after such retiring Agent gives notice of
its resignation, then such retiring Agent may, on behalf of the Lenders, appoint
a successor to such Agent, which successor shall be a commercial banking
institution organized under the laws of the United States (or any State thereof)
or a United States branch or agency of a commercial banking institution, in each
case, having combined capital and surplus of at least $500,000,000; provided

 

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that if such retiring Agent is unable to find a commercial banking institution
which is willing to accept such appointment and which meets the qualifications
set forth above, such retiring Agent’s resignation shall nevertheless thereupon
become effective, and the Lenders shall assume and perform all of the duties of
such Agent hereunder until such time, if any, as the Required Lenders appoint a
successor to such Agent with the approval of the Borrower (which approval shall
not be unreasonably withheld). Upon the acceptance of a successor’s appointment
as an Agent hereunder, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring (or retired)
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder or under the other Loan Documents. The fees payable by the
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After an Agent’s resignation hereunder, the provisions of this Article X and
Section 11.03 shall continue in effect for the benefit of such retiring Agent,
its sub-agents and their respective Affiliates in respect of any actions taken
or omitted to be taken by any of them while it was acting as Agent.
Notwithstanding anything herein to the contrary, no ZCOF Lender or any Affiliate
of a ZCOF Lender shall be a successor Agent hereunder.

SECTION 10.07 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges
that it has, independently and without reliance upon any 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 Agreement. Each
Lender further represents and warrants that it will, independently and without
reliance upon any Agent or any other Lender 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 related agreement or any document furnished hereunder
or thereunder.

SECTION 10.08 Reserved.

SECTION 10.09 Indemnification. The Lenders severally agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by the Borrower or
the Guarantors and without limiting the obligation of the Borrower or the
Guarantors to do so), ratably according to their respective outstanding Loans
and Commitments in effect on the date on which indemnification is sought under
this Section 10.09 (or, if indemnification is sought after the date upon which
all Commitments shall have terminated and the Loans shall have been paid in
full, ratably in accordance with such outstanding Loans and Commitments as in
effect immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever that may at any time
(whether before or after the payment of the Loans) be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing or in any way related to the
Chapter 11 Case; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements that are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from such Agent’s gross negligence or willful misconduct. The agreements in this
Section shall survive the payment of the Loans and all other amounts payable
hereunder.

 

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SECTION 10.10 Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining prior written consent of the Administrative Agent and the Required
Lenders, it being the intent of the Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of the Administrative Agent or the Required
Lenders and as provided in Section 8.01.

SECTION 10.11 Enforcement. Notwithstanding anything to the contrary contained
herein or in any other Loan Document, the authority to enforce rights and
remedies hereunder and under the Loan Documents against the Loan Parties or any
of them shall be vested exclusively in, and all actions and proceedings at law
in connection with such enforcement shall be instituted and maintained
exclusively by, the Administrative Agent and Collateral Agent (as applicable),
or as the Required Lenders may require or otherwise direct the Administrative
Agent or Collateral Agent, for the benefit of all Lenders; provided, however,
that the foregoing shall not prohibit (a) the Administrative Agent from
exercising on its own behalf the rights and remedies that inure to its benefit
(solely in its capacity as Administrative Agent) hereunder and under the other
Loan Documents, (b) any Lender from exercising setoff rights in accordance with,
and subject to, the terms of this Agreement, or (c) any Lender from filing
proofs of claim or appearing and filing pleadings on its own behalf during the
pendency of a proceeding relative to any Loan Party under any bankruptcy or
insolvency law.

SECTION 10.12 Withholding Tax. To the extent required by any applicable law, the
Administrative Agent may withhold from any payment to any Lender an amount
equivalent to any applicable withholding tax. Without limiting the provisions of
Section 2.14(a) or (c), each Lender shall, and does hereby, indemnify the
Administrative Agent, and shall make payable in respect thereof within 30 days
after demand therefor, against any and all Taxes and any and all related losses,
claims, liabilities and expenses (including fees, charges and disbursements of
any counsel for the Administrative Agent) incurred by or asserted against the
Administrative Agent by the Internal Revenue Service or any other Governmental
Authority as a result of the failure of the Administrative Agent to properly
withhold tax from amounts paid to or for the account of any Lender for any
reason (including, without limitation, because the appropriate form was not
delivered or not property executed, or because such Lender failed to notify the
Administrative Agent of a change in circumstance that rendered the exemption
from, or reduction of withholding tax ineffective). A certificate as to the
amount of such payment or liability delivered to any Lender by the
Administrative Agent shall be conclusive absent manifest error. Each Lender
hereby authorizes the Administrative Agent to set off and apply any and all
amounts at any time owing to such Lender under this Agreement or any other Loan
Document against any amount due the Administrative Agent under this
Section 10.12. The agreements in this Section 10.12 shall survive the
resignation and/or replacement of the Administrative Agent, any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all other Obligations.

 

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ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Notices. 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:

 

  (a)

if to any Loan Party, to the Borrower at:

Delta Petroleum Corporation

370 Seventeenth Street, Suite 4300

Denver, CO 80202

Attention:  Chief Financial Officer

Telecopier No.: (303) 298-8251;

with copies to (which shall not constitute notice):

Davis Graham & Stubbs LLP

1550 17th Street

Suite 500

Denver Colorado 80202

Attention:  Ronald Levine, II.

                      Telecopier

No.: (303)-892-7400

 

  (b)

if to the Administrative Agent, to it at:

Whitebox Advisors LLC

3033 Excelsior Blvd.

Minneapolis, MN 55416

Attention:  Jake Mercer

Telecopier No.: (612) 253-6100

with a copy to (which shall not constitute notice):

Brown Rudnick LLP

Seven Times Square

New York, NY 10036

United States of America

Attention:  Robert Stark, Esq.

                      Andreas

Andromalos, Esq.

                      Telecopier

No.: (617) 856-8200

Email: RStark@brownrudnick.com

 

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(c) if to a Lender, to it at its address (or telecopier number) set forth on the
applicable Lender Addendum or in the Assignment and Assumption pursuant to which
such Lender shall have become a party hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopier or by certified or registered mail, in each case delivered, sent or
mailed (properly addressed) to such party as provided in this Section 11.01 or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 11.01, and failure to deliver courtesy copies of
notices and other communications shall in no event affect the validity or
effectiveness of such notices and other communications.

(d) Electronic Communications. Notices and other communications to the Lenders
hereunder may (subject to Section 11.01(g)) be delivered or furnished by
electronic communication (including email 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 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 (including as set forth in
Section 11.01(f)); 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 web site 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 web site address therefor.

(e) Change of Address, etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.

(f) Posting. Each Loan Party hereby agrees that it will provide to the
Administrative Agent all information, documents and other materials that it is
obligated to furnish to the Administrative Agent pursuant to this Agreement and
any other Loan Document, including all notices, requests, financial statements,
financial and other reports, certificates and other information materials, but
excluding any such communication that (i) relates to a request for a new
Borrowing, (ii) relates to the payment of any principal or other amount due
under this Agreement prior to the scheduled date therefor, (iii) provides notice
of any Default under this Agreement or (iv) is required to be delivered to
satisfy any condition precedent to the effectiveness of this Agreement and/or
any Borrowing (all such non-excluded communications,

 

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collectively, the “Communications”), by transmitting the Communications in an
electronic/soft medium in a format reasonably acceptable to the Administrative
Agent at JMercer@whiteboxadvisors.com or at such other e-mail address(es)
provided to the Borrower from time to time or in such other form, including hard
copy delivery thereof, as the Administrative Agent shall require. In addition,
each Loan Party agrees to continue to provide the Communications to the
Administrative Agent in the manner specified in this Agreement or any other Loan
Document or in such other form, including hard copy delivery thereof, as the
Administrative Agent shall require. Nothing in this Section 11.01 shall
prejudice the right of the Agents, any Lender or any Loan Party to give any
notice or other communication pursuant to this Agreement or any other Loan
Document in any other manner specified in this Agreement or any other Loan
Document or as any such Agent shall require.

To the extent consented to by the Administrative Agent in writing from time to
time, Administrative Agent agrees that receipt of the Communications by the
Administrative Agent at its e-mail address(es) set forth above shall constitute
effective delivery of the Communications to the Administrative Agent for
purposes of the Loan Documents; provided that the Borrower shall also deliver to
the Administrative Agent an executed original of each Compliance Certificate
required to be delivered hereunder.

Each Loan Party further agrees that Administrative Agent may make the
Communications available to the Lenders by posting the Communications on
Intralinks or a substantially similar electronic transmission system (the
“Platform”). The Platform is provided “as is” and “as available.” The Agents do
not warrant the accuracy or completeness of the Communications, or the adequacy
of the Platform and expressly disclaim liability for errors or omissions in the
Communications. No warranty of any kind, express, implied or statutory,
including, without limitation, 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 in connection with the
Communications or the Platform. In no event shall the Administrative Agent or
any of its employees, agents, officers or directors have any liability to the
Loan Parties, any Lender or any other person for damages of any kind, including
direct or indirect, special, incidental or consequential damages, losses or
expenses (whether in tort, contract or otherwise) arising out of any Loan
Party’s or the Administrative Agent’s transmission of communications through the
Internet, except to the extent the liability of such person is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from such person’s gross negligence or willful misconduct.

SECTION 11.02 Waivers; Amendment.

(a) No failure or delay by any Agent or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each Agent and the Lenders hereunder
and under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
any Loan Document or consent to any departure by any Loan Party therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such

 

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waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default, regardless
of whether any Agent or any Lender may have had notice or knowledge of such
Default at the time.

(b) Except as provided in paragraphs (c) and (d) below, neither this Agreement
nor any other Loan Document nor any provision hereof or thereof may be waived,
amended, supplemented or modified except, in the case of this Agreement,
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Required Lenders (and, to the extent that Whitebox Advisors LLC is
serving as the Administrative Agent at such time, the Administrative Agent) or,
in the case of any other Loan Document, pursuant to an agreement or agreements
in writing entered into by the Administrative Agent and the Loan Party or Loan
Parties that are parties thereto, in each case with the written consent of the
Required Lenders; provided that no such agreement shall:

(i) increase the Commitment of any Lender without the written consent of such
Lender;

(ii) reduce the principal amount or premium of any Loan or reduce the rate of
interest thereon, or reduce any Fees payable hereunder, or change the currency
of payment of any Obligation, without the written consent of each Lender
affected thereby;

(iii) postpone or extend the maturity of any Loan, or any date for the payment
of any interest or fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby;

(iv) change Section 2.13(b) or (c), Section 9.03 or the definition of “Pro Rata
Share”, in each case, in a manner that would alter the pro rata sharing of
payments or setoffs required thereby, without the written consent of each
Lender;

(v) change the percentage set forth in the definition of “Required Lenders” or
any other provision of any Loan Document (including this Section) specifying the
number or percentage of Lenders required to waive, amend or modify any rights
thereunder or make any determination or grant any consent thereunder, without
the written consent of each Lender;

(vi) release any Guarantor from its Guarantee (except as expressly provided in
Article VII), or limit its liability in respect of such Guarantee, without the
written consent of each Lender; or

(vii) release all or substantially all of the Collateral from the Liens under
the Financing Orders or the Security Documents or alter the relative priorities
of the Obligations entitled to the Liens under the Financing Orders or the
Security Documents (except in connection with securing additional Obligations
equally and ratably with the other Obligations), in each case without the
written consent of each Lender;

 

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provided, further, that (1) no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent without the prior
written consent of the Administrative Agent, (2) no such agreement shall
increase the aggregate amount of Commitments (or increase the principal amount
of outstanding Loans) without the prior written consent of the Required Lenders,
(3) no such agreement shall amend, modify or otherwise affect the rights or
duties of the Collateral Agent without the prior written consent of the
Collateral Agent and (4) no such agreement shall amend, modify or otherwise
affect the rights or duties of any or all ZCOF Lenders in a manner that directly
affects, in a disproportionate manner, any or all ZCOF Lenders as compared to
the effect on other Lenders. Notwithstanding the foregoing, any provision of
this Agreement may be amended by an agreement in writing entered into by the
Borrower, the Required Lenders and the Administrative Agent if (x) by the terms
of such agreement the Commitment of each Lender not consenting to the amendment
provided for therein shall terminate upon the effectiveness of such amendment
and (y) at the time such amendment becomes effective, each Lender not consenting
thereto receives payment in full of the principal of, premium, if any, and
interest accrued on each Loan made by it and all other amounts owing to it or
accrued for its account under this Agreement.

Notwithstanding anything to the contrary contained in this Section 11.02, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except to the extent the consent of such Lender
would be required under clause (i), (ii) or (iii) in the proviso to the first
sentence of this Section 11.02(b).

(c) If, in connection with any proposed change, waiver, discharge or termination
of the provisions of this Agreement as contemplated by Section 11.02(b) (other
than clause (iii) of such Section), the consent of the Required Lenders is
obtained but the consent of one or more of such other Lenders whose consent is
required is not obtained, then the Borrower shall have the right to replace
(subject to the last sentence of Section 11.02(b)) all, but not less than all,
of such non-consenting Lender or Lenders (so long as all non-consenting Lenders
are so replaced) with one or more persons pursuant to Section 2.15 so long as at
the time of such replacement each such new Lender consents to the proposed
change, waiver, discharge or termination.

SECTION 11.03 Expenses; Indemnity.

(a) The Loan Parties agree, jointly and severally, to pay, promptly upon demand:

(i) all reasonable out-of-pocket costs and expenses incurred by the
Administrative Agent, Collateral Agent and Lenders, including the reasonable
fees, charges and disbursements of Advisors for the Administrative Agent,
Collateral Agent and Lenders, in connection with the syndication of the Loans
and Commitments, the preparation, execution and delivery of the Loan Documents,
the administration of the Loans and Commitments, the perfection and maintenance
of the Liens securing the Collateral and any actual or proposed amendment,
supplement or waiver of any of the Loan Documents (whether or not the
transactions contemplated hereby or thereby shall be consummated), provided that
except as set forth in Section 11.03(e) the Lenders shall be reimbursed for the
costs and expenses that they incurred in connection with such administration
solely while an Event of Default has occurred and is continuing;

 

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(ii) all reasonable out-of-pocket costs and expenses incurred by the
Administrative Agent and Collateral Agent, including the reasonable fees,
charges and disbursements of Advisors for the Administrative Agent and
Collateral Agent, in connection with any action, suit or other proceeding
affecting the Collateral or any part thereof, in which action, suit or
proceeding the Administrative Agent and/or Collateral Agent is made a party or
participates or in which the right to use the Collateral or any part thereof is
threatened, or in which it becomes necessary in the reasonable judgment of the
Administrative Agent or Collateral Agent to defend or uphold the Liens granted
pursuant to the Financing Orders or by the Security Documents (including any
action, suit or proceeding to establish or uphold the compliance of the
Collateral with any Requirements of Law);

(iii) all costs and expenses incurred by the Administrative Agent, Collateral
Agent or any Lender, including the reasonable fees, charges and disbursements of
Advisors for the Administrative Agent, Collateral Agent or any Lender, incurred
in connection with the enforcement or protection of its rights under the Loan
Documents, including its rights under this Section 11.03(a), or in connection
with the Loans made hereunder and the collection of the Obligations, including
all such costs and expenses incurred during any workout, restructuring or
negotiations in respect of the Obligations; and

(iv) all of the reasonable out-of-pocket fees and expenses of the Advisors in
connection with the preparation, reproduction, delivery and review of pleadings,
documents and reports related to the Chapter 11 Cases (including, without
limitation, the Loan Documents) and any subsequent case under Chapter 7 of the
Bankruptcy Code, attendance at meetings, court hearings or conferences related
to the Chapter 11 Cases and any subsequent case under Chapter 7 of the
Bankruptcy Code, and general monitoring of the Chapter 11 Cases and any
subsequent case under Chapter 7 of the Bankruptcy Code.

(b) The Loan Parties agree, jointly and severally, to indemnify the Agents, each
Lender and each Affiliate of any of the foregoing persons and each of their
respective partners, controlling persons, directors, officers, trustees,
employees and agents (each such person being called an “Indemnitee”) against,
and to hold each Indemnitee harmless from, all reasonable out-of-pocket costs
and any and all losses, claims, damages, liabilities, penalties, judgments,
suits and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution, delivery,
performance, administration or enforcement of the Loan Documents, (ii) any
actual or proposed use of the proceeds of the Loans, (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged
presence or Release or threatened Release of Hazardous Materials, on, at, under
or from any property owned, leased or operated by any Loan Party at any time, or
any Environmental Claim related in any way to any Loan Party; 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 nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

(c) The provisions of this Section 11.03 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the release of all or any portion of the Collateral, the expiration of
the Commitments, the invalidity or unenforceability of any term

 

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or provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Agents or any Lender. All amounts due under this
Section 11.03 shall be payable on written demand therefor accompanied by
reasonable documentation with respect to any reimbursement, indemnification or
other amount requested.

(d) To the extent that the Borrower fails to promptly pay any amount required to
be paid by it to the Agents under paragraph (a) or (b) of this Section, each
Lender severally agrees to pay to the Agents, as the case may be, such Lender’s
Pro Rata 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 any of the
Agents in its capacity as such.

(e) The Loan Parties agree, jointly and severally, to pay, within 30 days after
the entry of the Interim Order, all out-of pocket expenses (including the fees
and expenses of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to ZCOF)
incurred by ZCOF from the period commencing on December 16, 2011 through and
including the Closing Date in connection with the Chapter 11 Cases and the
preparation, execution and delivery of the Loan Documents provided that the Loan
Parties shall not be required to reimburse ZCOF for any such expenses under this
Section 11.03(e) in excess of $115,000.

SECTION 11.04 Successors and Assigns.

(a) 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 any attempted assignment or
transfer by the Borrower without such consent shall be null and void). Nothing
in this Agreement, express or implied, shall be construed to confer upon any
person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the other
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

(b) Any Lender shall have the right at any time to assign to an Eligible
Assignee 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 (i) that except in the case of an assignment to a Lender, an
Affiliate of a Lender or an Approved Fund, any assignment made in connection
with the primary syndication of the Commitment and Loans by the Administrative
Agent or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or 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) shall not be less than $1,000,000 unless each of the
Borrower and the Administrative Agent otherwise consents, (ii) 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, (iii) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Assumption, together with a processing and recordation fee of
$3,500 (provided that only one such fee shall be payable in the event of

 

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contemporaneous Assignments to or by two or more Approved Funds), and (iv) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an Administrative Questionnaire. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Assumption the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement
(provided that any liability of the Borrower to such assignee under
Section 2.11, 2.12 or 2.14 shall be limited to the amount, if any, that would
have been payable thereunder by the Borrower in the absence of such assignment,
except to the extent any such amounts are attributable to a Change in Law
occurring after the date of such assignment), 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 2.11,
2.12, 2.14 and 11.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be null and void to effect such assignment or transfer and instead 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 and subject to
the limitations on sales of participations set forth in this Section 11.04.
Notwithstanding any provisions set forth herein, to the extent that ZCOF Lender
assigns to any of its Affiliates all or any portion of its rights and/or
obligations under this Agreement, such rights and obligations assigned to such
Affiliate shall be subject to all of the restrictions, limitations and other
provisions herein applicable to the ZCOF Lender.

(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices 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 Commitment of, and principal amount 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 in the absence of
manifest error, and Borrower, the Administrative Agent and the Lenders shall
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 (with respect to its own interest only), at any
reasonable time and from time to time upon reasonable prior notice.

(d) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’ s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.

(e) Any Lender shall have the right at any time, without the consent of the
Borrower, any Loan Party or the Administrative Agent, to sell participations to
one or more banks or other entities (a “Participant”) in all or a portion of
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Agreement (including all or a portion of its Commitment and 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 other 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) such participation is recorded in the
register described in the last sentence of this Section 11.04(e). 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 the Loan
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents; provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in clause (i), (ii) or (iii) of the
first proviso to Section 11.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.11, 2.12 and 2.14 (subject to the
requirements and limitations of Section 2.14) to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 11.08 as though it were a Lender; provided
that such Participant agrees in writing to be subject to Section 2.13(c) as
though it were a Lender. Each Lender shall, acting solely for this purpose as a
non-fiduciary agent of the Borrower, maintain at one of its offices a register
on which it records the names and addresses of its Participants, and the amount
and terms of its participations.

(f) A Participant shall not be entitled to receive any greater payment under
Section 2.11, 2.12 or 2.14 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant.

(g) 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, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto. In
the case of any Lender that is a fund that invests in bank loans, such Lender
may, without the consent of the Borrower or the Administrative Agent,
collaterally assign or pledge all or any portion of its rights under this
Agreement, including the Loans and Notes or any other instrument evidencing its
rights as a Lender under this Agreement, to any holder of, trustee for, or any
other representative of holders of, obligations owed or securities issued, by
such fund, as security for such obligations or securities; provided that, with
respect to any Loans, the documentation governing or evidencing such collateral
assignment or pledge shall provide that any foreclosure or similar action by
such trustee or representative shall be subject to the provisions of this
Section 11.04 concerning assignments and shall not be effective to transfer any
rights under this Agreement or in any Loan under this Agreement unless the
requirements of this Section 11.04 concerning assignments are fully satisfied.

(h) 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
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enforceability as a manually executed signature or the used of a paper-based
recording system, as the case may be, to the extent and as provided for under
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.

SECTION 11.05 Survival of Agreement. All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Agents or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.11, 2.13, 2.14 and
11.03 and Article X shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of
the Loans, the expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.

SECTION 11.06 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on 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. 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 which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.

SECTION 11.07 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 11.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates are hereby authorized
(notwithstanding the provisions of Section 362 of the Bankruptcy Code, without
any application, motion to, hearing before, or order from, the Bankruptcy Court)
but subject in all cases to the provisions of the Financing Orders, at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at

 

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any time held and other obligations at any time owing by such Lender or
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 held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff) which such Lender may
have.

SECTION 11.09 Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York. Each Loan Party hereby consents and agrees that the
Bankruptcy Court (or if the reference is withdrawn, the applicable United States
District Court) shall have exclusive jurisdiction to hear and determine any
claims or disputes between the Loan Parties, Agents and the Lenders pertaining
to this Agreement or any of the other Loan Documents related to this Agreement
or to any other matter arising out of or relating to this Agreement; provided,
that Agents, the Lenders and the Loan Parties acknowledge that any appeals from
the Bankruptcy Court may have to be heard by a court other than the Bankruptcy
Court; provided, further, that nothing in this Agreement shall be deemed or
operate to preclude Agents from bringing suit or taking other legal action in
any other jurisdiction to realize on the Collateral or any other security for
the Obligations, or to enforce a judgment or other court order in favor of
Agents. Each Loan Party expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any court, and each Loan Party
hereby waives any objection that such Loan Party may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Each Loan Party hereby waives personal service of the
summons, complaint and other process issued in any such action or suit and
agrees that service of such summons, complaint and other process may be made by
registered or certified mail addressed to such Loan Party at the address set
forth in Section 11.01 of this Agreement and that service so made shall be
deemed completed upon the earlier of such Loan Party’s actual receipt thereof or
three (3) days after deposit in the United States mail, proper postage prepaid.

(b) Each Loan Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in Section 11.09(a). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

(c) Each party to this Agreement irrevocably consents to service of process in
any action or proceeding arising out of or relating to any Loan Document, in the
manner provided for notices (other than telecopier) in Section 11.01. Nothing in
this Agreement or any other Loan Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by applicable law.

SECTION 11.10 Waiver of Jury Trial. Each party hereto hereby 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, any other Loan

 

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Document or the transactions contemplated hereby (whether based on contract,
tort or any other theory). Each party hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party 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 by, among other
things, the mutual waivers and certifications in this Section.

SECTION 11.11 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 11.12 Confidentiality. Neither any Agent nor any Lender shall disclose
any Confidential Information to any person without the consent of the Borrower,
other than (a) to such Agent’s or such Lender’s Affiliates and their officers,
directors, employees, agents and advisors and to potential lenders, pledgees
under Section 11.04(g) and Participants, and then only if such potential lender
or Participant has agreed to be bound by the terms of this Section 11.12
(provided that if such potential lender or participant is not a commercial
lending institution or fund that makes or holds bank loans in the ordinary
course of its business the consent of the Borrower shall be required prior to
such disclosure and such consent shall not affect the Borrower’s consent rights
provided for in Section 11.04) and any other confidentiality agreement entered
into by such Agent or such Lender with respect to such Confidential Information,
(b) as required by any law, rule or regulation or judicial process, (c) as
requested or required by any state, federal or foreign Governmental Authority or
regulatory authority or examiner regulating such Lender Party (including the
National Association of Insurance Commissioners), (d) to any direct or indirect
contractual counterparty in any swap, hedge or similar agreement (or such
professional advisor) agrees to be bound by the provisions of this
Section 11.12, (e) in connection with the exercise of any remedies hereunder or
any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder in a related court
proceeding so long as such Confidential Information is (i) filed under seal with
the applicable court, (ii) used in a manner consistent with any applicable
protective order entered by any applicable court proceeding, or (iii) as may be
agreed between the Administrative Agent and the Borrower and (f) when required
by it, to S&P, Administrative Agent, provided that, prior to any such
disclosure, each such rating agency shall undertake to preserve the
confidentiality of any Confidential Information relating to the Loan Parties
received by it from such Lender. Neither any Agent nor any Lender shall disclose
any Confidential Information to any person in contravention of any
confidentiality agreement entered into by such Agent or such Lender.
“Confidential Information” means information concerning the Borrower of any of
its direct or indirect shareholders, or any of their respective employees,
directors, or Subsidiaries, or Affiliates received by any Agent or any Lender on
a confidential basis from the Borrower or any other person under or pursuant to
this Agreement or any other Loan Document including without limitation financial
terms and financial and organizational information contained in any documents,
statements, certificates, materials or information furnished, or to be
furnished, by or on behalf of the Borrower or any other person on a confidential
basis in connection with this Agreement and the Loan Documents, but does not
include any such information that (i) is publicly available at the time of
disclosure or becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent or any Lender
on a non-confidential basis from a source other than the Borrower or any of its
direct or indirect shareholders, or any of their respective employees,
directors, Subsidiaries or Affiliates or any of their respective agents or
representatives.

 

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SECTION 11.13 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively, the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 11.14 Lender Addendum. Each Lender to become a party to this Agreement
on the Closing Date shall do so by delivering to the Administrative Agent a
Lender Addendum duly executed by such Lender, the Borrower and the
Administrative Agent.

SECTION 11.15 Obligations Absolute. To the fullest extent permitted by
applicable law, all obligations of the Loan Parties hereunder with respect to
any Guarantee or granting of any Lien on any property shall be absolute and
unconditional irrespective of:

(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of any other Loan Party;

(b) any lack of validity or enforceability of any Loan Document or any other
agreement or instrument relating thereto against any other Loan Party;

(c) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from any Loan Document or any other agreement or
instrument relating thereto;

(d) any exchange, release or non-perfection of any other Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Obligations;

(e) any exercise or non-exercise, or any waiver of any right, remedy, power or
privilege under or in respect hereof or any Loan Document; or

(f) any other circumstances which might otherwise constitute a defense available
to, or a discharge of, the other Loan Parties.

SECTION 11.16 USA PATRIOT Act Notice. Each Lender that is subject to the Patriot
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

 

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PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Patriot Act”), it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name, address and
tax identification number of the Borrower and other information regarding the
Borrower that will allow such Lender or the Administrative Agent, as applicable,
to identify the Borrower in accordance with the Patriot Act. This notice is
given in accordance with the requirements of the Patriot Act and is effective as
to the Lenders and the Administrative Agent.

SECTION 11.17 Parties including the Trustees; Bankruptcy Court Proceedings. This
Agreement, the other Loan Documents, and all Liens and other rights and
privileges created hereby or pursuant hereto or to any other Loan Document shall
be binding upon each Loan Party, the bankruptcy estate of each Loan Party, and
any trustee, other bankruptcy estate representative or any successor-in-interest
of any Loan Party in the Chapter 11 Case or any subsequent case commenced under
Chapter 7 of the Bankruptcy Code, and shall not be subject to Section 365 of the
Bankruptcy Code. This Agreement and the other Loan Documents shall be binding
upon, and inure to the benefit of, the successors of Agents and Lenders and
their respective assigns, transferees and endorsees. The Liens created by this
Agreement and the other Loan Documents shall be and remain valid and perfected
in the event of the substantive consolidation or conversion of the Chapter 11
Case or any other bankruptcy case of any Loan Party to a case under Chapter 7 of
the Bankruptcy Code or in the event of dismissal of the Chapter 11 Case or the
release of any Collateral from the jurisdiction of the Bankruptcy Court for any
reason, without the necessity that the Administrative Agent file financing
statements or otherwise perfect its Liens under applicable law. No Loan Party
may assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the express written consent of the Agents and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Loan Party
without the prior express written consent of Agents and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Loan Party, Agents and Lenders with
respect to the transactions contemplated hereby and no person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.

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Borrower:

 

Delta Petroleum Corporation, as Borrower

 

By:

 

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   CFO

Signature Page to Amended and Restated Senior Secured Debtor-in-Possession
Credit Agreement

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  GUARANTORS:   DPCA, LLC, as a Guarantor         By:  

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   CFO Delta Petroleum Corporation Sole
Member and Manager         DLC, INC, as a Guarantor        

By:

 

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   Treasurer & CFO         DELTA PIPELINE,
LLC, as a Guarantor        

By:

 

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   CFO Delta Petroleum Corporation Sole
Member and Manager         DELTA EXPLORATION COMPANY,INC., as a Guarantor      
 

By:

 

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   Treasurer & CFO         CEC, INC., as a
Guarantor        

By:

 

/s/ Kevin K. Nanke

    Name:   Kevin K. Nanke     Title:   Treasurer

Signature Page to Amended and Restated Senior Secured Debtor-in-Possession
Credit Agreement (Guarantors)

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Administrative Agent and Collateral Agent:

 

WHITEBOX ADVISORS LLC, as Administrative Agent and Collateral Agent

 

By:

 

/s/ Mark Strefling

    Name:   Mark Strefling     Title:  

CLO

Signature Page to Amended and Restated Senior Secured Debtor-in-Possession
Credit Agreement