EXHIBIT 10.1
CREDIT AGREEMENT
     CREDIT AGREEMENT, dated as of September 8, 2006, among NGAS RESOURCES,
INC., a corporation organized under the laws of the Province of British Columbia
(“Holdings”), DAUGHERTY PETROLEUM, INC., a Kentucky corporation (the
“Borrower”), the several banks and other financial institutions or entities from
time to time party to this Agreement (the “Lenders”), and KEYBANK NATIONAL
ASSOCIATION, as administrative agent (in such capacity, the “Administrative
Agent”).
     The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.01. Defined Terms. As used in this Agreement, the terms listed in
this Section 1.01 shall have the respective meanings set forth in this
Section 1.01.
     “ABR” means, for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: “Prime Rate” shall mean the rate of interest per
annum publicly announced from time to time by the Reference Lender as its prime
rate in effect at its principal office in Cleveland, Ohio (the Prime Rate not
being intended to be the lowest rate of interest charged by the Reference Lender
in connection with extensions of credit to debtors). Any change in the ABR due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change in
the Prime Rate or the Federal Funds Effective Rate, respectively.
     “ABR Loans” means Loans the rate of interest applicable to which is based
upon the ABR.
     “Acceptable Security Interest” in any Property means a Lien which (a) is
created by the Borrower or any of its Restricted Subsidiaries in favor of the
Administrative 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 payment and performance of the
Obligations, and (d) is perfected and enforceable.
     “Administrative Agent” means KeyBank National Association, as the
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.
     “Administrative Questionnaire” means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
     “Affiliate” means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, either to (a) vote 5% or more of the Equity
Interests having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Equity Interests, by contract or otherwise.
     “After-Acquired Oil and Gas Properties” has the meaning specified in
Section 6.11.
     “Aggregate Outstanding Credit” means, at any time, the aggregate amount of
Credit Extensions of the Lenders outstanding at such time.
     “Agreement” means this Credit Agreement.

 

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     “Anti-Terrorism Order” means Executive Order No. 13,224 of September 24,
2001, Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as
amended.
     “Applicable Margin” means, for any day, with respect to any Type of Loan,
or with respect to Unused Commitment Fees payable under this Agreement, as the
case may be, the applicable rate per annum set forth below under the column
heading “Applicable Margin for Eurodollar Loans”, “Applicable Margin for ABR
Loans”, or “Unused Commitment Fee Rate”, as the case may be, based upon the
Borrowing Base Usage in effect on such date:

                                              Applicable             Applicable
              Margin for     Unused     Margin for       Borrowing    
Eurodollar     Commitment     Base Rate   Level   Base Usage     Loans     Fee
Rate     Loans  
I
    ≥ 90%       2.50%       0.50%       0.75%  
II
    ≥ 75% < 90%       2.00%       0.50%       0.50%  
III
    ≥ 40% < 75%       1.75%       0.375%       0.25%  
IV
    < 40%       1.50%       0.375%       0.00%  

Each change in the Applicable Margin and the Unused Commitment Fee Rate shall
apply during the
period commencing on the effective date of such change and ending on the date
immediately preceding
the effective date of the next change. If an Event of Default exists, the
Applicable Margin and
the Unused Commitment Fee Rate shall be at Level I.
     “Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) represented by such Lender’s
Commitment at such time. If the Commitment of each Lender to make Loans and the
obligation of the Issuing Bank to issue Letters of Credit have been terminated
pursuant to Section 8.01, or if the Commitments have expired, then the
Applicable Percentage of each Lender shall be determined based on the Applicable
Percentage of such Lender most recently in effect, giving effect to any
subsequent assignments. The initial Applicable Percentage of each Lender is set
forth opposite the name of such Lender on Schedule 1.01 or in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable.
     “Application” means an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
     “Approved Fund” means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender, or (c) an entity or Affiliate of an entity
that administers or manages a Lender.
     “Approved Hedge Counterparty” means, at any time and from time to time,
(a) any Person engaged in the business of buying, selling and dealing in Hedge
Agreements that is acceptable to the Administrative Agent and (i) has and
maintains, or (ii) has a guarantor or other credit support provider that is
acceptable to the Administrative Agent and has and maintains, a Credit Rating of
A- or better from S&P or A3 or better from Moody’s and (b) any Hedge Bank.
     “Arranger” means KeyBank in its capacity as sole lead arranger and sole
bookrunner.
     “Assignment and Assumption” means an Assignment and Assumption entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.06), and accepted by the Administrative Agent), in
substantially the form of Exhibit E or any other form approved by the
Administrative Agent.
     “Attributable Indebtedness” means, on any date, (a) in respect of any
Capitalized Lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease or similar payments under the relevant lease or
other applicable agreement or instrument that would appear on

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a balance sheet of such Person prepared as of such date in accordance with GAAP
if such lease or other agreement or instrument were accounted for as a Capital
Lease Obligation, and (c) all Synthetic Debt of such Person.
     “Availability” means, at any time, an amount equal to the lesser of (a) the
Total Commitments then in effect minus the Aggregate Outstanding Credit, and
(b) the Borrowing Base minus the Aggregate Outstanding Credit.
     “Available Commitment” means, as to any Lender at any time, an amount equal
to the excess, if any, of (a) such Lender’s Commitment then in effect over
(b) such Lender’s Credit Extensions then outstanding.
     “Board” means the Board of Governors of the Federal Reserve System of the
United States (or any successor).
     “Borrower” has the meaning specified in the preamble hereto.
     “Borrowing Base” means at any particular time, the Dollar amount determined
in accordance with Section 2.02 on account of Proved Reserves attributable to
Oil and Gas Properties of the Borrower and its Restricted Subsidiaries subject
to an Acceptable Security Interest and described in the most recent Engineering
Report delivered to the Administrative Agent and the Lenders pursuant to
Section 2.02.
     “Borrowing Base Availability” means, at any time, an amount equal to
(a) the lesser of the Borrowing Base and the Total Commitments then in effect,
minus (b) the Aggregate Outstanding Credit.
     “Borrowing Base Usage” means, as of any date and for all purposes, the
quotient, expressed as a percentage of (a) the Aggregate Outstanding Credit as
of such date, divided by (b) the Borrowing Base as of such date.
     “Borrowing Date” means any Business Day specified by the Borrower as a date
on which the Borrower requests the Lenders to make Loans hereunder.
     “Business” has the meaning specified in Section 5.16.
     “Business Day” means a day other than a Saturday, Sunday or other day on
which commercial banks in Cleveland, Ohio, are authorized or required by law to
close, provided, that with respect to notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, such day is
also a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
     “Capital Lease Obligations” means, as to any Person, 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, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
     “Cash” or “cash” means money, currency or a credit balance in a deposit
account.
     “Cash Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Secured Parties, Cash in an amount
equal to the then outstanding LC Obligations, pursuant to documentation in form
and substance satisfactory to the Administrative Agent and the Issuing Bank
(which documents are hereby consented to by the Lenders). Derivatives of such
term shall have corresponding meanings.
     “Cash Equivalents” means any of the following:
     (a) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within one
year from the date of acquisition;

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     (b) certificates of deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000;
     (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by
Moody’s, or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within six months from the date
of acquisition;
     (d) fully collateralized repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than 30 days, with respect to securities issued or
fully guaranteed or insured by the United States government;
     (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, or by any political subdivision or taxing authority of any
such state, commonwealth or territory the securities of which state,
commonwealth, territory, political subdivision, or taxing authority (as the case
may be) are rated at least A by S&P or A by Moody’s;
     (f) securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition;
     (g) shares of money market mutual or similar funds that invest exclusively
in assets satisfying the requirements of clauses (a) through (f) of this
definition; or
     (h) shares of money market mutual funds that (i) comply with the criteria
set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are
rated AAA by S&P or Aaa by Moody’s, and (iii) have portfolio assets of at least
$5,000,000,000.
     “CBT Controlled Account” means deposit account numbers 001-0312999,
001-0312964, and 001-0312956, established by the Borrower and maintained with
Central Bank & Trust Co., which deposit accounts are subject to the Deposit
Account Control Agreement dated as of September 8, 2006, among Central Bank &
Trust Co., as Depository Bank, the Borrower, as Grantor, and the Administrative
Agent, as Secured Party.
     “Change in Law” means the occurrence, after the date of this Agreement, of
any of the following: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty or
in the administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.
     “Closing Date” means the date on which the conditions precedent set forth
in Section 4.01 shall have been satisfied, which date shall be September 8,
2006.
     “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
     “Collateral” means all property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
     “Collateral Account” has the meaning specified in the Guarantee and
Collateral Agreement.
     “Commitment” means, as to any Lender, the obligation of such Lender, if
any, to make Loans and/or issue or participate in Letters of Credit under this
Agreement, in an aggregate principal and/or face amount not to exceed the amount
set forth under the heading “Commitment” opposite such Lender’s name on
Schedule 1.01 or in the Assignment and Assumption pursuant to which such Lender
became a party hereto, as the same may be changed

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from time to time pursuant to the terms hereof. The original amount of the Total
Commitments on the Closing Date is $50,000,000.
     “Commitment Period” means the period from and including the Closing Date
to, but not including, the Termination Date.
     “Commonly Controlled Entity” means an entity, whether or not incorporated,
that is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group that includes the Borrower and that
is treated as a single employer under Section 414 of the Code.
     “Compliance Certificate” means a certificate duly executed and property
completed by a Responsible Officer substantially in the form of Exhibit L, or in
such other form as may be required by the Administrative Agent.
     “Confidential Information Memorandum” means the Confidential Information
Memorandum dated June, 2006, prepared by KeyBanc Capital Markets with respect to
the Borrower and furnished to any Agent or any Lender.
     “Consolidated Current Assets” means, at any date, the total of (a) all
amounts (other than cash and Cash Equivalents) that would, in conformity with
GAAP, be set forth opposite the caption “total current assets” (or any like
caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at
such date, plus (b) the Availability existing at such date, less (iii) any
non-cash assets required to be included in the consolidated current assets of
the Borrower and its Subsidiaries as a result of the application of SFAS 133 as
of such date.
     “Consolidated Current Liabilities” means, at any date, the total of (a) all
amounts that would, in conformity with GAAP, be set forth opposite the caption
“total current liabilities” (or any like caption) on a consolidated balance
sheet of the Borrower and its Subsidiaries at such date, but excluding all
Indebtedness consisting of Loans to the extent otherwise included therein, less
(b) any non-cash obligations required to be included in the consolidated current
liabilities of the Borrower and its Subsidiaries as a result of the application
of SFAS 133 as of such date.
     “Consolidated EBITDA” means, for any period, Consolidated Net Income for
such period plus, without duplication and to the extent deducted in determining
such Consolidated Net Income for such period, the sum of (a) cash interest
expense, (b) income tax expense, (c) depreciation and depletion expense,
(d) amortization expense, (e) any non-cash losses or charges on any Hedge
Agreement resulting from the requirements of SFAS 133 for such period; and
minus, to the extent included in determining such Consolidated Net Income for
such period, the sum of (a) interest income, (b) any non-cash gains on any Hedge
Agreements resulting from the requirements of SFAS 133 for such period, (c) any
extraordinary income or gains in accordance with GAAP, (d) income tax credits
(to the extent not netted from income tax expense) and (e) any other non-cash
income, all as determined on a consolidated basis. For the purposes of
calculating Consolidated EBITDA for any period of four consecutive Fiscal
Quarters (each, a “Reference Period”) pursuant to any determination of the
Consolidated Leverage Ratio, (i) if at any time during such Reference Period the
Borrower or any Subsidiary shall have made any Material Disposition, the
Consolidated EBITDA for such Reference Period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive) attributable to the Property that
is the subject of such Material Disposition for such Reference Period or
increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such Reference Period and (ii) if during such Reference
Period the Borrower or any Subsidiary shall have made a Material Acquisition,
Consolidated EBITDA for such Reference Period shall be calculated after giving
pro forma effect thereto as if such Material Acquisition occurred on the first
day of such Reference Period. As used in this definition, “Material Acquisition”
means any acquisition of Property or series of related acquisitions of Property
that (a) constitutes assets comprising all or substantially all of an operating
unit of a business or constitutes all or substantially all of the common stock
of a Person and (b) involves the payment of consideration by the Borrower and
its Subsidiaries in excess of $5,000,000; and “Material Disposition” means any
Disposition of Property or series of related Dispositions of Property that
yields gross proceeds to the Borrower or any of its Subsidiaries in excess of
$5,000,000.
     “Consolidated Funded Indebtedness” means, at any date, the aggregate amount
of all Funded Indebtedness of Holdings, the Borrower and its Subsidiaries at
such date (excluding all Funded Debt outstanding under the NGAS

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Convertible Notes as of such date but including all other Funded Indebtedness of
Holdings outstanding as of such date).
     “Consolidated Interest Coverage Ratio” means, for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
     “Consolidated Interest Expense” means, for any period, (a) total cash
interest expense (including that attributable to Capital Lease Obligations,
Synthetic Lease Obligations, and Synthetic Debt) of the Borrower and its
Subsidiaries for such period with respect to all outstanding Indebtedness of the
Borrower and its Subsidiaries (including all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers’ acceptance
financing, net costs under Hedge Agreements in respect of interest rates to the
extent such net costs are allocable to such period in accordance with GAAP) plus
(b) all cash interest expense of Holdings for such period with respect to the
NGAS Convertible Notes and any other Indebtedness of Holdings.
     “Consolidated Leverage Ratio” means, as at the last day of any period, the
ratio of (a) Consolidated Funded Indebtedness on such day to (b) Consolidated
EBITDA for such period.
     “Consolidated Net Income” means, for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
cash dividends or similar cash distributions and (c) the undistributed earnings
of any Subsidiary of the Borrower to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
     “Continuing Directors” means the directors of Holdings on the Closing Date,
and each other director, if, in each case, such other director’s nomination for
election to the board of directors of Holdings is recommended by at least
66-2/3% of the then Continuing Directors.
     “Contractual Obligation” means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
     “Credit Extension” means (a) the making of any Loan by any Lender and
(b) the issuance of any Letter of Credit by the Issuing Bank.
     “Credit Rating” means, with respect to any Person on any date of
determination, the respective rating then assigned to its unsecured and senior
long-term debt or deposit obligations or (not supported by third party credit
enhancement) by S&P, Moody’s, or any other nationally recognized statistical
rating agency acceptable to the Administrative Agent.
     “Default” means any of the events specified in Section 8.01, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
     “Default Rate” means (a) when used with respect to Obligations other than
Letter of Credit fees payable pursuant to Section 3.03(a), an interest rate
equal to (i) the ABR plus the Applicable Margin for ABR Loans plus (ii) 2% per
annum, provided, however, that with respect to a Eurodollar Loan, the Default
Rate shall be an interest rate equal to the interest rate (including any
Applicable Margin) otherwise applicable to such Loan plus 2% per annum and
(b) when used with respect to Letter of Credit fees payable pursuant to
Section 3.03(a), a rate equal to the Applicable Margin for Eurodollar Loans plus
2% per annum.

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     “Defaulting Lender” means any Lender that (a) has failed to fund any
portion of the Loans or participations in LC Obligations required to be funded
by it hereunder within one Business Day of the date required to be funded by it
hereunder, (b) has otherwise failed to pay over to the Administrative Agent or
any other Lender any other amount required to be paid by it hereunder within one
Business Day of the date when due, unless the subject of a good faith dispute,
or (c) has been deemed insolvent or become the subject of a bankruptcy or
insolvency proceeding.
     “Deficiency Notice” has the meaning as specified in Section 2.07(a).
     “Disbursement Letter” means the Disbursement Letter to be executed and
delivered by the Borrower, substantially in the form of Exhibit H.
     “Disposition” means with respect to any property, any sale, lease, license,
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.
     “Dollars” and “$” means dollars in lawful currency of the United States.
     “Drilling Program” means an operating partnership between the Borrower and
a Drilling Program Partnership created and structured by the Borrower, each such
Drilling Program Partnership being owned 99% by subscribers for its units of
limited or general partner interests, as investors, and 1% by the Borrower, as
the managing general partner, the proceeds of which are contributed by the
Drilling Program Partnership to the associated Drilling Program, along with the
Borrower’s capital contribution, and applied by the Drilling Program to drill
Hydrocarbon development or exploratory wells on drilling sites selected and
assigned to the Drilling Program by the Borrower from its inventory of drilling
prospects in the Appalachian Basin and other gas basins where it holds
Hydrocarbon Interests.
     “Drilling Program Agreements” means, with respect to each Drilling Program,
the collective reference to the limited partnership agreement of the Drilling
Program Partnership, the general partnership agreement of the Drilling Program
between the Drilling Program Partnership and the Borrower, as manager, all
assignments of drilling rights from the Borrower to the Drilling Program, all
joint drilling and operating agreements between the Borrower and the Drilling
Program, all investor subscription agreements with the Drilling Program
Partnership and all other agreements, contracts, instruments and documents
governing, evidencing or relating to such Drilling Program, in each case as any
of the same may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the Loan Documents, including, without
limitation, (i) all rights of the Borrower to receive moneys due and to become
due to it thereunder or in connection therewith, (ii) all rights of the Borrower
to damages arising thereunder or in connection therewith and (iii) all rights of
the Borrower to perform thereunder and to compel performance and otherwise
exercise rights and remedies thereunder.
     “Drilling Program Partnership” means any limited partnership created by the
Borrower as part of any Drilling Program of which the Borrower is the managing
general partner and that is a party to one or more Drilling Program Agreements.
     “Engineering Report” means an Independent Engineering Report or an Internal
Engineering Report.
     “Environmental Laws” means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
     “Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement

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or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.
     “Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrant, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
     “Eurocurrency Reserve Requirements” means for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
     “Eurodollar Base Rate” means, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the British
Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as designated by
the Administrative Agent from time to time) at approximately 11:00 a.m., London
time, determined on the basis of the rate for deposits in Dollars for a period
equal to such Interest Period commencing on the first day of such Interest
Period two (2) Business Days prior to the beginning of such Interest Period. In
the event that such rate is not available at such time for any reason, the
“Eurodollar Base Rate” for such Interest Period shall be the rate per annum
determined by reference to such other comparable publicly available service for
displaying eurodollar rates as may be selected by the Administrative Agent or,
in the absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two (2) Business Days prior to the beginning of such Interest Period
in the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
     “Eurodollar Loans” means Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
     “Eurodollar Rate” means, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
                      Eurodollar Base Rate                      
1.00 — Eurocurrency Reserve Requirements
     “Eurodollar Tranche” means the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
     “Event of Default” means any of the events specified in Section 8.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
     “Excluded Taxes” means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) taxes imposed on or
measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.20), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
hereto (or designates a new lending office) or is attributable to such Foreign
Lender’s failure or inability (other than as a result of a Change in

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Law) to comply with Section 2.16, except to the extent that such Foreign Lender
(or its Assignor, if any) was entitled, at the time of designation of a new
lending office (or assignment), to receive additional amounts from the Borrower
with respect to such withholding tax pursuant to Section 2.16. Notwithstanding
anything to the contrary contained herein, Taxes (including withholding taxes)
imposed by Canada or any Province or any political subdivision thereof shall not
constitute Excluded Taxes.
     “Existing Guarantees” means any and all existing guaranty agreements and
other similar agreements and instruments between any Loan Party and the Existing
Lender.
     “Existing Lender” means KeyBank, in its capacity as the “Bank” under the
Existing Loan Agreement.
     “Existing Letter of Credit” means the Letter of Credit, dated March 20,
2006, with an expiration of March 20, 2007, issued by the Existing Lender for
the benefit of Duke Power Company in the principal amount of $2,000,000.
     “Existing Loan Agreement” means the Loan Agreement dated as of July 19,
2001, among Daugherty Petroleum, Inc., Sentra Petroleum, Inc., and the Existing
Lender, as amended, supplemented and modified through and including the Closing
Date.
     “Existing Loan Documents” means the Existing Loan Agreement, the Existing
Notes, the Existing Security Documents and the Existing Guarantees.
     “Existing Mortgages” means the collective reference to all mortgages, deeds
of trust and similar instruments between any Loan Party and the Existing Lender
or created by any Loan Party in favor of the Existing Lender, in each case
granting or creating Liens on its Oil and Gas Properties, as amended, restated,
supplemented or otherwise modified through and including the Closing Date.
     “Existing Notes” means the collective reference to all promissory notes
issued from time to time by Daugherty Petroleum, Inc. and payable to the order
of the Existing Lender, as amended, supplemented and modified through and
including the Closing Date.
     “Existing Obligations” means all outstanding loans evidenced by the
Existing Notes and all other indebtedness, liabilities and obligations existing
under the Existing Loan Documents.
     “Existing Security Documents” means the collective reference to all
Existing Mortgages and all other security agreements, pledge agreements and
similar agreements and instruments between any Loan Party and the Existing
Lender, or created by any Loan Party in favor of the Existing Lender, in each
case granting or creating any Lien in favor of the Existing Lender to secure the
payment of the Existing Obligations.
     “FASB” means the Financial Accounting Standards Board, and any successor
thereto.
     “Federal Funds Effective Rate” means, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System 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 of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
     “Fee Letter” means the letter agreement, dated on or about May 16, 2006,
among the Borrower, the Administrative Agent and the Arranger.
     “Fiscal Quarter” means any of the four quarters of any Fiscal Year.
     “Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries
ending on December 31 in any calendar year.

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     “Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.
     “Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
     “Funded Indebtedness” means, as to any Person, all Indebtedness of such
Person that matures more than one (1) year from the date of its creation or
matures within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year from such date or arises
under a revolving credit or similar agreement that obligates the lender or
lenders to extend credit during a period of more than one year from such date,
including all current maturities and current sinking fund payments in respect of
such Indebtedness whether or not required to be paid within one year from the
date of its creation and, in the case of the Borrower, Indebtedness in respect
of the Loans.
     “Funding Office” means the principal office of the Administrative Agent in
Cleveland, Ohio or such other office as may be specified from time to time by
the Administrative Agent as its funding office by written notice to the Borrower
and the Lenders.
     “GAAP” means generally accepted accounting principles in the United States
as in effect from time to time, except that for purposes of Section 7.01, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 5.01. In the event that any
“Accounting Change” (as defined below) shall occur and such change results in a
change in the method of calculation of financial covenants, standards or terms
in this Agreement, then the Borrower and the Administrative Agent agree to enter
into negotiations in order to amend such provisions of this Agreement so as to
reflect equitably such Accounting Changes with the desired result that the
criteria for evaluating the Borrower’s financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and delivered by
the Borrower, the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated
or construed as if such Accounting Changes had not occurred. “Accounting
Changes” refers to changes in accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by FASB or, if applicable, the
SEC.
     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government (including any supra-national bodies such as the
European Union or the European Central Bank), any securities exchange and any
self-regulatory organization (including the National Association of Insurance
Commissioners).
     “Group Members” means the collective reference to Holdings, the Borrower
and their respective Subsidiaries.
     “Guarantee Obligation” means, as to any Person (the “guaranteeing person”),
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the “primary obligations”)
of any other third Person (the “primary obligor”) in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) 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 or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.

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     The amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee Obligation
is made and (b) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person’s
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
     “Guarantee and Collateral Agreement” means the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Restricted
Subsidiary, substantially in the form of Exhibit A.
     “Guarantors” means the collective reference to Holdings and the Restricted
Subsidiaries.
     “Hazardous Materials” means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas and (b) any other chemicals,
materials or substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental Law.
     “Hedge Agreement” means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange-traded, “over-the-counter” or otherwise, and whether settled in cash or
settled by physical delivery (including any agreement with respect to any
forward purchase or sale of any Hydrocarbons), involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions.
     “Hedge Bank” means any Lender or any Affiliate of a Lender that is a
counterparty to a Hedge Agreement with the Borrower or any Restricted
Subsidiary.
     “Hedge Bank Obligations” means all obligations of the Borrower or any
Restricted Subsidiary arising from time to time under any Hedge Agreement with a
Hedge Bank; provided that (a) if such Hedge Bank ceases to be a Lender or an
Affiliate of a Lender hereunder, the Hedge Bank Obligations owed to such Hedge
Bank shall no longer be secured or guaranteed under any Loan Document and
(b) for any Hedge Bank Obligations to be secured or guaranteed under any Loan
Document, the applicable Hedge Bank (other than KeyBank or an Affiliate of
KeyBank) must have provided the Administrative Agent written notice of the
existence thereof and such transaction must not otherwise be prohibited under
this Agreement.
     “Hedge Termination Value” means, in respect of any one or more Hedge
Agreements, after taking into account the effect of any legally enforceable
netting agreement contained in or relating to such Hedge Agreements, (a) for any
date on or after the date such Hedge Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such Hedge Agreements,
as determined based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Hedge Agreements (which may
include a Lender or any Affiliate of a Lender).
     “Highest Lawful Rate” means, with respect to any Agent, the Issuing Bank or
any Lender, the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged or received on
the Obligations under laws applicable to such Agent, the Issuing Bank or such
Lender which are currently in effect or, to the extent allowed by law, under
such applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
     “Holdings” has the meaning specified in the preamble hereto.
     “Holdings Guarantee” means the Holdings Guarantee to be executed and
delivered by Holdings, in substantially the form of Exhibit M.

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     “Holdings Pledge Agreement” means the Holdings Pledge Agreement to be
executed and delivered by Holdings, in substantially the form of Exhibit N.
     “Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons and all products, by-products, and other substances
derived, produced, refined, separated, settled and dehydrated therefrom or the
processing thereof, and all other minerals and substances produced in
conjunction with such substances, including kerosene, liquefied petroleum gas,
refined lubricating oils, diesel fuel, helium, sulfur, geothermal steam, water,
carbon dioxide, and any and all minerals, ores, or substances of value and the
products therefrom.
     “Hydrocarbon Interests” means all rights, titles, interests and estates now
owned or hereafter acquired in and to all Leases, fee mineral interests, term
mineral interests, farm-outs, overriding royalty and royalty interests, net
profit interests, carried interests, oil payments, production payments and
similar mineral interests, and all unsevered and unextracted Hydrocarbons in,
under or attributable to any such oil and gas Properties and all other reserved
or residual interests of whatever nature.
     “Increased Facility Activation Notice” means a notice in substantially the
form of Exhibit O.
     “Increased Facility Closing Date” means any Business Day designated as such
in an Increased Facility Activation Notice.
     “Indebtedness” means, with respect to any Person, without duplication:
     (a) all indebtedness of such Person for borrowed money;
     (b) all obligations of such Person for the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of such Person’s business that are not past due by more than sixty (60) days
after the date on which such trade payable was created);
     (c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments;
     (d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property);
     (e) all Attributable Indebtedness in respect of Capital Lease Obligations
and Synthetic Lease Obligations of such Person and all Synthetic Debt of such
Person;
     (f) the maximum amount of all obligations of such Person, contingent or
otherwise, with respect to bankers’ acceptances, letters of credit, letters of
guaranty, surety bonds, performance bonds and similar obligations;
     (g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interests in such Person or
any other Person, valued, in the case of the redeemable Preferred Interests, at
the greater of its voluntary or involuntary liquidation preference plus all
accrued and unpaid dividends;
     (h) all obligations with respect to payments received in consideration of
Hydrocarbons yet to be acquired or produced at the time of payment (including
obligations under “take-or-pay” contracts to deliver gas in return for payments
already received and the undischarged balance of any volumetric or other
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment);
     (i) all obligations of such Person in respect of Hedge Agreements, valued
at the Hedge Termination Value thereof;
     (j) all Guarantee Obligations of such Person in respect of obligations of
the kind referred to in clauses (a) through (i) above; and

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     (k) all obligations of the kind referred to in clauses (a) through
(i) above secured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation.
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 to the extent the
terms of such Indebtedness expressly provide that such Person is not liable
therefor.
     “Indemnified Taxes” means Taxes other than Excluded Taxes.
     “Independent Engineer” means Wright & Associates or any other engineering
firm reasonably acceptable to the Administrative Agent.
     “Independent Engineering Report” means a report, in form and substance
reasonably satisfactory to the Administrative Agent and each of the Lenders,
prepared by an Independent Engineer, addressed to the Administrative Agent and
the Lenders with respect to the Oil and Gas Properties owned by the Borrower and
its Restricted Subsidiaries (or to be acquired by the Borrower or any of its
Restricted Subsidiaries, as applicable) which report shall (a) specify the
location and quantity of the Proved Reserves attributable to such Oil and Gas
Properties and separately report on the Proved Developed Producing Reserves,
Proved Developed Nonproducing Reserves, Proved Undeveloped Reserves and probable
reserves attributable to such Oil and Gas Properties, (b) use and contain
projections of future rates of production of such Oil and Gas Properties,
(c) contain estimates of the net operating revenues to be derived from the
production and sale of Hydrocarbons from such Proved Reserves based on pricing
and cost escalation assumptions, discount factors and other economic assumptions
and parameters that are established by or acceptable to the Administrative Agent
and the Lenders, (d) identify and take into account any “over-produced” or
“under-produced” status under gas balancing agreements, (e) take into account
actual experience with leasehold operating expenses and other costs in
determining projected leasehold operating expenses and other costs, and
(f) contain such other information and data regarding such Oil and Gas
Properties as is customarily obtained from and provided in such reports or is
otherwise reasonably requested by the Administrative Agent or any Lender.
     “Initial Borrowing Base” has the meaning specified in Section 2.02(a).
     “Initial Engineering Report” has the meaning specified in Section 4.01(e).
     “Insolvency” means, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
     “Insolvent” means pertaining to a condition of Insolvency.
     “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
     “Intellectual Property Security Agreement” has the meaning specified in the
Guarantee and Collateral Agreement.
     “Interest Payment Date” means (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding and
the Termination Date, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period and the Termination
Date, (c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
the

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Termination Date, and (d) as to any Loan (other than any Loan that is an ABR
Loan), the date of any repayment or prepayment made in respect thereof.
     “Interest Period” means, as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
          (i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
          (ii) the Borrower may not select an Interest Period that would extend
beyond the Termination Date;
          (iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
          (iv) the Borrower shall select Interest Periods so as not to require a
payment or prepayment of any Eurodollar Loan during an Interest Period for such
Loan.
     “Internal Engineering Report” means a report, in form and substance
reasonably satisfactory to the Administrative Agent and each Lender, prepared by
the Borrower and certified by a Responsible Officer of the Borrower, addressed
to the Administrative Agent and the Lenders with respect to the Oil and Gas
Properties owned by the Borrower and any of its Restricted Subsidiaries (or to
be acquired by the Borrower and any of its Restricted Subsidiaries, as
applicable), which report shall (a) specify the location and quantity of the
Proved Reserves attributable to such Oil and Gas Properties and separately
report on the Proved Developed Producing Reserves, Proved Developed Nonproducing
Reserves, Proved Undeveloped Reserves and probable reserves attributable to such
Oil and Gas Properties, (b) use and contain projections of future rates of
production of such Oil and Gas Properties, (c) contain estimates of the net
operating revenues to be derived from the production and sale of Hydrocarbons
from such Proved Reserves based on pricing and cost escalation assumptions,
discount factors and other economic assumptions and parameters that are
established by or acceptable to the Administrative Agent and the Lenders,
(d) identify and take into account any “over-produced” or “under-produced”
status under gas balancing agreements, (e) take into account actual experience
with leasehold operating expenses and other costs in determining projected
leasehold operating expenses and other costs, and (f) contain such other
information and data regarding such Oil and Gas Properties as is customarily
obtained from and provided in such reports or is otherwise reasonably requested
by the Administrative Agent or any Lender.
     “Investment” means, with respect to any Person, any direct or indirect
acquisition or investment by such Person whether by means of (a) the purchase or
other acquisition of any Equity Interest of another Person, (b) the purchase or
other acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit or all or a substantial part of
the business of such Person, (c) any loan, advance, deposit, extension of credit
or capital contribution to, assumption of debt of, or purchase or other
acquisition of any other debt of or interest in, another Person, (d) any
Guarantee Obligation incurred by that Person in respect of Indebtedness of any
other Person, and (e) any other investment by that Person in any other Person.
For purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.
     “IP Security Agreement Supplement” has the meaning specified in the
Guarantee and Collateral Agreement.

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     “ISP98” means the “International Standby Practices 1998” published by the
Institute of International Banking Law & Practice, as the same may be amended
from time to time.
     “Issuing Bank” means KeyBank in its capacity as issuer of Letters of Credit
hereunder.
     “KeyBank” means KeyBank National Association.
     “LC Commitment” means $5,000,000.
     “LC Fee Payment Date” means the last day of each March, June, September and
December and the last day of the Commitment Period.
     “LC Obligations” means, at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not been reimbursed pursuant to Section 3.05.
     “LC Participants” means the collective reference to all the Lenders other
than the Issuing Bank.
     “LC Reimbursement Obligation” means the obligation of the Borrower to
reimburse the Issuing Bank pursuant to Section 3.05 for amounts drawn under
Letters of Credit.
     “Leases” means all oil and gas leases, oil, gas and mineral leases, oil,
gas and casinghead gas leases or any other instruments, agreements, or
conveyances under and pursuant to which the owner thereof has or obtains the
right to enter upon lands and explore for, drill, and develop such lands for the
production of Hydrocarbons.
     “Lenders” has the meaning specified in the preamble hereto. Unless the
context otherwise requires, the term “Lender” includes the Issuing Bank.
     “Letters of Credit” has the meaning specified in Section 3.01(a).
     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any capital lease having substantially the same
economic effect as any of the foregoing, and any easement, right of way or other
encumbrance on title to real property).
     “Loan” has the meaning specified in Section 2.01.
     “Loan Documents” means this Agreement, the Notes, the Applications, and the
Security Documents.
     “Loan Parties” means each Group Member that is or hereafter becomes a party
to a Loan Document.
     “Material Adverse Effect” means a material adverse effect on (a) the
business, property, operations, condition (financial or otherwise) or prospects
of the Borrower and its Restricted Subsidiaries taken as a whole, (b) the
validity or enforceability of this Agreement or any of the other Loan Documents
or the rights or remedies of the Administrative Agent or the or Lenders under
any Loan Document, (c) the validity, perfection or priority of any Lien granted
pursuant to the Security Documents, or (d) the ability of any Loan Party to
perform its obligations under any Loan Document to which it is or is to be a
party.
     “Material Contract” means any Lease or other agreement or contract of the
Borrower or any Restricted Subsidiary which (a) involves consideration to the
Borrower or any Restricted Subsidiary of $500,000 or more in any year,
(b) involves consideration by the Borrower or any Restricted Subsidiary of
$500,000 or more in any year, (c) imposes financial obligations on the Borrower
or any Restricted Subsidiary of $500,000 or more in any year, (d) is a Hedge
Agreement or (e) is otherwise material (or together with related agreements and
contracts, is material) to

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the business, operations, financial condition, performance or properties of the
Borrower and its Restricted Subsidiaries taken as a whole.
     “Moody’s” means Moody’s Investors Service, Inc., and any successor thereto
that is a nationally recognized rating agency.
     “Mortgaged Properties” means all Oil and Gas Properties of the Borrower and
the Restricted Subsidiaries as to which the Administrative Agent for the benefit
of the Secured Parties is or shall be granted a Lien pursuant to the Mortgages.
     “Mortgages” means the collective reference to all mortgages, deeds of
trust, assignments of production, and other documents made by the Borrower or
any Restricted Subsidiary in favor of, or for the benefit of, the Administrative
Agent for the benefit of the Secured Parties, substantially in the form of
Exhibit C (with such changes thereto as shall be advisable under the law of the
jurisdiction in which such mortgage, deed of trust, assignment of production or
other document is to be recorded).
     “Multiemployer Plan” means a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
     “New Lender” has the meaning specified in Section 2.01(d).
     “New Lender Supplement” has the meaning specified in Section 2.01(d).
     “NGAS Convertible Notes” means the Notes issued by Holdings pursuant to the
NGAS Securities Purchase Agreement, issued prior to and as in effect on the
Closing Date.
     “NGAS Registration Rights Agreement” means the Registration Rights
Agreement dated as of December 13, 2005, among Holdings and the Buyers specified
therein, as in effect on the Closing Date.
     “NGAS Securities Purchase Agreement” means the Securities Purchase
Agreement dated as of December 13, 2005, among Holdings and the Investors
specified therein, as in effect on the Closing Date.
     “NGAS Securities Purchase Documents” means the NGAS Securities Purchase
Agreement, the NGAS Convertible Notes, the NGAS Registration Rights Agreement,
and all other agreements, instruments and documents relating to any of the
foregoing, each as in effect on the Closing Date.
     “NGAS Warrants” means the Warrants (as defined in the NGAS Securities
Purchase Agreement) issued pursuant to Section 1 of the NGAS Securities Purchase
Agreement to purchase common stock of Holdings, as in effect on the Closing
Date.
     “Non-Appalachian State” means any State within the United States, other
than Kentucky, Tennessee, Virginia and West Virginia.
     “Note” has the meaning specified in Section 2.19(d).
     “Notice of Borrowing” means a Notice of Borrowing, substantially in the
form of Exhibit K.
     “Notice of Conversion/Continuation” means a Notice of
Conversion/Contribution, substantially in the form of Exhibit G.
     “Obligations” means the unpaid principal of and interest on (including
interest accruing after the maturity of the Loans and LC Reimbursement
Obligations and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Loan Party, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) the Loans and LC
Reimbursement Obligations and all other obligations, indebtedness and
liabilities of the Loan Parties to the Secured Parties and each

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of them, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, any other Loan Document, the Letters of Credit,
any Hedge Bank Obligations, or any other document, instrument or agreement made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, guarantee obligations, fees,
indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to any Agent or to any Secured Party that are required to be paid by the
Loan Parties pursuant to any Loan Document) or otherwise.
     “Oil and Gas Properties” means (a) all Hydrocarbon Interests; (b) all
Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
(c) all operating agreements, contracts and other agreements, including
production sharing contracts and agreements, which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; (d) all
existing and future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including, without limitation, all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (e) all pipelines,
gathering lines, compression facilities, tanks and processing plants; (f) all
oil wells, gas wells, water well, injection wells, platforms, spars or other
offshore facilities, casings, rods, tubing, pumping units and engines, christmas
trees, derricks, separators, gun barrels, flow lines, gas systems (for
gathering, treating and compression), and water systems (for treating, disposal
and injection); (g) all interests held in royalty trusts whether presently
existing or hereafter created; (h) all Hydrocarbons in and under and which may
be produced, saved, processed or attributable to the Hydrocarbon Interests,
including all lands covered thereby, including all Hydrocarbons in pipelines,
gathering lines, tanks and processing plants and all rents, issues, profits,
proceeds, products, revenues and other incomes from or attributable to the
Hydrocarbon Interests; (i) all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests; (j) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use
or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding any drilling rigs, automotive
equipment, rental equipment or other Property that may be located on such
premises for the purpose of drilling a well or for other temporary uses) and
including all oil wells, gas wells, injection wells and other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing together with all additions, substitutions,
replacements, accessions and attachments to any of the foregoing; and (k) all
oil, gas and mineral leasehold, fee and term interests, overriding royalty
interests, mineral interests, royalty interests, net profits interests, net
revenue interests, oil payments, production payments, carried interests, leases,
subleases, farm-outs and all other interests in Hydrocarbons; in each case for
any Property described in clauses (a) through (k) above, whether now owned or
hereafter acquired directly or indirectly.
     “Oil and Gas Title Information” means all land records, title opinions,
title searches, title reports, Lien searches, abstracts and other information
necessary or desirable to establish, verify, and evaluate the status of rights,
titles and interests of the Borrower and its Restricted Subsidiaries in and to
their respective Oil and Gas Properties.
     “Organizational Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
     “Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

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     “Participant” has the meaning specified in Section 10.06(d).
     “PBGC” means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
     “Permitted Liens” has the meaning specified in Section 7.03.
     “Person” means a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
     “Plan” means at a particular time, any employee benefit plan that is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5)
of ERISA.
     “Pledged Equity Interests” has the meaning specified in the Guarantee and
Collateral Agreement.
     “Pledged Notes” has the meaning specified in the Guarantee and Collateral
Agreement.
     “Preferred Interests” means, with respect to any Person, Equity Interests
issued by such Person that are entitled to a preference or priority over any
other Equity Interests issued by such Person upon any distribution of such
Person’s property and assets, whether by dividend or upon liquidation.
     “Property” of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.
     “Proved Reserves” means “Proved Reserves” as defined in the Definitions for
Oil and Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. As used in this Agreement or any other Loan
Document, “Proved Developed Producing Reserves” means Proved Reserves which are
categorized as both “Developed” and “Producing” in the Definitions, “Proved
Developed Nonproducing Reserves” means Proved Reserves which are categorized as
both “Developed” and “Nonproducing” in the Definitions, and “Proved Undeveloped
Reserves” means Proved Reserves which are categorized as “Undeveloped” in the
Definitions, provided that the following criteria shall also apply to Proved
Developed Producing Reserves: (a) no reserves shall be classified as Proved
Developed Producing Reserves until a minimum of forty-five (45) days of
production have occurred in at least one consecutive period of sixty (60) days
following any operation, workover or capital expenditure, and (b) during such
forty-five (45) days of production, the well relating to such reserves must be
tested a minimum of three (3) times for at least twenty-four (24) hours of
continuous duration.
     “Reference Lender” means KeyBank.
     “Register” has the meaning specified in Section 10.06(c).
     “Regulation U” has the meaning specified in Regulation U of the Board as in
effect from time to time.
     “Related Parties” means, with respect to any Person, such Person’s
Affiliates and the partners, directors, officers, employees, agents and advisors
of such Person and of such Person’s Affiliates.
     “Reorganization” means, with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
     “Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. §
4043.

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     “Required Lenders” means, at any time, (a) if more than two (2) Lenders are
party to this Agreement, the holders of at least 66-2/3% of (i) until the
Closing Date, the Commitments then in effect and (ii) thereafter, the Total
Commitments then in effect or, if the Commitments have been terminated, the
Aggregate Outstanding Credit then outstanding or (b) if two (2) or fewer Lenders
are party to this Agreement, the holders of 100% of the Commitments then in
effect; provided, however, that the Commitments of, and aggregate outstanding
Loans and LC Obligations held or deemed held by, a Defaulting Lender shall be
excluded for purposes of making a determination of Required Lenders.
     “Requirement of Law” means, as to any Person, the Organizational Documents
of such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
     “Responsible Officer” means the chief executive officer, president or chief
financial officer of a Loan Party. Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.
     “Restricted Account” means any deposit account of the Borrower that is a
segregated account established with Central Bank & Trust Co. (a) for the benefit
of investors in its Drilling Program Partnerships, to hold (i) subscriptions
from such investors in escrow pending the closing of the offering and sale of
limited and general partnership interests in the Drilling Program Partnerships
(which funds are released to the associated Drilling Program as capital
contributions at one or incremental closings) or (ii) investor funds segregated
solely for the purpose of paying drilling costs and expenses pursuant to
Drilling Program Agreements, (b) for the benefit of Drilling Programs, to hold
production proceeds segregated solely for the purpose and in the amount
necessary to pay the Drilling Program’s proportionate share of the costs for
plugging, abandoning and reclaiming wells pursuant to the terms and conditions
of the Drilling Program Agreements, and (c) for the benefit of investors
entitled to periodic cash distributions from Drilling Program Partnerships and
holders of royalty and overriding royalty interests, to hold production proceeds
segregated solely for the purpose and in the amount necessary to make
distributions to such investors in Drilling Program Partnerships pursuant to the
terms and conditions of the Drilling Program Agreements and to such holders of
royalty interests under the instruments governing the Hydrocarbon Interests of
the Borrower.
     “Restricted Payment” means any dividend or other distribution (whether in
cash, securities or other property) with respect to any capital stock or other
Equity Interest of any Person or any of its Subsidiaries, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to any Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.
     “Restricted Subsidiary” means each present and future direct and indirect
Subsidiary of the Borrower that is not an Unrestricted Subsidiary. Each
Restricted Subsidiary must be a direct Subsidiary of the Borrower or another
Restricted Subsidiary.
     “S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor that is a nationally recognized statistical
rating agency.
     “SEC” means the Securities and Exchange Commission, any successor thereto
and any analogous Governmental Authority.
     “Secured Parties” means the collective reference to the Administrative
Agent, the Issuing Bank, the Lenders, the Hedge Banks, and each co-agent or
sub-agent appointed by the Administrative Agent from time to time pursuant to
any Security Document. Notwithstanding anything to the contrary contained herein
or in any other Loan Document, the Hedge Banks, in their capacity as such, shall
have no rights in connection with the management or release of any Collateral or
the obligations of any Loan Party under any Loan Document.

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     “Security Documents” means the collective reference to the Guarantee and
Collateral Agreement, the Holdings Guarantee, the Holdings Pledge Agreement, the
Intellectual Property Security Agreement, the IP Security Agreement Supplement,
the Mortgages, the Transfer Letters and all other security documents hereafter
delivered to the Administrative Agent that create or purport to create a Lien in
favor of the Administrative Agent for the benefit of the Secured Parties.
     “SFAS 133” means Statement of Financial Accounting Standard 133, Accounting
for Derivative Instruments and Hedging Activities, adopted by FASB, as amended,
restated, supplemented or otherwise modified from time to time.
     “Single Employer Plan” means any Plan that is subject to Title IV of ERISA,
but that is not a Multiemployer Plan.
     “Solvent” means, with respect to any Person as of any date of
determination, that on such date (a) the amount of the “present fair saleable
value” of the assets of such Person will, as of such date, exceed the amount of
all “liabilities of such Person, contingent or otherwise”, as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) “debt” means liability on a “claim”, and
(ii) “claim” means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or
(y) right to an equitable remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
     “Subsidiary” means as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person, provided, that the term
“Subsidiary” shall not include any Drilling Program Partnership or Drilling
Program. Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
     “Subsidiary Guarantor” means each Restricted Subsidiary.
     “Synthetic Debt” means, with respect to any Person as of any date of
determination thereof, all obligations and liabilities of such Person in respect
of transactions entered into by such Person that are intended to function
primarily as or are the functional equivalent of or takes the place of a
borrowing of funds (including any repurchase obligations or liabilities and any
minority interest transactions that function primarily as a borrowing) but are
not otherwise included in the definition of “Indebtedness” or as a liability on
the consolidated balance sheet of such Person and its Subsidiaries in accordance
with GAAP, except for obligations arising under Hedge Agreements expressly
permitted under this Agreement.
     “Synthetic Lease” means, at any time, any lease (including leases that may
be terminated by the lessee at any time) of any Property (a) that is accounted
for as an operating lease under GAAP and (b) in respect of which the lessee
retains or obtains ownership of the Property so leased for income tax purposes,
other than any such lease under which such Person is the lessor.
     “Synthetic Lease Obligations” means, with respect to any Synthetic Lease,
at any time, an amount of equal to the higher of (a) the aggregate termination
value or purchase price or similar payments in the nature of principal payable
thereunder and (b) the then aggregate outstanding principal amount of the notes
or other instruments issued by, and the amount of the equity investment, if any,
in, the lessor under such Synthetic Lease.

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     “Taxes” means all present or future taxes (including ad valorem, production
and severance taxes), levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority,
including any interest, additions to tax or penalties applicable thereto.
     “Termination Date” means September 8, 2011.
     “Total Commitments” means at any time, the aggregate amount of the
Commitments then in effect.
     “Transfer Letters” means, collectively, the letters in lieu of transfer
orders in substantially the form of the attached Exhibit J and executed by the
Borrower and each Restricted Subsidiary executing a Mortgage, as applicable.
     “Type” means, as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
     “UCC” means the Uniform Commercial Code as in effect in the State of Ohio;
provided that if perfection or the effect of perfection or non-perfection is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Ohio, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-perfection or
priority.
     “Uniform Customs” means the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
     “United States” and “U.S.” mean the United States of America.
     “Unrestricted Subsidiary” means each of NGAS Securities, Inc., a Kentucky
corporation; NGAS Gathering, LLC, a Kentucky limited liability company; Sentra
Corporation, a Kentucky corporation; and Daugherty Petroleum ND Ventures, LLC, a
Kentucky limited liability company. Any designation by the Borrower of any other
Subsidiary as an Unrestricted Subsidiary shall require the prior written
approval of the Administrative Agent and the Lenders.
     “USA Patriot Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
     Section 1.02. Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
     (b) As used herein and in the other Loan Documents, and any certificate or
other document made or delivered pursuant hereto or thereto, accounting terms
relating to Holdings, the Borrower and its Subsidiaries not defined in
Section 1.01 and accounting terms partly defined in Section 1.01, to the extent
not defined, shall have the respective meanings given to them under GAAP.
     (c) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise
(i) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, amended and restated supplemented
or otherwise modified (subject to any restrictions on such amendments,
amendments and restatements, supplements or modifications set forth herein),
(ii) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (iv) the
word “incur” shall be construed to mean incur, create, issue, assume,

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become liable in respect of or suffer to exist (and the words “incurred” and
“incurrence” shall have correlative meanings), (v) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement,
(vi) any reference to any law or regulation herein shall, unless otherwise
specified, refer to such law or regulation as amended, modified or supplemented
from time to time and (vii) the words “asset” and “property” shall be construed
to have the same meaning and effect and to refer to any interest of any kind of
asset or property, whether real, personal, or mixed, or tangible or intangible,
including cash, Equity Interests, securities, accounts and contract rights.
     (d) No inference in favor of, or against, any party to this Agreement shall
be drawn from the fact that such party has drafted any portion of this
Agreement.
     (c) All obligations of the Borrower or Holdings under this Agreement and
the other Loan Documents shall be performed and satisfied by or on behalf of the
Borrower or Holdings, as applicable, at its sole cost and expense.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS
     Section 2.01. Commitments. (a) Subject to the terms and conditions hereof,
each Lender severally agrees to make revolving credit loans (“Loans”) to the
Borrower from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding which, when added to such Lender’s
Applicable Percentage of the LC Obligations then outstanding does not exceed the
amount of such Lender’s Commitment; provided, however, that after giving effect
to any borrowing of a Loan, the Aggregate Outstanding Credit shall not exceed an
amount equal to the lesser of (i) the Borrowing Base, or (ii) the Total
Commitments then in effect. During the Commitment Period the Borrower may use
the Commitments by borrowing, prepaying the Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The Loans
may from time to time be Eurodollar Loans or ABR Loans, as determined by the
Borrower and notified to the Administrative Agent in accordance with
Sections 2.03 and 2.08.
     (b) The Borrower unconditionally promises to repay all outstanding Loans on
the Termination Date (or such earlier date on which the Loans become due and
payable pursuant to Section 8.01).
     (c) The Borrower and any one or more Lenders (including New Lenders) may
agree that each such Lender shall obtain a Commitment or increase of the amount
of its existing Commitment, as applicable, in each case by executing and
delivering to the Administrative Agent an Increased Facility Activation Notice
specifying (i) the amount of such increase and (ii) the Increased Facility
Closing Date, which shall be at least forty-five (45) days after receipt by the
Administrative Agent of such Increased Facility Activation Notice.
Notwithstanding the foregoing, without the consent of the Required Lenders,
(i) the aggregate amount of incremental Commitments obtained pursuant to this
paragraph shall not exceed $75,000,000 and (ii) no more than three (3) Increased
Facility Closing Dates may be selected by the Borrower during the term of this
Agreement. No Lender shall have any obligation to participate in any increase
described in this paragraph unless it agrees to do so in its sole discretion.
     (d) Any additional bank, financial institution or other entity which, with
the consent of the Borrower and the Administrative Agent (which consent shall
not be unreasonably withheld), elects to become a “Lender” under this Agreement
in connection with any transaction described in Section 2.01(c) shall execute a
New Lender Supplement (each, a “New Lender Supplement”), substantially in the
form of Exhibit P, whereupon such bank, financial institution or other entity (a
“New Lender”) shall become a Lender for all purposes and to the same extent as
if originally a party hereto and shall be bound by and entitled to the benefits
of this Agreement.
     (e) For the purpose of providing that the respective amounts of Loans (and
Eurodollar Tranches in respect thereof) held by the Lenders are held by them on
a pro rata basis according to their respective Applicable Percentages, on each
Increased Facility Closing Date (i) all outstanding Loans shall be converted
into a single Revolving Loan that is a Eurodollar Loan (with an Interest Period
to be selected by the Borrower), and upon such conversion the Borrower shall pay
any amounts owing pursuant to Section 2.17, if any, (ii) any new borrowings of
Loans on such date shall also be part of such single Loan and (iii) all Lenders
(including the New Lenders) shall

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hold a portion of such single Loan equal to its Applicable Percentage thereof
and any fundings on such date shall be made in such a manner so as to achieve
the foregoing.
     Section 2.02. Borrowing Base.
     (a) Borrowing Base. The Borrowing Base in effect as of the date of this
Agreement is $50,000,000 (the “Initial Borrowing Base”). The Initial Borrowing
Base shall remain in effect until the next Borrowing Base redetermination made
pursuant to this Section 2.02. The Borrowing Base shall be determined in
accordance with the standards set forth in Section 2.02(d) and is subject to
periodic redetermination pursuant to Sections 2.02(b) and 2.02(c).
     (b) Calculation of Borrowing Base.
          (i) The Borrower shall deliver to the Administrative Agent and each of
the Lenders on or before each April 1, beginning April 1, 2007, an Independent
Engineering Report dated effective as of the immediately preceding January 1,
its requested amount for the redetermined Borrowing Base and such other
information and data as may be reasonably requested by any Lender with respect
to the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries,
including all such Oil and Gas Properties included or to be included in the
Borrowing Base. Within twenty (20) days after the Administrative Agent and the
Lenders’ receipt of such Independent Engineering Report and other information,
the Administrative Agent shall deliver to each Lender the Administrative Agent’s
recommendation for the redetermined Borrowing Base. Within ten (10) days after
the Lenders’ receipt of the Administrative Agent’s recommendation, the
Administrative Agent and the Lenders in the case of an increase in the Borrowing
Base, and the Administrative Agent and the Required Lenders in the case of a
decrease in the Borrowing Base or a reaffirmation of the then existing Borrowing
Base, shall redetermine the Borrowing Base in accordance with Section 2.02(d),
and the Administrative Agent shall promptly notify the Borrower in writing of
the amount of the Borrowing Base as so redetermined.
          (ii) The Borrower shall deliver to the Administrative Agent and each
Lender on or before each October 1, beginning October 1, 2006, an Internal
Engineering Report dated effective as of the immediately preceding July 1, its
requested amount for the redetermined Borrowing Base and such other information
and data as may be reasonably requested by the Administrative Agent or any
Lender with respect to the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries, including all such Oil and Gas Properties included or
to be included in the Borrowing Base. Within twenty (20) days after the
Administrative Agent and the Lenders’ receipt of such Internal Engineering
Report and other information, the Administrative Agent shall deliver to each
Lender the Administrative Agent’s recommendation for the redetermined Borrowing
Base. Within ten (10) days after the Lenders’ receipt of the Administrative
Agent’s recommendation, the Administrative Agent and the Lenders in the case of
an increase in the Borrowing Base, and the Administrative Agent and the Required
Lenders in the case of a decrease in the Borrowing Base or a reaffirmation of
the then existing Borrowing Base, shall redetermine the Borrowing Base in
accordance with Section 2.02(d), and the Administrative Agent shall promptly
notify the Borrower in writing of the amount of the Borrowing Base as so
redetermined.
          (iii) In the event that the Borrower does not furnish to the
Administrative Agent and the Lenders the Independent Engineering Report,
Internal Engineering Report or other information and data specified in clauses
(i) and (ii) above by the date specified therein, the Administrative Agent and
the Lenders may nonetheless redetermine the Borrowing Base and redesignate the
Borrowing Base from time to time thereafter in their sole discretion until the
Administrative Agent and the Lenders receive the relevant Independent
Engineering Report, Internal Engineering Report, or other information and data,
as applicable, whereupon the Administrative Agent and the Lenders shall
redetermine the Borrowing Base as otherwise specified in this Section 2.02(b)
and Section 2.02(d).
          (iv) Each delivery of an Engineering Report by the Borrower to the
Administrative Agent and the Lenders shall constitute a representation and
warranty by the Borrower to the Administrative Agent and the Lenders that
(A) the Borrower and its Restricted Subsidiaries, as applicable, own the Oil and
Gas Properties specified therein, (B) the Oil and Gas Properties specified
therein that are included in the Borrowing Base are subject to an Acceptable
Security Interest, except as otherwise permitted by Section 6.19, and (C) on and
as of the date of such Engineering Report each Oil and Gas Property constituting
Proved Developed Producing Reserves therein was developed for oil and gas, and
the wells pertaining to such Oil and Gas Properties that are described

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          therein as producing wells were each producing oil and gas in paying
quantities, except for any such wells that were utilized as water or gas
injection wells or as water disposal wells.
     (c) Interim Redeterminations. In addition to the Borrowing Base
redeterminations provided for in Section 2.02(b), the Borrower may request one
(1) additional redetermination of the Borrowing Base during any six-month period
between scheduled Borrowing Base redeterminations, and the Administrative Agent
and the Required Lenders may, in their sole discretion and based on such
information as the Administrative Agent and such Lenders deem relevant (but in
accordance with Section 2.02(d)), make requests for additional redeterminations
of the Borrowing Base at any time between scheduled Borrowing Base
redeterminations. The party requesting the redetermination shall give the other
parties to this Agreement at least ten (10) days’ prior written notice that a
redetermination of the Borrowing Base pursuant to this paragraph (c) is to be
performed. In connection with any redetermination of the Borrowing Base under
this Section 2.02(c), the Borrower shall provide the Administrative Agent and
the Lenders with such information regarding the Borrower and its Restricted
Subsidiaries’ business (including its Oil and Gas Properties, the Proved
Reserves attributable thereto, and production relating thereto) as the
Administrative Agent or any Lender may request, including, any updated
Engineering Report. The Administrative Agent shall promptly notify the Borrower
in writing of each redetermination of the Borrowing Base pursuant to this
Section 2.02(c) and the amount of the Borrowing Base as so redetermined.
     (d) Standards for Redetermination. (i) Each redetermination of the
Borrowing Base by the Administrative Agent and the Lenders pursuant to this
Section 2.02 shall be made (A) in the sole discretion of the Administrative
Agent and the Lenders (but in accordance with the other provisions of this
Section 2.02(d)), (B) in accordance with the Administrative Agent’s and the
Lenders’ customary internal standards and practices for valuing and
redetermining the value of Oil and Gas Properties in connection with reserve
based oil and gas loan transactions, (C) in conjunction with the most recent
Independent Engineering Report or Internal Engineering Report, as applicable, or
other information received by the Administrative Agent and the Lenders relating
to the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries,
and (D) based upon the discounted present value of the estimated net cash flows
to be realized from the production of Hydrocarbons from Proved Reserves
attributable to Oil and Gas Properties owned by the Borrower and its Restricted
Subsidiaries, as reasonably determined by the Administrative Agent and the
Lenders, and/or such other factors as the Administrative Agent and the Lenders
may consider in their sole discretion. In valuing and redetermining the
Borrowing Base, the Administrative Agent and the Lenders may also consider the
assets, liabilities, cash flows, business, properties, prospects, and management
of the Borrower and its Restricted Subsidiaries and such other factors as the
Administrative Agent and the Lenders reasonably deem appropriate. No Proved
Reserves of the Borrower or any Restricted Subsidiary shall be included or
considered for inclusion in the Borrowing Base unless the Administrative Agent
and the Lenders shall have received, at the Borrower’s expense, Oil and Gas
Title Information reasonably satisfactory in form and substance to the
Administrative Agent and evidence that the Administrative Agent has an
Acceptable Security Interest in the Oil and Gas Properties relating thereto
pursuant to the Security Documents. At all times after the Administrative Agent
has given the Borrower notification of a redetermination of the Borrowing Base
under this Section 2.02, the Borrowing Base shall be equal to the redetermined
amount or such lesser amount designated by the Borrower and disclosed in writing
to the Administrative Agent and the Lenders until the Borrowing Base is
subsequently redetermined in accordance with this Section 2.02. It is expressly
understood and agreed that the Administrative Agent and Lenders have no
obligation to designate the Borrowing Base at any particular amount, except in
the exercise of their discretion, whether in relation to the Total Commitments
or otherwise.
          (ii) Any redetermination of the Borrowing Base shall be subject to the
following restrictions: (A) the Borrowing Base shall not at any time exceed the
Total Commitments then in effect, (B) to the extent any redetermined Borrowing
Base would represent an increase in the Borrowing Base in effect prior to such
redetermination, such Borrowing Base must be approved by all Lenders, and (C) to
the extent any redetermined Borrowing Base would represent a decrease in the
Borrowing Base in effect prior to such redetermination or a reaffirmation of
such prior Borrowing Base, the Borrowing Base must be approved by the
Administrative Agent and the Required Lenders.
     Section 2.03. Procedure for Borrowing. The Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, provided that the
Borrower shall give the Administrative Agent irrevocable notice in the form of a
Notice of Borrowing (which notice must be received by the Administrative Agent
prior to 12:00 Noon, Cleveland, Ohio time, (a) three (3) Business Days prior to
the requested Borrowing Date, in the

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case of Eurodollar Loans, or (b) one (1) Business Day prior to the requested
Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type of
Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Period therefor. Any Loans made on
the Closing Date shall initially be ABR Loans. Each borrowing under the
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$1,000,000 or a whole multiple thereof (or, if the then aggregate Available
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any Notice of Borrowing from the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its Applicable Percentage of each borrowing available to the
Administrative Agent for the account of the Borrower at the Funding Office prior
to 12:00 Noon, Cleveland, Ohio time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
     Section 2.04. Unused Commitment Fees, Etc. (a) The Borrower agrees to pay
to the Administrative Agent for the account of each Lender, in accordance with
its Applicable Percentage, an unused commitment fee for the period from and
including the Closing Date to the last day of the Commitment Period, computed at
the Unused Commitment Fee Rate times the average daily amount of the Borrowing
Base Availability during the period for which payment is made, payable quarterly
in arrears on the last day of each March, June, September and December and on
the Termination Date, commencing on the first of such dates to occur after the
date hereof.
     (b) The Borrower shall pay to the Arranger and the Administrative Agent for
their own respective accounts fees in the amounts and at the times specified in
the Fee Letter.
     Section 2.05. Termination or Reduction of Commitments. The Borrower shall
have the right, upon not less than three Business Days’ notice to the
Administrative Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Commitments; provided that no such termination or
reduction of Commitments shall be permitted if, after giving effect thereto and
to any prepayments of the Loans made on the effective date thereof, the
Aggregate Outstanding Credit would exceed the Total Commitments then
outstanding. Any such reduction shall be in an amount equal to $1,000,000, or a
whole multiple thereof, and shall reduce permanently the Commitments then in
effect. All fees in respect of this Agreement and the Loans accrued until the
effective date of any termination of this Agreement shall be paid on the
effective date of such termination.
     Section 2.06. Optional Prepayments. The Borrower may at any time and from
time to time prepay the Loans, in whole or in part, without premium or penalty,
upon irrevocable notice delivered to the Administrative Agent at least three
(3) Business Days prior thereto in the case of Eurodollar Loans and at least one
Business Day prior thereto in the case of ABR Loans, which notice shall specify
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans or ABR Loans or a combination thereof; provided, that if a Eurodollar Loan
is prepaid on any day other than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.17.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each relevant Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein, together
with (except in the case of Loans that are ABR Loans) accrued interest to such
date on the amount prepaid. Partial prepayments of Loans shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof.
     Section 2.07. Borrowing Base Deficiency; Mandatory Prepayments. (a) If for
any reason the Aggregate Outstanding Credit ever exceeds the Borrowing Base, the
Borrower shall, after receipt of written notice from the Administrative Agent
regarding such deficiency (a “Deficiency Notice”), deliver to the Administrative
Agent within five (5) days of its receipt of such Deficiency Notice, a written
response (a “Response”) indicating which of the following actions it will take
to remedy the Borrowing Base deficiency (and the failure of the Borrower to
deliver such Response or to perform the action selected by the Borrower in such
Response to remedy such Borrowing Base deficiency shall constitute an Event of
Default):

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          (i) prepay the Loans or, if the Loans have been repaid in full, Cash
Collateralize the LC Obligations, such that the Borrowing Base deficiency is
cured within ten (10) days after the date such Deficiency Notice is received by
the Borrower; or
          (ii) grant an Acceptable Security Interest in additional Oil and Gas
Properties of the Borrower and the Restricted Subsidiaries acceptable to the
Administrative Agent and each of Lenders such that the Borrowing Base deficiency
is cured within fifteen (15) days after the date such Deficiency Notice is
received by the Borrower from the Administrative Agent.
     (b) If for any reason the Aggregate Outstanding Credit at any time exceeds
the amount of the Total Commitments then in effect, the Borrower shall
immediately prepay the Loans and LC Reimbursement Obligations in an aggregate
amount equal to such excess.
     (c) Each prepayment of the Loans pursuant to this Section 2.07 shall be
accompanied by accrued and unpaid interest to the date of prepayment on the
amount prepaid.
     Section 2.08. Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two (2) Business Days’ prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three (3) Business Days’ prior irrevocable
notice of such election (which notice shall specify the length of the initial
Interest Period therefor), provided that no ABR Loan may be converted into a
Eurodollar Loan when any Default or Event of Default has occurred and is
continuing and the Administrative Agent or the Required Lenders have determined
in its or their sole discretion not to permit such conversions. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
     (b) Any Eurodollar Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term “Interest Period” set forth in Section 1.01,
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such when any Default or
Event of Default has occurred and is continuing, and the Administrative Agent or
the Required Lenders have determined in its or their sole discretion not to
permit such continuations, and provided, further, that if the Borrower shall
fail to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans shall
be automatically converted to ABR Loans on the last day of such then expiring
Interest Period. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
     (c) Each notice by the Borrower pursuant to this Section 2.08 shall be
given pursuant to a Notice of Conversion/Continuation.
     Section 2.09. Limitations on Eurodollar Tranches. Notwithstanding anything
to the contrary in this Agreement, all borrowings, conversions and continuations
of Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that,
(a) after giving effect thereto, the aggregate principal amount of the
Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $5,000,000
or a whole multiple of $1,000,000 in excess thereof and (b) no more than ten
(10) Eurodollar Tranches shall be outstanding at any one time.
     Section 2.10. Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
     (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR
plus the Applicable Margin.

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     (c) (i) If any amount of principal of any Loan or LC Reimbursement
Obligation is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, such amount
shall thereafter bear interest at a fluctuating interest rate per annum at all
times equal to the Default Rate to the fullest extent permitted by applicable
Requirements of Law.
          (ii) If any amount (other than principal of any Loan or LC
Reimbursement Obligation) payable by the Borrower under any Loan Document is not
paid when due (without regard to any applicable grace periods), whether at
stated maturity, by acceleration or otherwise, then upon the request of the
Required Lenders such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Requirements of Law.
          (iii) Upon the request of the Required Lenders, while any Event of
Default exists, the Borrower shall pay interest on the principal amount of all
outstanding Obligations hereunder at a fluctuating interest rate per annum at
all times equal to the Default Rate to the fullest extent permitted by
applicable Requirements of Law.
          (iv) Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand.
     (d) Interest on each Loan shall be due and payable in arrears on each
Interest Payment Date applicable thereto and at such other times as may be
specified herein. Interest hereunder shall be due and payable in accordance with
the terms hereof before and after judgment, and before and after the
commencement of any proceeding under any bankruptcy, insolvency, reorganization
or similar law.
     Section 2.11. Computation of Interest and Fees. (a) Interest and fees
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to ABR Loans the rate of
interest on which is calculated on the basis of the Prime Rate, the interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
     (b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error.
     Section 2.12. Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
     (b) the Administrative Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
     (b) the Administrative Agent shall have received notice from the Required
Lenders that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give facsimile or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (i) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (ii) any Loans that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans and (iii) any outstanding Eurodollar Loans shall
be converted, on the last day of the then-current Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.

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     Section 2.13. Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made pro rata according to the Applicable Percentages of the Lenders.
     (b) Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
Applicable Percentages, as the case may be, of the Lenders.
     (c) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without any condition or deduction for any counterclaim, defense,
recoupment or setoff and shall be made prior to 12:00 Noon, Cleveland, Ohio
time, on the due date thereof to the Administrative Agent, for the account of
the Lenders, at the Funding Office, in Dollars and in immediately available
funds. The Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received. If any payment hereunder (other
than payments on the Eurodollar Loans) becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day. If any payment on a Eurodollar Loan becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day unless the result of such extension would be to
extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Business Day. In the case of any
extension of any payment of principal pursuant to the preceding two sentences,
interest thereon shall be payable at the then applicable rate during such
extension.
     (d) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of such
borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.03, and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made such amount available to
the Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of a payment to be made by 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 and (ii) in the case of a payment to be made by the Borrower, the
interest rate applicable to ABR Loans. If the Borrower and such Lender shall pay
such interest to the Administrative Agent for the same or an overlapping period,
the Administrative Agent shall promptly remit to the Borrower the amount of such
interest paid by the Borrower for such period. If such Lender pays its share of
the applicable borrowing to the Administrative Agent, then the amount so paid
shall constitute such Lender’s Loan included in such borrowing. Any payment by
the Borrower shall be without prejudice to any claim the Borrower may have
against a Lender that shall have failed to make such payment to the
Administrative Agent.
     (e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or the Issuing Bank, 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. Nothing herein shall be deemed to limit the rights of
the Administrative Agent, the Issuing Bank or any Lender against the Borrower.
     (f) Whenever any payment received by the Administrative Agent under this
Agreement or any of the other Loan Documents is insufficient to pay in full all
amounts due and payable to the Administrative Agent, the Lenders, and the
Issuing Bank under or in respect of this Agreement and the other Loan Documents
on any date, the Administrative Agent may, but shall not be obligated to,
distribute such payment in the order of priority set forth in Section 8.03. If
the Administrative Agent receives funds for application to the Obligations of
the Loan Parties under

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or in respect of the Loan Documents under circumstances for which the Loan
Documents do not specify the manner in which such funds are to be applied, the
Administrative Agent may, but shall not be obligated to, distribute such funds
in the order of priority set forth in Section 8.03.
     (g) The Borrower hereby authorizes each Lender and each of its Affiliates,
if and to the extent any payment owed to such Lender is not made when due
hereunder or any other Loan Document, to charge from time to time, to the
fullest extent permitted by applicable law, against any or all of the Borrower’s
accounts with such Lender or such Affiliate any amount so due.
     (h) The obligations of the Lenders hereunder to make Loans to fund
participations in Letters of Credit and to make payments pursuant to
Section 10.05(c) are several and not joint. The failure of any Lender to make
any Loan, to fund any such participation or to make any payment under Section
10.05(c) on any date required hereunder, shall not relieve any other Lender of
its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to make its Loan, to purchase
its participation or to make its payment under Section 10.05(c).
     (i) Nothing herein shall be deemed to obligate any Lender to obtain the
funds for any Loan in any particular place or manner or to constitute a
representation by any Lender that it has obtained or will obtain funds for any
Loan in any particular place or manner.
     Section 2.14. Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 2.17.
     Section 2.15. Increased Costs. (a) If any Change in Law shall:
          (i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender (except any reserve requirement reflected in the Eurodollar Rate) or
the Issuing Bank;
          (ii) subject any Lender or the Issuing Bank to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
participation in a Letter of Credit or any Eurodollar Loan made by it, or change
the basis of taxation of payments to such Lender or the Issuing Bank in respect
thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.16 and
the imposition of, or any change in the rate of, any Excluded Tax payable by
such Lender or the Issuing Bank); or
          (iii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition, cost or expense affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein; and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any Eurodollar Loan (or of maintaining its obligation
to make any Eurodollar Loan), or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
(or of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Bank hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or the Issuing Bank, the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

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     (b) If any Lender or the Issuing Bank determines that any Change in Law
affecting such Lender or the Issuing Bank or any lending office of such Lender
or such Lender’s or the Issuing Bank’s holding company, if any, regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender’s or the Issuing Bank’s capital or on the capital of such
Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this
Agreement, the Commitments of such Lender or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the
Issuing Bank’s holding company with respect to capital adequacy), then from time
to time the Borrower will pay to such Lender or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such
reduction suffered.
     (c) A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section and delivered to the Borrower shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Issuing Bank, 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 or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s or the Issuing Bank’s right to demand such compensation, provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs incurred or reductions
suffered more than nine (9) months prior to the date that such Lender or the
Issuing Bank, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the
Issuing Bank’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the nine-month period referred to above shall be extended to include the
period of retroactive effect thereof).
     (e) The obligations of the Borrower pursuant to this Section shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
     Section 2.16. Taxes.
     (a) Any and all payments by or on account of any obligation of the Borrower
or Holdings hereunder or under any other Loan Document shall be made free and
clear of and without reduction or withholding for any Indemnified Taxes or Other
Taxes, provided that if the Borrower or Holdings shall be required by applicable
law to deduct any Indemnified Taxes (including any Other Taxes) from such
payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) the Administrative Agent, Lender or Issuing
Bank, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or Holdings, as the
case may be, shall make such deductions and (iii) the Borrower or Holdings, as
the case may be, shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
     (b) Without limiting the provisions of paragraph (a) above, the Borrower
and Holdings shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.
     (c) The Borrower and Holdings shall, jointly and severally, indemnify the
Administrative Agent, each Lender and the Issuing Bank, within ten (10) days
after demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative
Agent, such Lender or the Issuing Bank, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower or Holdings,
as applicable, by a Lender or the Issuing Bank (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest
error.

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     (d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower or Holdings, as the case may be to a Governmental
Authority, the Borrower or Holdings, as the case may be, 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 or
Holdings, as the case may be, is resident for tax purposes, or any treaty to
which such jurisdiction is a party, with respect to payments hereunder or under
any other Loan Document shall deliver to the Borrower and Holdings (with a copy
to the Administrative Agent), at the time or times prescribed by applicable law
or reasonably requested by the Borrower, Holdings or the Administrative Agent,
such properly completed and executed documentation prescribed by applicable law
as will permit such payments to be made without withholding or at a reduced rate
of withholding. In addition, any Lender, if requested by the Borrower, Holdings
or the Administrative Agent, shall deliver such other documentation prescribed
by applicable law or reasonably requested by the Borrower, Holdings or the
Administrative Agent as will enable the Borrower, Holdings or the Administrative
Agent to determine whether or not such Lender is subject to backup withholding
or information reporting requirements.
     (f) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
     Section 2.17. Indemnity. The Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense that such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of or conversion from Eurodollar Loans after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement, (c) the
making of a prepayment of Eurodollar Loans on a day that is not the last day of
an Interest Period with respect thereto, or (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 2.20. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest that would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) that
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such Certificate within ten (10) days after receipt thereof. This covenant
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
     Section 2.18. Use of Proceeds. The proceeds of the Loans shall be available
(and the Borrower agrees that it will use such proceeds and Letters of Credit)
solely (a) to repay the Existing Obligations and (b) for general corporate
purposes of the Borrower and the Restricted Subsidiaries in the ordinary course
of business, including the exploration, acquisition and development of Oil and
Gas Properties. Letters of Credit will be issued only to support general
corporate purposes of the Borrower and the Restricted Subsidiaries in the
ordinary course of business.
     Section 2.19. Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from each Loan of 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.
     (b) The Administrative Agent shall maintain the Register pursuant to
Section 10.06(c), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan, made hereunder, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable

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or to become due and payable to the Lenders hereunder, (iii) the amount of each
Lender’s participation in outstanding Letters of Credit and (iv) both the amount
of any sum received by the Administrative Agent hereunder from the Borrower and
each Lender’s share thereof.
     (c) The entries made in the Register and the accounts of each Lender
maintained pursuant hereto shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded, provided, however, that the failure of any Lender or
the Administrative Agent to maintain the Register or any such account, or any
error therein, shall not in any manner affect the obligation of the Borrower to
repay (with applicable interest) the Loans made to the Borrower in accordance
with the terms of this Agreement.
     (d) The Borrower agrees that, upon the request to the Administrative Agent
by any applicable Lender, the Borrower will execute and deliver to such Lender,
as appropriate, a promissory note of the Borrower evidencing the Loans of such
Lender, substantially in the form of Exhibit D with appropriate insertions as to
date and principal amount (a “Note”). Each Lender is hereby authorized to record
the Borrowing Date, the amount of each relevant Loan and the date and amount of
each payment or prepayment of principal thereof, on the schedule annexed to and
constituting a part of the Note evidencing such Loan and any such recordation
shall constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure by a Lender to make any such recordation (or
any error therein) shall not affect any of the obligations of the Borrower under
such Note or this Agreement.
     Section 2.20. Mitigation Obligations; Replacement of Lenders. (a) If any
Lender requests compensation under Section 2.15, or requires the Borrower to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.16, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.15 or 2.16, 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 to such Lender. The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.
     (b) If any Lender requests compensation under Section 2.15, 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 2.16,
or if any Lender is a Defaulting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by,
Section 10.06), all of its interests, rights and obligations under this
Agreement and the related Loan Documents to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment), provided that:
          (i) the Borrower shall have paid to the Administrative Agent the
assignment fee specified in Section 10.06;
          (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Reimbursement
Obligations, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 2.16) 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);
          (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.15 or payments required to be made pursuant to
Section 2.16, such assignment will result in a reduction in such compensation or
payments thereafter; and
          (iv) such assignment does not conflict with applicable Requirements of
Law.

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A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.
ARTICLE III
LETTERS OF CREDIT
     Section 3.01. LC Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Bank, in reliance on the agreements of the other Lenders set
forth in Section 3.04(a), agrees to issue letters of credit (“Letters of
Credit”) for the account of the Borrower on any Business Day during the
Commitment Period in such form as may be approved from time to time by the
Issuing Bank; provided that the Issuing Bank shall have no obligation to issue
any Letter of Credit if, after giving effect to such issuance, (i) the LC
Obligations would exceed the LC Commitment, (ii) the Aggregate Outstanding
Credit would exceed the Borrowing Base, or (iii) the aggregate amount of the
Available Commitments would be less than zero. The Existing Letter of Credit
shall constitute and be treated as a Letter of Credit issued pursuant to this
Agreement.
     (b) Each Letter of Credit shall (i) be denominated in Dollars, (ii) have a
face amount of at least $250,000 (unless otherwise agreed by the Issuing Bank),
and (iii) expire no later than the earlier of (x) the first anniversary of its
date of issuance and (y) the date that is one (1) year after the Termination
Date, provided that any Letter of Credit with a one-year term may provide for
the renewal thereof for additional one-year periods (which shall in no event
extend beyond the date referred to in clause (y) above); provided, further, that
any Letter of Credit that expires after the Termination Date shall be Cash
Collateralized at all times.
     (c) Letters of Credit may be either standby letters of credit or commercial
letters of credit.
     (d) Each Letter of Credit shall be subject to ISP98 or the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of Ohio.
     (e) The Issuing Bank shall not at any time be obligated to issue any Letter
of Credit if:
          (i) the issuance of such Letter of Credit would conflict with, or
cause the Issuing Bank or any LC Participant to exceed any limits imposed by,
any applicable Requirement of Law;
          (ii) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank
from issuing such Letter of Credit, or any Requirement of Law applicable to the
Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit or request that the Issuing Bank refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the Issuing Bank is not
otherwise compensated hereunder) not in effect on the Closing Date, or shall
impose upon the Issuing Bank any unreimbursed loss, cost or expense which was
not applicable on the Closing Date and which the Issuing Bank in good faith
deems material to it;
          (iii) the issuance of such Letter of Credit would violate one or more
policies of the Issuing Bank; or
          (iv) any Lender is at such time a Defaulting Lender hereunder, unless
the Issuing Bank has entered into satisfactory arrangements with the Borrower or
such Lender to eliminate the Issuing Bank’s risk with respect to such Lender.
     (f) The Issuing Bank shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith, and the
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Administrative Agent in Article IX or Section 10.05(c) with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit issued by it or proposed to be issued by it and the documents associated
therewith as fully as if the term “Administrative Agent” or “Agent” as used in
Article IX or

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Section 10.05(c) included the Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided herein with respect to the Issuing
Bank.
     (g) References herein to “issue” and derivations thereof with respect to
Letters of Credit shall also include extensions or modifications of any
outstanding Letters of Credit, unless the content otherwise requires.
     Section 3.02. Procedure for Issuance of Letter of Credit. The Borrower may
from time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed to by the Issuing Bank
and the Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit
to the Borrower promptly following the issuance thereof. The Issuing Bank shall
promptly furnish to the Administrative Agent, which shall in turn promptly
furnish to the Lenders, notice of the issuance of each Letter of Credit
(including the amount thereof).
     Section 3.03. Letter of Credit Fees, Commissions and Other Charges. (a) The
Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with respect to Eurodollar Loans,
shared ratably among the Lenders and payable quarterly in arrears on each LC Fee
Payment Date after the issuance date. In addition, the Borrower shall pay to the
Issuing Bank for its own account a fronting fee of 0.125% per annum on the
stated face of each Letter of Credit, payable quarterly in arrears on each LC
Fee Payment Date after the issuance date.
     (b) In addition to the foregoing fees, the Borrower shall pay or reimburse
the Issuing Bank for such normal and customary costs and expenses as are
incurred or charged by the Issuing Bank in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit.
     Section 3.04. LC Participations. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each LC Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each LC Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such LC Participant’s own
account and risk an undivided interest equal to such LC Participant’s Applicable
Percentage in the Issuing Bank’s obligations and rights under and in respect of
each Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each LC Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such LC Participant shall pay to
the Issuing Bank upon demand at the Issuing Bank’s address for notices specified
herein an amount equal to such LC Participant’s Applicable Percentage of the
amount of such draft, or any part thereof, that is not so reimbursed.
     (b) If any amount required to be paid by any LC Participant to the Issuing
Bank pursuant to Section 3.04(a) in respect of any unreimbursed portion of any
payment made by the Issuing Bank under any Letter of Credit is paid to the
Issuing Bank within three (3) Business Days after the date such payment is due,
such LC Participant shall pay to the Issuing Bank on demand an amount equal to
the product of (i) such amount, times (ii) the daily average Federal Funds
Effective Rate during the period from and including the date such payment is
required to the date on which such payment is immediately available to the
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any LC Participant pursuant to
Section 3.04(a) is not made available to the Issuing Bank by such LC Participant
within three (3) Business Days after the date such payment is due, the Issuing
Bank shall be entitled to recover from such LC Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans. A certificate of the Issuing Bank submitted to any LC
Participant with respect to any amounts owing under this Section shall be
conclusive in the absence of manifest error.

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     (c) Whenever, at any time after the Issuing Bank has made payment under any
Letter of Credit and has received from any LC Participant its pro rata share of
such payment in accordance with Section 3.04(a), the Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Borrower or
otherwise, including proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof, the Issuing Bank will
distribute to such LC Participant its pro rata share thereof; provided, however,
that in the event that any such payment received by the Issuing Bank shall be
required to be returned by the Issuing Bank, such LC Participant shall return to
the Issuing Bank the portion thereof previously distributed by the Issuing Bank
to it.
     (d) Each LC Participant’s obligation to purchase participating interests
pursuant to Section 3.04(a) shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any setoff, counterclaim,
recoupment, defense or other right that such LC Participant or the Borrower may
have against the Issuing Bank, the Borrower or any other Person for any reason
whatsoever, (ii) the occurrence or continuance of a Default or an Event of
Default or the failure to satisfy any of the other conditions specified in
Article IV; (iii) any adverse change in the condition (financial or otherwise)
of any Loan Party; (iv) any breach of this Agreement or any other Loan Document
by the Borrower, any other Loan Party or any other Lender; or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
     Section 3.05. Reimbursement Obligation of the Borrower. The Borrower agrees
to reimburse the Issuing Bank on the Business Day next succeeding the Business
Day on which the Issuing Bank notifies the Borrower of the date and amount of a
draft presented under any Letter of Credit and paid by the Issuing Bank for the
amount of (a) such draft so paid and (b) any Taxes, fees, charges or other costs
or expenses incurred by the Issuing Bank in connection with such payment. Each
such payment shall be made to the Issuing Bank at its address for notices
specified herein in Dollars and in immediately available funds. Interest shall
be payable on any such amounts from the date on which the relevant draft is paid
until payment in full at the rate set forth in (i) until the Business Day next
succeeding the date of the relevant notice, Section 2.10(b) and (ii) thereafter,
the Default Rate.
     Section 3.06. Obligations Absolute. The Borrower’s obligations under this
Article III (including its reimbursement obligations under Section 3.05) shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (a) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (b) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (c) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (d) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
     Section 3.07. Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Bank shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Bank to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to

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determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
     Section 3.08. Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.
     Section 3.09. Cash Collateral Pledge. If there are any outstanding LC
Obligations on the Termination Date, then the Borrower shall immediately Cash
Collateralize all such outstanding LC Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
     Section 4.01. Conditions to Initial Credit Extension. The agreement of each
Lender to make the initial Credit Extension requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
Credit Extension on the Closing Date, of the following conditions precedent:
     (a) Credit Agreement; Other Loan Documents. The Administrative Agent shall
have received the following, each of which shall be originals or, at the
discretion of the Administrative Agent, telecopies (followed promptly by
originals) unless otherwise specified, each properly executed by a Responsible
Officer of the signing Loan Party, each dated the Closing Date (or, in the case
of certificates of government officials, a recent date before the Closing Date)
and each in form and substance satisfactory to the Administrative Agent:
          (i) this Agreement, duly executed and delivered by the Administrative
Agent, Holdings, the Borrower and each Person listed on Schedule 1.01;
          (ii) for the account of each of the Lenders that has requested a Note
pursuant to Section 2.19(d), a Note conforming to the requirements hereof and
duly executed and delivered by a duly authorized officer of the Borrower;
          (iii) the Guarantee and Collateral Agreement, duly executed and
delivered by each Loan Party;
          (iv) the Holdings Guarantee, duly executed and delivered by Holdings;
          (v) the Holdings Pledge Agreement, duly executed and delivered by
Holdings;
          (vi) the deposit account control agreements referred to in and
required by Section 6.14 of this Agreement, duly executed by the Administrative
Agent, the applicable Loan Parties, and the applicable financial institutions;
and
          (vii) [Reserved]
          (viii) the Disbursement Letter, duly executed and delivered by the
Borrower.
     (b) Resolutions. The Administrative Agent shall have received from each
Loan Party, as applicable, (i) a copy of a good standing certificate, dated a
date reasonably close to the Closing Date, for each such Person and (ii) a
certificate, dated the Closing Date and with counterparts for each Lender, duly
executed and delivered by such Person’s Secretary or Assistant Secretary,
managing member or general partner, as applicable, as to
     (A) resolutions of each such Person’s Board of Directors (or other managing
body, in the case of other than a corporation) then in full force and effect
authorizing the execution, delivery and performance of each Loan Document to be
executed by such Person and the transactions contemplated hereby and thereby;

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     (B) the incumbency and signatures of those of its officers, managing member
or general partner, as applicable, authorized to act with respect to each Loan
Document to be executed by such Person; and
     (C) the full force and validity of each Organizational Document of such
Person and copies thereof;
upon which certificates the Administrative Agent and each Lender may
conclusively rely until they shall have received a further certificate of the
Secretary, Assistant Secretary, managing member or general partner, as
applicable, of any such Person canceling or amending the prior certificate of
such Person.
     (c) Financial Statements. The Lenders shall have received (i) audited
consolidated and consolidating financial statements of Holdings and its
consolidated Subsidiaries for the 2003, 2004 and 2005 Fiscal Years and
(ii) unaudited interim consolidated and consolidating financial statements of
Holdings and its consolidated Subsidiaries for each fiscal month and quarterly
period ended subsequent to the date of the latest applicable financial
statements delivered pursuant to clause (i) of this paragraph as to which such
financial statements are available, and such financial statements shall not, in
the reasonable judgment of the Lenders, reflect any material adverse change in
the consolidated financial condition of Holdings, the Borrower or any of its
Subsidiaries, as reflected in the financial statements or projections contained
in the Confidential Information Memorandum.
     (d) Approvals. The Administrative Agent shall be satisfied that all
governmental and third party licenses, permits, consents and approvals necessary
in connection with the borrowings hereunder and the transactions contemplated
hereby shall have been obtained and be in full force and effect. No order,
decree, judgment, ruling or injunction shall exist which restrains the
consummation of the transactions contemplated by the Loan Documents.
     (e) Initial Engineering Report. Receipt and review by the Administrative
Agent and its counsel and engineers of an Internal Engineering Report covering
the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries
meeting the requirements applicable to such Engineering Reports in this
Agreement and otherwise in form and substance satisfactory to the Administrative
Agent and the Lenders in their sole discretion (the “Initial Engineering
Report”).
     (f) Other Lien Searches. The Administrative Agent shall have received the
results of recent Lien searches by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, Intellectual Property, judgment and tax
lien filings that may have been filed with respect to personal property of the
Loan Parties, and the results of such searches shall be satisfactory in form and
substance to the Administrative Agent.
     (g) Environmental Matters. The Administrative Agent and the Lenders shall
be satisfied with the environmental condition of the Oil and Gas Properties and
other assets of the Borrower and its Restricted Subsidiaries.
     (h) Fees and Expenses. The Lenders and the Administrative Agent shall have
received all fees and other amounts required to be paid, and all expenses for
which invoices have been presented (including the reasonable fees, expenses and
disbursements of legal counsel), on or before the Closing Date, together with
such additional amounts as shall constitute each such counsel’s reasonable
estimate of fees, expenses and disbursements to be incurred by such counsel in
connection with the recording and filings of any Mortgages and UCC financing
statements. All such amounts will be paid with proceeds of Loans made on the
Closing Date and will be reflected in the funding instructions given by the
Borrower to the Administrative Agent on or before the Closing Date.
     (i) Closing Certificates. The Administrative Agent shall have received,
with a counterpart for each Lender, (i) a certificate of Holdings, dated the
Closing Date, substantially in the form of Exhibit B-1, with appropriate
insertions and attachments, and (ii) a certificate of the Borrower dated the
Closing Date, substantially in the form of Exhibit B-2, with appropriate
insertions and attachments.
     (j) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:

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          (i) the legal opinion of Stephen P. Carson, senior corporate counsel
of Holdings, the Borrower and the Restricted Subsidiaries, substantially in the
form of Exhibit F-1;
          (ii) the legal opinion of Black, McCuskey, Souers & Arbaugh, special
Ohio counsel to the Administrative Agent, substantially in the form of
Exhibit F-2; and
          (iii) the legal opinion of Maitland & Company, Barristers and
Solicitors, special Canadian counsel to Holdings, in form and substance
satisfactory to the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
     (k) Pledged Equity Interests; Pledged Notes. The Administrative Agent shall
have received (i) the certificates representing the Pledged Equity Interests and
the Pledged Stock (as defined in the Holdings Pledge Agreement), together with
an undated stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof and (ii) each of the Pledged Notes
endorsed (without recourse) in blank (or accompanied by an executed transfer
form in blank) by the pledgor thereof.
     (l) Actions to Perfect Liens. The Administrative Agent shall have received
evidence satisfactory to it that all filings, recordings, registrations, and
other actions necessary, or in the opinion of the Administrative Agent,
desirable to perfect and protect the Liens created by the Security Documents
(other than the Mortgages) shall have been completed (including, without
limitation, the filing of financing statements on form UCC-1 and receipt by the
Administrative Agent of duly executed payoff letters, UCC-3 termination
statements (or authorizations to terminate financing statements)).
     (m) Solvency Certificate. The Administrative Agent shall have received
(i) a Solvency Certificate, in substantially the form of Exhibit I-1, executed
by the chief financial officer of Holdings, and a Solvency Certificate, in
substantially the form of Exhibit I-2, executed by the chief financial officer
of the Borrower.
     (n) Insurance. The Administrative Agent shall have received insurance
certificates and endorsements satisfying the requirements of Section 6.06(b) of
this Agreement and Section 5.02(b) of the Guarantee and Collateral Agreement.
     (o) Existing Obligations. The Administrative agent shall have received
evidence satisfactory to it that the Existing Obligations have been or,
substantially contemporaneously with the Closing Date, will be, paid and
satisfied in full and that all Liens created under any Existing Security
Document (other than liens created under any Existing Mortgage which is being
amended and restated pursuant to a new Mortgage) and Existing Guarantees shall
have been terminated.
     (p) Related Agreements. The Administrative Agent shall have received true
and correct executed copies, certified as to authenticity by the Borrower, of
the NGAS Securities Purchase Documents and such other documents or instruments
as may be requested by the Administrative Agent, including a copy of each Hedge
Agreement, debt instrument, security agreement, mortgage, deed of trust, and
other Material Contract to which any Loan Party or any of its Subsidiaries may
be a party, together with all amendments, modifications and supplements to any
of the foregoing.
     (q) No Litigation. There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its Subsidiaries
pending or threatened before any court, governmental agency or arbitrator that
could reasonably be expected to have a Material Adverse Effect.
     (r) Capitalization; Legal Structure. The Lenders shall be satisfied with
the corporate and legal structure and capitalization of each Loan Party and each
of its Subsidiaries, including the terms and conditions of their Organizational
Documents and each class of Equity Interests in each Loan Party and each such
Subsidiary and of each agreement or instrument relating to such structure or
capitalization.

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Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.
     Section 4.02. Conditions to Each Credit Extension. The agreement of each
Lender to make any Credit Extension requested to be made by it on any date
(including its initial Credit Extension) is subject to the satisfaction of the
following conditions precedent:
     (a) Representations and Warranties. Each of the representations and
warranties of the Loan Parties contained in each Loan Document shall be true and
correct on and as of such date, before and after giving effect to such Credit
Extension and application of the proceeds therefrom, as if made on and as of
such date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case, they shall be true and
correct as of such earlier date;
     (b) No Default. No Default or Event of Default shall have occurred and be
continuing on such date or would result from such Credit Extension or the
application of the proceeds therefrom;
     (c) Availability. After giving effect to any Credit Extension, Availability
would not be less than zero; and
     (d) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents shall be
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions contemplated hereby
or thereby as it shall reasonably request.
Each Credit Extension hereunder shall be deemed to be a representation and
warranty by the Borrower that the conditions specified in this Section 4.02 have
been satisfied on and as of the date of the applicable Credit Extension.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
     To induce the Administrative Agent, the Issuing Bank and the Lenders to
enter into this Agreement and to make the Loans and issue or participate in the
Letters of Credit, Holdings and the Borrower hereby jointly and severally
represent and warrant to the Administrative Agent, the Issuing Bank and each
Lender that:
     Section 5.01. Financial Condition. The audited consolidated and
consolidating balance sheets of Holdings and its Subsidiaries as at December 31,
2003, December 31, 2004, and December 31, 2005, and the related consolidated and
consolidating statements of income and of cash flows for the Fiscal Years ended
on such dates, reported on by and accompanied by an unqualified report from
Kraft, Berger, Grill, Schwartz, Cohen & March LLP, present fairly on a
consolidated and consolidating basis the financial condition of Holdings and its
Subsidiaries as at such date, and on a consolidated and consolidating basis the
results of their operations and their cash flows for the respective Fiscal Years
then ended. The unaudited consolidated and consolidating balance sheets of
Holdings and its Subsidiaries as at June 30, 2006, and the related unaudited
consolidated and consolidating statements of income and cash flows for the
three-month period ended on such date, present fairly the consolidated and
consolidating financial condition of Holdings and its Subsidiaries as at such
date, and the results of their operations and their consolidated and
consolidating cash flows for the three-month period then ended (subject to
normal year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). No Group Member has
any material Indebtedness or Guarantee Obligations, contingent obligations or
liabilities of any kind (including any liabilities for taxes, obligations under
farm-in agreements or similar arrangements, obligations under long-term leases
and unusual forward or long-term commitments (or unrealized or anticipated
losses from any unfavorable commitments), and any obligations in respect of
Hedge Agreements and Synthetic Debt) that are not referred to or reflected or
provided

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for in the most recent financial statements referred to in this paragraph.
During the period from December 31, 2005, to and including the date hereof there
has been no Disposition by any Group Member of any material part of its business
or property.
     Section 5.02. No Change. Since December 31, 2005, there has been no
development, event or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect.
     Section 5.03. Corporate Existence; Compliance With Law. Each Group Member
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the corporate power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation or other entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
     Section 5.04. Corporate Power; Authorization; Enforceable Obligations. Each
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has
taken all necessary organizational action to authorize the execution, delivery
and performance of the Loan Documents to which it is a party and, in the case of
the Borrower, to authorize the extensions of credit on the terms and conditions
of this Agreement. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the extensions of credit hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 5.04, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect and (ii) the
filings referred to in Section 5.19. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party thereto, enforceable against each such
Loan Party in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
     Section 5.05. No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate,
conflict with or create a default under any Requirement of Law or any
Contractual Obligation of any Group Member and will not result in, or require,
the creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such Contractual Obligation
(other than the Liens created by the Security Documents). No Requirement of Law
or Contractual Obligation applicable to any Loan Party could reasonably be
expected to have a Material Adverse Effect.
     Section 5.06. Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the knowledge
of Holdings or the Borrower, threatened by or against any Group Member or
against any of their respective properties or revenues (a) with respect to any
of the Loan Documents or any of the transactions contemplated thereby, or
(b) that could reasonably be expected to have a Material Adverse Effect.
     Section 5.07. No Default. No Group Member is in default under or with
respect to any of its Contractual Obligations in any respect that could
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
     Section 5.08. Ownership of Property; Liens. Except as otherwise provided in
Section 5.18 with respect to Oil and Gas Properties, each Group Member has title
in fee simple to, or a valid leasehold interest in, all its real property, and
good title to, or a valid leasehold interest in, all its other property, and
none of such property of any Loan Party is subject to any Lien except Permitted
Liens.

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     Section 5.09. Intellectual Property. Each Group Member owns, or is licensed
to use, all Intellectual Property necessary for the conduct of its business as
currently conducted. No material claim has been asserted and is pending by any
Person challenging or questioning the use of any Intellectual Property or the
validity or effectiveness of any Intellectual Property, nor does Holdings or the
Borrower know of any valid basis for any such claim. The use of Intellectual
Property by each Group Member does not infringe on the rights of any Person in
any material respect.
     Section 5.10. Taxes. Each Group Member has filed or caused to be filed all
Federal, state and other Tax returns that are required to be filed and has paid
all Taxes shown to be due and payable on said returns or on any assessments made
against it or any of its Property and all other Taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the relevant Group Member); no Tax Lien
has been filed, and, to the knowledge of Holdings and the Borrower, no claim is
being asserted, with respect to any such Tax, fee or other charge. The Federal
income Tax liabilities of each Group Member have been audited by the Internal
Revenue Service and satisfied for all taxable years up to and including the
taxable year December 31, 2005. No Group Member is a party to any Tax sharing or
Tax allocation agreement.
     Section 5.11. Margin Stock. No Loan Party is engaged principally, or as one
of its important activities, in the business of extending credit for, and no
part of the proceeds of any Loans will be used for, “buying” or “carrying” any
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U as now and from time to time hereafter in effect or for any purpose
that violates the provisions of the Regulations of the Board. If requested by
any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable,
referred to in Regulation U.
     Section 5.12. Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against any Group Member pending or, to the
knowledge of Holdings or the Borrower, threatened; (b) hours worked by and
payment made to employees of each Group Member have not been in violation of the
Fair Labor Standards Act or any other applicable Requirement of Law dealing with
such matters; and (c) all payments due from any Group Member on account of
employee health and welfare insurance have been paid or accrued as a liability
on the books of the relevant Group Member.
     Section 5.13. ERISA. Set forth on Schedule 5.13 is a complete and accurate
list of all Plans. Neither a Reportable Event nor an “accumulated funding
deficiency” (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by more than $500,000 in the aggregate as to all such Plans. Neither
Holdings, the Borrower nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan that has resulted or could
reasonably be expected to result in a material liability under ERISA, and
neither Holdings, the Borrower nor any Commonly Controlled Entity would become
subject to any material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
     Section 5.14. Investment Company Act; Other Regulations. No Group Member is
an “investment company,” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940. No Group Member is
subject to regulation under any Requirement of Law (other than Regulation X of
the Board) that limits its ability to incur Indebtedness.
     Section 5.15. Subsidiaries; Etc. As of the Closing Date, (a) Schedule 5.15
sets forth (i) each Subsidiary of Holdings, (ii) the full legal name and
jurisdiction of incorporation or other organization of (y) each Subsidiary of

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Holdings and the Borrower and (y) each Drilling Program Partnership and Drilling
Program and, as to each such Subsidiary and Drilling Program Partnership and
Drilling Program, the percentage of each class of Equity Interests owned by any
Group Member and (b) there are no outstanding subscriptions, options, warrants,
calls, rights or other agreements or commitments (other than stock or similar
options granted to employees or directors and directors’ qualifying shares) of
any nature relating to any Equity Interests of any Group Member.
     Section 5.16. Environmental Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:
     (a) the Properties owned, leased or operated by any Group Member do not
contain, and have not previously contained, any Hazardous Materials in amounts
or concentrations or under circumstances that constitute or constituted a
violation of any Environmental Law or could give rise to any Environmental
Liability;
     (b) no Group Member has received or is aware of any notice of violation,
alleged violation, non-compliance, Environmental Liability or potential
Environmental Liability or compliance with Environmental Laws with regard to any
of the Properties or the business operated by any Group Member (the “Business”),
nor does Holdings or the Borrower have knowledge or reason to believe that any
such notice will be received or is being threatened;
     (c) Hazardous Materials have not been transported or disposed of from the
Properties in violation of any Environmental Law, or in a manner or to a
location that could give rise to any Environmental Liability, nor have any
Hazardous Materials been generated, treated, stored or disposed of at, on or
under any of the Properties in violation of, or in a manner that could give rise
to any Environmental Liability;
     (d) no judicial proceeding or governmental or administrative action is
pending or, to the knowledge of Holdings and the Borrower, threatened, under any
Environmental Law to which any Group Member is or will be named as a party with
respect to the Properties or the Business, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to the Properties or the Business;
     (e) there has been no release or threat of release of Hazardous Materials
at or from the Properties, or arising from or related to the operations of any
Group Member in connection with the Properties or otherwise in connection with
the Business, in violation of or in amounts or in a manner that could give rise
to any Environmental Liability;
     (f) the Properties and all operations at the Properties are in compliance,
and have in the last five (5) years been in compliance, with all applicable
Environmental Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with respect to the Properties
or the Business; and
     (g) no Group Member has assumed any Environmental Liability of any other
Person.
     Section 5.17. Accuracy of Information, Etc. No statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, report, certificate or statement
furnished by or on behalf of any Loan Party to the Administrative Agent or the
Lenders, or any of them, in connection with the transactions contemplated by
this Agreement or the other Loan Documents, contained as of the date such
statement, information, document or certificate was so furnished (or, in the
case of the Confidential Information Memorandum, as of the date of this
Agreement), any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements contained herein or therein not
misleading. The projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the

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Administrative Agent and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents. There are no statements or
conclusions in any Engineering Report delivered to the Administrative Agent
which are based upon or include misleading information or fail to take into
account material information regarding the matters reported therein (it being
understood that projections concerning volumes attributable to Oil and Gas
Properties and production and cost estimates contained in each Engineering
Report are necessarily based upon professional opinions, estimates and
projections and that Holdings, the Borrower and its Restricted Subsidiaries do
not warrant that such opinions, estimates and projections will ultimately prove
to have been accurate).
     Section 5.18. Oil and Gas Properties. (a) The Borrower and each of its
Restricted Subsidiaries has good and defensible title to, or a valid leasehold
interest in, all of its respective Oil and Gas Properties, and none of such Oil
and Gas Properties is subject to any Lien except for Permitted Liens. All such
Oil and Gas Properties are valid, subsisting, and in full force and effect, and
all rentals, royalties and other amounts due and payable in respect thereof have
been duly paid. After giving full effect to Permitted Liens, the Borrower or the
Restricted Subsidiary specified as the owner of any such Oil and Gas Properties
owns the net interests in production attributable to the Oil and Gas Properties
as reflected in the most recently delivered Engineering Report, and the
ownership of such Oil and Gas Properties does not in any material respect
obligate the Borrower or such Restricted Subsidiary to bear the costs and
expenses relating to the maintenance, development and operations of each such
Oil and Gas Property in an amount in excess of the working interest of such Oil
and Gas Property set forth in the most recently delivered Engineering Report
that is not offset by a corresponding proportionate increase in the Borrower’s
or such Restricted Subsidiary’s net revenue interest in such Oil and Gas
Property.
     (b) All Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries (and all properties unitized therewith) have been and are being
maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards, in conformity with all applicable
Requirements of Law and in conformity with the provisions of all leases,
subleases and other contracts comprising any part of the Oil and Gas Properties
of the Borrower and its Restricted Subsidiaries and in conformity with any
existing Permitted Liens. None of the Oil and Gas Properties of the Borrower or
any of its Restricted Subsidiaries is subject to having allowable production
reduced below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time). None of the wells comprising any part of the Oil and
Gas Properties of the Borrower and its Restricted Subsidiaries (or properties
unitized therewith) are deviated from the vertical more than the maximum
permitted by applicable Requirements of Law, and such wells are bottomed under
and are producing from, and the well bores are wholly within, such Oil and Gas
Properties (or in the case of wells located on properties unitized therewith,
such unitized properties) of the Borrower or any such Restricted Subsidiary. All
or substantially all of the wells comprising part of the Oil and Gas Properties
of the Borrower and its Restricted Subsidiaries are currently in production,
except for temporary shut-ins. Each well drilled in respect of Proved Developed
Producing Reserves of the Borrower and its Restricted Subsidiaries described in
the Initial Engineering Report and each subsequent Engineering Report delivered
to the Administrative Agent (i) is capable of, and is presently, either
producing Hydrocarbons in commercially profitable quantities or in the process
of being worked over or enhanced, and the Borrower or the Restricted Subsidiary
that owns such Proved Developed Producing Reserves is currently receiving
payments for its share of production, with no funds in respect of any thereof
being presently held in suspense pending delivery of appropriate division
orders, and (ii) has been drilled, bottomed, completed, and operated in
compliance with all applicable Requirements of Law. The Borrower and each
Restricted Subsidiary has obtained all governmental approvals, consents,
licenses and permits and all easements, rights-of-way and other fee and
leasehold interests necessary to own, drill, develop and operate its Oil and Gas
Properties, all of which are in full force and effect and neither the Borrower
nor any of its Restricted Subsidiaries has received notice from any Governmental
Authority or other Person of any violations in respect of any such licenses or
permits.
     (c) All pipelines, wells, gas processing plants, platforms and other
material improvements, fixtures and equipment owned in whole or in part by the
Borrower or any of its Restricted Subsidiaries that are necessary to conduct
normal operations are being maintained in a state adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Borrower or any of its Restricted Subsidiaries, in a manner consistent with the
Borrower’s or such Restricted Subsidiary’s past practices. All material Leases,
deeds, and other agreements forming any part of the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries to which Proved Reserves are
attributed in the Initial Engineering Report and each subsequent Engineering
Report delivered

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to the Administrative Agent are valid and subsisting and in full force and
effect. All rents, royalties and other payments due and payable under such
Leases, deeds, and other agreements have been properly and timely paid other
than to the extent such could not reasonably be expected to cause the loss or
forfeiture of any such Proved Reserves. None of the Borrower nor any of its
Restricted Subsidiaries (i) is in default with respect to any of its obligations
(and no such Loan Party is aware of any default by any third party with respect
to such third party’s obligations) under any such Leases, deeds, and other
agreements, or under any Permitted Liens, or otherwise attendant to the
ownership or operation of any part of the Oil and Gas Properties of the Borrower
and its Restricted Subsidiaries, where such default could materially adversely
affect the ownership or operation of any such Oil and Gas Properties to which
any Proved Reserves are attributable. None of the Borrower nor any of its
Restricted Subsidiaries (i) is currently accounting for any royalties, or
overriding royalties or other payments out of production, on a basis (other than
delivery in kind) less favorable to such Loan Party than proceeds received by
such Loan Party (calculated at the well) from sale of production, or (ii) has
any liability (or alleged liability) to account for the same on any such less
favorable basis.
     (d) The Oil and Gas Properties of the Borrower and its Subsidiaries that
are included in the Initial Borrowing Base are listed on Schedule 5.18(d).
     Section 5.19. Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Secured Parties, a legal, valid and enforceable security interest
in the Collateral described therein and proceeds thereof. In the case of the
Pledged Equity Interests described in the Guarantee and Collateral Agreement,
when stock certificates representing such Pledged Equity Interests are delivered
to the Administrative Agent, and in the case of the other Collateral described
in the Guarantee and Collateral Agreement, when financing statements and other
filings specified on Schedule 5.19(a) in appropriate form are filed in the
offices specified on Schedule 5.19(a), the Guarantee and Collateral Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Collateral and the proceeds
thereof, as security for the Obligations, in each case prior and superior in
right to any other Person (except, in the case of Collateral other than Pledged
Equity Interests, Permitted Liens).
     (b) Upon the execution and delivery thereof, each of the Mortgages will
create in favor of the Administrative Agent, for the benefit of the Secured
Parties, a legal, valid and enforceable Lien on the Mortgaged Properties
described therein and proceeds thereof, and when the Mortgages are filed in the
offices specified on Schedule 5.19(b), each such Mortgage shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Borrower and its Restricted Subsidiaries in the Mortgaged Properties and
the proceeds thereof, as security for the Obligations (as defined in the
relevant Mortgage), in each case prior and superior in right to any other Person
(except Permitted Liens).
     (c) The Holdings Pledge Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Secured Parties, a legal, valid and
enforceable security interest in the Pledged Stock and the other Collateral (as
defined in the Pledge Agreement). In the case of the Pledged Stock, when stock
certificates representing such Pledged Stock are delivered to the Administrative
Agent, and in the case of the other Collateral described in the Pledge
Agreement, when financing statements and other filings specified on
Schedule 5.19(c) in appropriate form are filed in the offices specified on
Schedule 5.19(c), the Pledge Agreement shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of Holdings in and
to the Pledged Stock and the other Collateral, as security for the Obligations,
in each case, prior and superior in right to any other Person.
     Section 5.20. Solvency. Each Loan Party is, and after giving effect to the
incurrence of all Indebtedness and obligations being incurred in connection
herewith will be and will continue to be, Solvent.
     Section 5.21. Certain Documents. The Borrower has delivered to the
Administrative Agent complete and correct executed copies of each of the NGAS
Securities Purchase Documents, including any amendments, supplements or
modifications with respect to any of the foregoing. The NGAS Warrants have
expired in accordance with their terms.
     Section 5.22. Material Contracts. Schedule 5.22 sets forth as of the
Closing Date a complete and accurate list of all Material Contracts of the
Borrower and its Restricted Subsidiaries, showing the parties, subject matter
and term thereof. Each such Material Contract has been duly authorized, executed
and delivered by all of the

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parties thereto, has not been amended, supplemented or otherwise modified, is in
full force and effect and is binding upon and enforceable against all parties
thereto in accordance with its terms, and there exists no default or termination
event under any Material Contract by any party thereto.
     Section 5.23. Insurance. Schedule 5.23 sets forth as of the Closing Date a
complete and accurate list of all policies of insurance maintained by the
Borrower and its Restricted Subsidiaries, showing with respect to each such
policy the type of insurance, the coverage amount, the carrier, and the duration
of coverage. All premiums with respect to such policies of insurance have been
fully paid.
     Section 5.24. Marketing Arrangements. Except as set forth in Schedule 5.24,
no Oil and Gas Property of the Borrower or any Restricted Subsidiary is subject
to any contractual or other arrangement (i) whereby payment for production is or
can be deferred for a substantial period after the month in which such
production is delivered (in the case of oil, not in excess of sixty (60) days,
and in the case of gas, not in excess of ninety (90) days) or (ii) whereby
payments are made to any such Loan Party other than by check, draft, wire
transfer or other similar writings, instruments or communications for the
immediate payment of money. Except for production sales contracts, processing
agreements, transportation agreements and other agreements relating to the
marketing of production that are listed in Schedule 5.24 in connection with the
Oil and Gas Properties of the Borrower and its Restricted Subsidiaries to which
such contract or agreement relates: (i) no Oil and Gas Property of any such Loan
Party is subject to any contractual or other arrangement for the sale,
processing or transportation of production (or otherwise related to the
marketing of production) which cannot be canceled on less than one hundred
twenty (120) days’ notice and (ii) all contractual or other arrangements for the
sale, processing or transportation of production (or otherwise related to the
marketing of production) are bona fide arm’s length transactions made on the
best terms reasonably available with third parties not affiliated with the Loan
Parties. The Borrower and each Restricted Subsidiary is presently receiving a
price for all production from (or attributable to) each of its respective Oil
and Gas Properties covered by a production sales contract or marketing contract
listed in Schedule 5.24 that is computed in accordance with the terms of such
contract, and no Loan Party is having deliveries of production from such Oil and
Gas Property curtailed by any purchaser or transporter of production
substantially below such property’s delivery capacity, except for curtailments
caused (a) by an act or event of force majeure not reasonably within the control
of and not caused by the fault or negligence of any Loan Party and which by the
exercise of reasonable diligence such Loan Party is unable to prevent or
overcome, and (b) by routine maintenance requirements in the ordinary course of
business.
     Section 5.25. Right to Receive Payment for Future Production. Except as set
forth in Schedule 5.25, neither the Borrower nor any Restricted Subsidiary, nor
any of their respective predecessors in title, has received or is obligated in
any material respect by virtue of any prepayments (including payments for gas
not taken pursuant to “take or pay” or other similar arrangements) for any
Hydrocarbons produced or to be produced from any Oil and Gas Properties of the
Borrower or any Restricted Subsidiary after the date hereof. Except as set forth
in Schedule 5.25, no Oil and Gas Property of the Borrower or any Restricted
Subsidiary is subject to any “take or pay,” gas imbalances or other similar
arrangement (i) which can be satisfied in whole or in part by the production or
transportation of gas from other properties or (ii) as a result of which
production from any such Oil and Gas Property may be required to be delivered to
one or more third parties without payment (or without full payment) therefor as
a result of payments made, or other actions taken, with respect to other
properties. Except as set forth in Schedule 5.25, there is no Oil and Gas
Property of the Borrower or any Restricted Subsidiary with respect to which the
Borrower or any Restricted Subsidiary, or any of their respective predecessors
in title, has, prior to the date hereof, taken more (overproduced), or less
(“underproduced”), gas from the lands covered thereby (or pooled or unitized
therewith) than its ownership interest in such Oil and Gas Property would
entitle it to take; and Schedule 5.25 accurately reflects, for each well or unit
with respect to which such an imbalance is shown thereon to exist, (i) whether
the Borrower, any such Restricted Subsidiary or any such Oil and Gas Property is
overproduced or underproduced and (ii) the volumes (in cubic feet or British
thermal units) of such overproduction or underproduction and the effective date
of such information. No Oil and Gas Property of the Borrower or any Restricted
Subsidiary is subject at the present time to any regulatory refund obligation
and, to the best of the Borrower’s knowledge, no facts exist which might cause
the same to be imposed.
     Section 5.26. Foreign Assets Control Regulations, Etc.

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     (a) Neither the making of the Loans to the Borrower hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
     (b) No Group Member (i) is a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) engages in
any dealings or transactions with any such Person. Each Group Member is in
compliance, in all material respects, with the USA Patriot Act.
     (c) No part of the proceeds from the Loans will be used, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that
such Act applies to the Borrower.
ARTICLE VI
AFFIRMATIVE COVENANTS
     Holdings and the Borrower hereby jointly and severally agree that, so long
as the Commitments remain in effect, any Letter of Credit remains outstanding or
any Loan or other amount is owing to any Lender, the Issuing Bank or the
Administrative Agent hereunder, each of Holdings and the Borrower shall, and
shall cause each of the Restricted Subsidiaries to:
     Section 6.01. Financial Statements. Furnish to the Administrative Agent and
each Lender:
     (a) as soon as available, but in any event within ninety (90) days after
the end of each Fiscal Year of the Borrower, a copy of the audited consolidated
and consolidating balance sheets of the Holdings and its consolidated
Subsidiaries as at the end of such year and the related audited consolidated and
consolidating statements of income and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year,
reported on without a “going concern” or like qualification or exception, or
qualification arising out of the scope of the audit, by Kraft, Berger, Grill,
Schwartz, Cohen & March LLP or other independent certified public accountants of
nationally recognized standing;
     (b) as soon as available, but in any event not later than forty-five
(45) days after the end of each of the first three quarterly periods of each
Fiscal Year of the Borrower, the unaudited consolidated and consolidating
balance sheets of the Holdings and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated and consolidating
statements of income and of cash flows for such quarter and the portion of the
Fiscal Year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal
year-end audit adjustments); and
     (c) as soon as available, but in any event not later than forty-five
(45) days after the end of each month occurring during each Fiscal Year of the
Borrower (other than the third, sixth, ninth and twelfth such month), the
unaudited consolidated and consolidating balance sheets of the Holdings and its
Subsidiaries as at the end of such month and the related unaudited consolidated
and consolidating statements of income and of cash flows for such month and the
portion of the Fiscal Year through the end of such month, setting forth in each
case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied (except as approved by such accountants or officer, as the case may be,
and disclosed in reasonable detail therein) consistently throughout the periods
reflected therein and with prior periods.

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     Section 6.02. Certificates; Other Information. Furnish to the
Administrative Agent and each Lender (or, in the case of clause (j), to the
relevant Lender):
     (a) concurrently with the delivery of the financial statements referred to
in Section 6.01(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate.
     (b) concurrently with the delivery of any financial statements pursuant to
Section 6.01, (i) a Compliance Certificate executed by a Responsible Officer
(x) stating that each Loan Party during such period has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to which it is a party
to be observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as specified
in such certificate and (y) containing all information and calculations
necessary for determining compliance by each Loan Party with the provisions of
this Agreement referred to therein as of the last day of the Fiscal Quarter or
Fiscal Year of the Borrower, as the case may be; (ii) to the extent not
previously disclosed to the Administrative Agent in writing, a description of
any change in the jurisdiction of organization or name of any Loan Party and a
list of all Intellectual Property and real property (including any leasehold
interests) acquired by any Loan Party since the date of the most recent list
delivered pursuant to this clause (iii) (or, in the case of the first such list
so delivered, since the Closing Date); and (iii) a true and complete list of all
Hedge Agreements (including any master agreements and each agreement or document
evidencing any transaction entered into and then existing thereunder) of the
Borrower and each Restricted Subsidiary as of the last Business Day of such
Fiscal Quarter or Fiscal Year, which shall include a description of all material
terms and provisions thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark-to-market value
thereof, any credit support providers and credit support documents relating
thereto, any guarantees provided or cash, Cash Equivalents or other margin
required or supplied under any credit support document or pursuant to the rules
of any derivatives exchange (or other self-regulatory organization governing or
relating to such derivatives exchange), the Approved Hedge Counterparty to each
such Hedge Agreement, and the Credit Rating of each such Approved Hedge
Counterparty (or such Approved Hedge Counterparty’s guarantor or other credit
support provider);
     (c) as soon as available, and in any event no later than forty-five
(45) days after the end of each Fiscal Year of the Borrower, a detailed
consolidated budget of the Borrower and its Subsidiaries, in form reasonably
satisfactory to the Administrative Agent, for the following Fiscal Year (the
“Budget”), which Budget shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Budget is based on reasonable estimates,
information and assumptions and that such Responsible Officer has no reason to
believe that such Budget is incorrect or misleading in any material respect;
     (d) within forty-five (45) days after the end of each Fiscal Quarter of the
Borrower, a narrative discussion and analysis of the financial condition and
results of operations of the Borrower and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal Year to
the end of such Fiscal Quarter, as compared to the portion of the Budget
covering such periods and to the comparable periods of the previous year;
     (e) no later than ten (10) Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification under or pursuant to any NGAS
Securities Purchase Documents or any Hedge Agreement;
     (f) within five (5) days after the same are sent, copies of all financial
statements, reports, proxy statements, and material notices that any Group
Member sends to any holder of any of its debt securities (including pursuant to
the NGAS Securities Purchase Documents) or Equity Interests and, within five
(5) days after the same are filed, copies of all financial statements, reports,
proxy statements and other materials that Holdings or the Borrower may make to,
or file with, the SEC;
     (g) as soon as available and in any event within ninety (90) days after the
end of each Fiscal Year of the Borrower, (a) a report in form and substance
satisfactory to the Administrative Agent outlining all insurance coverage
maintained as of the date of such report by the Group Members (specifying the
type, amount, deductibles

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and carrier) and the duration of such coverage, and (b) an insurance broker’s
statement that all premiums then due and payable with respect to such coverage
have been paid and confirming compliance by the Group Members with
Section 6.06(b) of this Agreement and Section 5.02 (a) of the Guarantee and
Collateral Agreement;
     (h) as soon as available and in any event within five (5) Business Days
after the receipt thereof, copies of any “management letter” or similar letter
or report received by Holdings or the Borrower from its independent public
accountants;
     (i) by November 1 of each year, an updated business plan for the Borrower
and its Restricted Subsidiaries, including proposed budgets and plans for the
drilling, operation and development of their Oil and Gas Properties, in form and
substance reasonably satisfactory to the Administrative Agent; and
     (j) promptly, such additional financial and other information as any Lender
may from time to time reasonably request.
     Section 6.03. Oil and Gas Reporting. Furnish to the Administrative Agent
and each Lender:
     (a) as soon as available and in any event on or before each April 1 of each
year, an Independent Engineering Report dated effective as of January 1 for such
year;
     (b) as soon as available and in any event on or before October 1 of each
year an Internal Engineering Report dated effective as of the immediately
preceding July 1;
     (c) such other data and information as may be reasonably requested by the
Administrative Agent or any Lender with respect to any of the Oil and Gas
Properties of the Borrower and its Restricted Subsidiaries, including all such
Oil and Gas Properties that are included or to be included in the Borrowing
Base;
     (d) with the delivery of each Engineering Report, a certificate from a
Responsible Officer of the Borrower, in form satisfactory to the Administrative
Agent, certifying that: (i) the information contained in the Engineering Report
and any other information delivered in connection therewith is true and correct,
(ii) the Borrower and each of its Restricted Subsidiaries, as applicable, owns
good and defensible title to the Oil and Gas Properties evaluated in such
Engineering Report and, to the extent required by Section 6.10(d), such
Properties are subject to an Acceptable Security Interest, (iii) 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 its Oil and Gas
Properties evaluated in such Engineering Report which would require the Borrower
or any Restricted Subsidiary to deliver Hydrocarbons produced from such Oil and
Gas Properties at some future time without then or thereafter receiving full
payment therefor, (iv) none of its Oil and Gas Properties have been sold since
the date of the last determination of the Borrowing Base, except as set forth on
an exhibit to the certificate, which certificate shall list all of its Oil and
Gas Properties sold and in such detail as required by the Administrative Agent,
(v) attached as an exhibit to the certificate is (A) a list of all Oil and Gas
Properties added to and deleted from the immediately preceding Engineering
Report and (B) a list showing any change in working interest or net revenue
interest in any Oil and Gas Properties covered in the Engineering Report and the
reason for each such change, (vi) attached as an exhibit to the certificate is a
list of all Persons disbursing proceeds to the Borrower or to any Guarantor, as
applicable, from its Oil and Gas Properties, (vii) all of the Oil and Gas
Properties of the Borrower and its Restricted Subsidiaries that are subject to
an Acceptable Security Interest are listed on an exhibit to the certificate,
(viii) except as set forth on an exhibit to the certificate, none of the Oil and
Gas Properties of the Borrower and its Restricted Subsidiaries are subject to
any farm-in, farm-out or similar arrangement, and (ix) attached as an exhibit to
the certificate is a monthly cash flow budget for the twelve (12) months
following the delivery of such certificate setting forth the Borrower’s
projections for production volumes, revenues, expenses, taxes and budgeted
capital expenditures during such period;
     (e) with the delivery of each Engineering Report and otherwise at any time
upon the request of the Administrative Agent, a variance analysis with
projection of drilling, production, sales and revenues for the succeeding twelve
(12) month period for the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries; and

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     (f) as soon as available and in any event within sixty (60) days after the
end of each Fiscal Quarter, commencing with the fiscal quarter ending
December 31, 2006, a report certified by a Responsible Officer of the Borrower
in form and substance satisfactory to the Administrative Agent prepared by the
Borrower covering each of the Mortgaged Properties of the Borrower and its
Restricted Subsidiaries and detailing on a quarterly basis (i) the production,
revenue, and price information and associated operating expenses for each such
quarter, (ii) any changes to any producing reservoir, production equipment, or
producing well during each such quarter, which changes could have a Material
Adverse Effect and (iii) any sales of the Borrower’s or any Restricted
Subsidiary’s Oil and Gas Properties during each such quarter.
     Section 6.04. Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent or a default occurs
thereunder, as the case may be, all its Indebtedness and other obligations of
whatever nature, including Tax liabilities, except where (a) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings, (b) reserves in conformity with GAAP with respect thereto have been
provided on the books of the Group Members, (c) such contest effectively
suspends collection of the contested obligation and enforcement of any Lien
securing such obligation, and (d) the failure to make payment pending the
resolution of such contest could not reasonably be expected to have a Material
Adverse Effect.
     Section 6.05. Maintenance of Existence; Compliance. (a)(i) Preserve, renew
and keep in full force and effect its organizational existence and (ii) without
limiting the Borrower’s obligations under Section 6.13, take all reasonable
action to maintain in full force and effect all rights, privileges, permits,
licenses and franchises necessary or desirable in the normal conduct of its
business, except, in each case, as otherwise permitted by Section 7.04 and
except, in the case of clause (ii) above, to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and
(b) comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
     Section 6.06. Maintenance of Property; Insurance; Bonding. (a) Keep all
Property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, (b) maintain, with financially sound
and reputable insurance companies, insurance on all of its Property in at least
such amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are customarily
maintained by companies engaged in the same or a similar business operating in
the same or similar locations, and (c) maintain all bonds and letters of credit
in lieu of bonds that it is required to maintain (by applicable Requirements of
Law, Lease terms, or consistent with prudent industry practices) in order to
carry out development and production operations on its Oil and Gas Properties.
     Section 6.07. Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and
(b) permit representatives of the Administrative Agent or any Lender to visit
and inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of the Group Members with officers and employees of the Group
Members and with their independent certified public accountants.
     Section 6.08. Notices. Promptly give notice to the Administrative Agent and
each Lender of:
     (a) the occurrence of any Default or Event of Default;
     (b) any (i) default or event of default under any Contractual Obligation of
any Group Member or (ii) litigation, investigation or proceeding that may exist
at any time between any Group Member and any Governmental Authority, that in
either case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
     (c) the filing or commencement of any litigation, proceeding or other claim
against or affecting any Group Member (i) in which the amount involved is
$500,000 or more and not covered by insurance, (ii) in which injunctive or
similar relief is sought or (iii) which relates to any Loan Document;

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     (d) any assertion of any Environmental Liability by any Person or any other
claim under any Environmental Law by any Person against, or with respect to any
activities or properties of, Holdings, the Borrower or any of its Subsidiaries
in which the amount of the Environmental Liability or claim is $500,000 or more;
     (e) the following events, as soon as possible and in any event within
thirty (30) days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan;
     (f) any material change in accounting policies or financial reporting
practices by any Group Member;
     (g) the occurrence of any occurrence of any material breach, default, event
of default or termination event under, or repudiation or termination of any
Material Contract; and
     (h) any development or event that has had or could reasonably be expected
to have a Material Adverse Effect.
Each notice pursuant to this Section 6.08 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the relevant Group Member proposes to take with
respect thereto.
     Section 6.09. Environmental Laws. (a) Comply with, and ensure compliance by
all tenants, subtenants, and any Persons using, developing or operating any of
their Oil and Gas Properties, if any, with all applicable Environmental Laws,
and obtain and comply with and maintain, and ensure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws.
     (b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws.
     Section 6.10. Collateral; Restricted Subsidiaries; Oil and Gas Properties.
(a) With respect to any Property acquired after the Closing Date by the Borrower
or any Restricted Subsidiary (other than (x) any property described in paragraph
(b), (c) or (d) below and (y) any property subject to a Lien expressly permitted
by Section 7.03(f)) as to which the Administrative Agent, for the benefit of the
Secured Parties, does not have a perfected Lien, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement or such other documents or agreements as the Administrative
Agent may require to grant to the Administrative Agent, for the benefit of the
Secured Parties, a perfected first priority security interest in such property
and (ii) take all actions required by the Administrative Agent to grant to the
Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in such Property, including the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent.
     (b) With respect to any fee interest in any real Property (other than Oil
and Gas Properties) having a value (together with improvements thereof) of at
least $100,000 acquired after the Closing Date by the Borrower or any Restricted
Subsidiary (other than any such real Property subject to a Lien expressly
permitted by Section 7.03(f)), promptly (i) execute and deliver a first priority
Mortgage, in favor of the Administrative Agent, for the benefit of the Secured
Parties, covering such real Property, (ii) if requested by the Administrative
Agent, provide the Secured Parties with (v) title and extended coverage
insurance covering such real Property in an amount at least equal to the
purchase price of such real Property (or such other amount as shall be specified
by the Administrative Agent), together with such endorsements as the
Administrative Agent may require, (w) a current ALTA survey of such real
Property, together with a surveyor’s certificate, (x) an environmental site
assessment report for such real property, (y) an appraisal of such real
Property, and (z) such consents, waivers, and estoppels, and intercreditor,

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attornment and subordination agreements as may be required by the Administrative
Agent in connection with such Mortgage, each of the foregoing to be in scope,
form and substance satisfactory to the Administrative Agent, and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, satisfactory to the Administrative Agent.
     (c) With respect to any Restricted Subsidiary created or acquired after the
Closing Date by the Borrower or any Restricted Subsidiary (which, for the
purposes of this paragraph (c), shall include any Unrestricted Subsidiary that
becomes or is designated by the Borrower as a Restricted Subsidiary), promptly
(i) execute and deliver to the Administrative Agent such amendments to the
Guarantee and Collateral Agreement and take such other action as the
Administrative Agent may require to grant to the Administrative Agent, for the
benefit of the Secured Parties, a perfected first priority security interest in
the Equity Interests of such new Restricted Subsidiary, (ii) deliver to the
Administrative Agent the certificates representing such Equity Interests,
together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of the relevant Group Member, (iii) cause such new Restricted
Subsidiary (A) to become a party to the Guarantee and Collateral Agreement,
(B) to take all actions required by the Administrative Agent to grant to the
Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in the Collateral described in the Guarantee and
Collateral Agreement with respect to such new Restricted Subsidiary, including
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent and (C) to deliver to the
Administrative Agent a certificate of such Restricted Subsidiary, substantially
in the form of Exhibit B, with appropriate insertions and attachments, and
(iv) if requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described above, which opinions
shall be in form and substance, and from counsel, satisfactory to the
Administrative Agent.
     (d) Cause on or before the sixtieth (60th) day following the Closing Date
and at all times thereafter, the Administrative Agent to have an Acceptable
Security Interest in all Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries included in the Borrowing Base.
     Section 6.11. Title Information. (a) Provide (or cause to be provided) to
the Administrative Agent and the Lenders and their counsel within sixty
(60) days after the Closing Date (i) all Oil and Gas Title Information deemed
necessary or appropriate by the Administrative Agent and the Lenders with
respect to all Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries included or to be included in the Borrowing Base, and (ii) all UCC
and other lien searches and title searches requested by the Administrative Agent
covering such Oil and Gas Properties in the appropriate records of the states
and counties in which such Oil and Gas Properties are located, setting forth the
status of title to such Oil and Gas Properties. Such Oil and Gas Title
Information shall be satisfactory to the Administrative Agent and the Lenders
and shall reveal no defects in title, or liens or other encumbrances, on or with
respect to such Oil and Gas Properties except for Permitted Liens.
     (b) Deliver to the Administrative Agent promptly (and in any event within
thirty (30) days after the same becomes available):
          (i) copies of any and all Oil and Gas Title Information covering or
relating to any Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries included or to be included in the Borrowing Base that the Borrower
or any of its Restricted Subsidiaries obtained after the Closing Date which has
not previously been delivered to the Administrative Agent prior to such date;
          (ii) without limiting clause (a) above, with respect to any Oil and
Gas Properties acquired by, or otherwise assigned, transferred or conveyed to,
or drilled or developed by, the Borrower or any of its Restricted Subsidiaries
after the Closing Date that are included or to be included in the Borrowing Base
(collectively, “After-Acquired Oil and Gas Properties”), (A) copies of (or, in
the discretion of the Administrative Agent, access of the Administrative Agent
and its counsel and engineers to) any and all Oil and Gas Title Information
covering or relating to such After-Acquired Oil and Gas Properties and received
or obtained by or provided to the Borrower or any Restricted Subsidiary in
connection with such acquisition, assignment, transfer, conveyance or drilling
(it being further understood and agreed that if the Borrower or any Restricted
Subsidiary is entitled to receive or will receive any title opinions covering or
relating to any such After-Acquired Oil and Gas Properties, the Borrower or such

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          Restricted Subsidiary shall cause the Administrative Agent and the
Secured Parties to be named as addressees of such title opinions), and
(B) without limiting clause (b)(ii)(A) above, if the Borrower or the
Administrative Agent determines that any such After-Acquired Oil and Gas
Properties (1) has an aggregate value in excess of 10% of the aggregate value of
all Oil and Gas Properties of the Borrower and its Restricted Subsidiaries
included in the Borrowing Base (as determined by the Administrative Agent and
the Lenders in connection with determination of the Initial Borrowing Base or
the most recently redetermined Borrowing Base immediately preceding the date of
such acquisition, assignment, transfer or conveyance, or date of commencement of
such drilling (as applicable)), or (2) is located in a Non-Appalachian State,
the Borrower or relevant Restricted Subsidiary shall provide (or cause to be
provided) title opinions naming the Administrative Agent and the Lenders as
addressees thereof and other Oil and Gas Title Information covering or relating
to such After-Acquired Oil and Gas Properties, in each case as requested by and
in form and substance satisfactory to the Administrative Agent; and
          (iii) other information as the Administrative Agent and the Lenders
shall from time to time request to identify and verify the status of title of
any After-Acquired Oil and Gas Properties or any other Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries included or to be included in the
Borrowing Base and the validity, perfection and priority of the Liens created in
favor of the Administrative Agent (for the benefit of the Secured Parties) on
the Mortgaged Properties and such other related matters and information
pertaining to any of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries included or to be included in the Borrowing Base as the
Administrative Agent shall reasonably request.
     (c) Deliver, or cause to be delivered, to the Administrative Agent from
time to time upon the request of the Administrative Agent, at the sole expense
of the Borrower, such legal opinions as the Administrative Agent may require,
from counsel satisfactory to the Administrative Agent, with respect to any and
all Mortgages executed and delivered by the Borrower or any Restricted
Subsidiary after the Closing Date.
     Section 6.12. Preparation of Environmental Reports. At the request of the
Administrative Agent from time to time, provide to the Administrative Agent and
the Lenders within sixty (60) days after such request, at the expense of the
Borrower, an environmental site assessment report for any of its or its
Restricted Subsidiaries’ Properties described in such request, prepared by an
environmental consulting firm acceptable to the Administrative Agent, indicating
the presence or absence of Hazardous Materials and the estimated cost of any
compliance, removal or remedial action in connection with any Hazardous
Materials on such properties. Without limiting the generality of the foregoing,
if the Administrative Agent determines at any time that a material risk exists
that any such report will not be provided within the time referred to above, the
Administrative Agent may retain an environmental consulting firm to prepare such
report at the expense of the Borrower, and each of Holdings and the Borrower
hereby grants and agrees to cause any Subsidiary that owns any Property
described in such request to grant at the time of such request to the
Administrative Agent, the Lenders, such firm and any agents or representatives
thereof an irrevocable non-exclusive license, subject to the rights of tenants,
to enter onto their respective Properties to undertake such an assessment.
     Section 6.13. Oil and Gas Properties.
     (a) Preserve, maintain, protect and keep in good repair, working order,
condition and efficiency all of its respective Oil and Gas Properties and other
material Properties and make all necessary repairs, renewals, replacements and
improvements thereto so that at all times the state and condition of all such
Oil and Gas Properties and other material Properties will be fully preserved and
maintained.
     (b) Promptly (i) pay and discharge, or cause to be paid and discharged, all
rentals, royalties, expenses, Taxes and Indebtedness accruing under the leases
or other agreements affecting or pertaining to its respective Oil and Gas
Properties, and (ii) do all other things necessary to keep unimpaired its rights
with respect thereto and prevent any forfeiture thereof or default thereunder.
     (c) Promptly perform or make reasonable and customary efforts to cause to
be performed, in accordance with prudent industry standards, the obligations
required by each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements applicable to or affecting its interests in its
respective Oil and Gas Properties or the production and sale of Hydrocarbons
therefrom.

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     (d) Maintain in full force and effect all permissions, licenses, easements,
rights-of-way and leasehold and fee interests, and all governmental approvals,
authorizations, consents and permits necessary for the ownership, development
and operation of its respective Oil and Gas Properties.
     (e) Operate its respective Oil and Gas Properties (or cause such Oil and
Gas Properties to be operated) on a continuous basis in a careful and efficient
manner in accordance with the usual and customary practices of the industry and
in compliance with all applicable Contractual Obligations and all applicable
Requirements of Law.
     (f) To the extent its interests in any Oil and Gas Properties are owned or
operated by Persons other than any Loan Party, it shall cause any such owner or
operator of such Oil and Gas Properties to comply with this Section 6.13 and
shall seek to enforce such owner’s or operator’s Contractual Obligations to
maintain, develop and operate such Oil and Gas Properties (subject to applicable
operating agreements).
     Section 6.14. Deposit Accounts. Cause all production proceeds attributable
to the Mortgaged Properties of and other revenues of the Borrower and its
Restricted Subsidiaries (other than production proceeds held in a Restricted
Account) to be paid and deposited into the CBT Controlled Account or other
deposit accounts of such Loan Party maintained with financial institutions
acceptable to the Administrative Agent that are subject to control agreements in
favor of the Administrative Agent for the benefit of the Secured Parties, each
in form and substance satisfactory to the Administrative Agent.
     Section 6.15. Material Contracts. Perform and observe all the terms and
provisions of each Material Contract to be performed or observed by it, maintain
each such Material Contract in full force and effect, enforce each such Material
Contract in accordance with its terms, take all such action to such end as may
be from time to time requested by the Administrative Agent and, upon request of
the Administrative Agent, make to each other party to each such Material
Contract such demands and requests for information and reports or for action as
any Group Member is entitled to make under such Material Contract, except, in
any case, where the failure to do so, either individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect.
     Section 6.16. Protection Against Draining of Hydrocarbons. To the extent
that the Oil and Gas Properties of the Borrower or any of its Restricted
Subsidiaries (i) are operated by the Borrower or any of its Restricted
Subsidiaries, act as a reasonably prudent operator in an effort to identify and
prevent the occurrence of any draining of Hydrocarbons from such Oil and Gas
Properties and (ii) are not operated by Borrower or any of its Restricted
Subsidiaries, utilize its property and contractual rights as a reasonably
prudent owner in an effort to identify and prevent the occurrence of any
draining of Hydrocarbons from such Oil and Gas Properties.
     Section 6.17. Further Assurances; Cure of Title Defects. (a) Promptly upon
request by the Administrative Agent, or any Lender through the Administrative
Agent, correct, any defect or error that may be discovered in any Loan Document
or in the execution, acknowledgment, filing or recordation thereof.
     (b) Promptly upon request by the Administrative Agent, or any Lender
through the Administrative Agent, do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further
acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust
deeds, assignments, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and other
instruments as the Administrative Agent, or any Lender through the
Administrative Agent, may require from time to time in order to (i) carry out
more effectively the purposes of the Loan Documents, (ii) to the fullest extent
permitted by applicable law, subject any Loan Party’s or any of its
Subsidiaries’ properties, assets, rights or interests to the Liens now or
hereafter intended to be covered by any of the Security Documents, (iii) perfect
and maintain the validity, effectiveness and priority of any of the Security
Documents and any of the Liens intended to be created thereunder and
(iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more
effectively unto the Administrative Agent or any Lender the rights granted or
now or hereafter intended to be granted to the Administrative Agent or any
Lender under any Loan Document or under any other instrument executed in
connection with any Loan Document to which any Loan Party or any of its
Subsidiaries is or is to be a party.
     (c) Within thirty (30) days after a request by the Administrative Agent or
the Required Lenders to cure any title defects or exceptions with respect to the
Mortgaged Properties that are not Permitted Liens, (i) cure

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such title defects or exceptions, or (ii) grant to the Administrative Agent an
Acceptable Security Interest in substitute Oil and Gas Properties with no title
defects or exceptions (except for Permitted Liens) of an equivalent value and
deliver to the Administrative Agent satisfactory title evidence (including
supplemental or new title opinions meeting the foregoing requirements) in form
and substance acceptable to the Administrative Agent as to the Borrower’s and
its Restricted Subsidiaries’ ownership of such Oil and Gas Properties and the
Administrative Agent’s Liens and security interests therein.
     Section 6.18. Transfer Letters. Deliver to the Administrative Agent within
sixty (60) days following the Closing Date and from time to time thereafter,
Transfer Letters duly executed by the Borrower and its Restricted Subsidiaries,
as appropriate, with respect to all Oil and Gas Properties included in the
Borrowing Base.
     Section 6.19. Post-Closing Items.
     (a) On or before the sixtieth (60th) day following the Closing Date, the
Borrower will deliver to the Administrative Agent descriptions of all Oil and
Gas Properties included in the Borrowing Base that are legally sufficient to
create a perfected Lien thereon pursuant to the Mortgages and are otherwise
satisfactory in form and substance to the Administrative Agent. Such Oil and Gas
Property descriptions shall contain and comply with the requirements shown on
Schedule 6.19(a) hereto.
     (b) On or before the sixtieth (60th) day following the Closing Date, the
Borrower shall deliver to the Administrative Agent Mortgages (which amend and
restate the Existing Mortgages) duly executed, acknowledged and delivered by the
appropriate Loan Party or Loan Parties, and in form suitable for filing or
recording in all applicable filing or recording offices, that create an
Acceptable Security Interest in all Oil and Gas Properties included in the
Borrowing Base. The Borrower shall pay all stamp, intangibles and recording
taxes and fees associated with the filing and recordation of the Mortgages.
     (c) On or before the sixtieth (60th) day following the Closing Date, the
Administrative Agent shall have received legal opinions of local counsel to the
Administrative Agent in Kentucky and Virginia in substantially the form of
Exhibit F-3 and Exhibit F-4, respectively. Each such legal opinion shall cover
such other matters incident to the transactions contemplated by this Agreement
as may be required by the Administrative Agent.
ARTICLE VII
NEGATIVE COVENANTS
     Holdings and the Borrower hereby jointly and severally agree that, so long
as the Commitments remain in effect, any Letter of Credit remains outstanding or
any Loan or other amount is owing to any Lender, the Issuing Bank or the
Administrative Agent hereunder, (x) Holdings shall not with respect to
Sections 7.01, 7.08, 7.11, 7.12, 7.13 and 7.14 and (y) the Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly:
     Section 7.01. Financial Condition Covenants.
     (a) Consolidated Leverage Ratio. Permit the ratio, determined as of the end
of any Fiscal Quarter of the Borrower, of Consolidated Funded Indebtedness as of
the end of such Fiscal Quarter, to (ii) Consolidated EBITDA for the trailing
period of four (4) Fiscal Quarters of the Borrower ending on each such date, to
exceed 3.50 to 1.00.
     (b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest
Coverage Ratio for any period of four consecutive Fiscal Quarters of the
Borrower ending on the last day of any Fiscal Quarter to be less than 3.00 to
1.00.
     (c) Consolidated Current Ratio. Permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities as of the end of any Fiscal Quarter
of the Borrower to be less than 1.00 to 1.00.

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     Section 7.02. Indebtedness. Create, issue, incur, assume, become liable in
respect of or suffer to exist any Indebtedness, except:
     (a) Indebtedness of any Loan Party pursuant to any Loan Document;
     (b) Indebtedness of (i) the Borrower to any Restricted Subsidiary or
(ii) of any Restricted Subsidiary to the Borrower or any other Restricted
Subsidiary;
     (c) Guarantee Obligations incurred by the Borrower or any Restricted
Subsidiary in respect of any Indebtedness of the Borrower or any Restricted
Subsidiary otherwise permitted by this Section 7.02;
     (d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.02(d) and any refinancings, refundings, renewals or extensions
thereof (without increasing, or shortening the maturity of, the principal amount
thereof);
     (e) Indebtedness incurred to finance the acquisition, construction or
improvement of fixed or capital assets (including, without limitation, Capital
Lease Obligations) secured by Liens permitted by Section 7.03(f) in an aggregate
principal amount not to time exceed $5,000,000;
     (f) Indebtedness under Hedge Agreements permitted under Section 7.15.
     (g) Indebtedness arising under surety bonds and related obligations
required by applicable Requirements of Law in connection with the operation of
its Oil and Gas Properties; and
     (h) additional unsecured Indebtedness of the Borrower or any of its
Restricted Subsidiaries in an aggregate principal amount (for the Borrower and
all Restricted Subsidiaries) which does not at any time exceed $500,000.
     Section 7.03. Liens. Create, incur, assume or permit to exist any Lien upon
any property or asset, whether now owned or hereafter acquired, except for
(collectively, “Permitted Liens”):
     (a) Liens for taxes not yet due or that are being contested in good faith
by appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on the books of the Borrower or its Restricted Subsidiaries, as
the case may be, in conformity with GAAP;
     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business that are not overdue
for a period of more than thirty (30) days or that are being contested in good
faith by appropriate proceedings;
     (c) pledges or deposits in connection with workers’ compensation,
unemployment insurance and other social security legislation;
     (d) deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
     (e) Liens in existence on the date hereof listed on Schedule 7.03(e),
securing Indebtedness permitted by Section 7.02(d), provided that no such Lien
is spread to cover any additional property after the Closing Date and the amount
of the Indebtedness secured thereby is not increased;
     (f) Liens securing Indebtedness of the Borrower or any Restricted
Subsidiary incurred pursuant to Section 7.02(e) to finance the acquisition,
construction or improvement of fixed or capital assets, provided that (i) such
Liens shall be created substantially contemporaneously with such acquisition or
completion of such construction or improvement of such fixed or capital assets,
(ii) such Liens do not at any time encumber any property other than the property
financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby
is

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not increased and (iv) the principal amount of the Indebtedness secured by any
such Lien shall at no time exceed the cost of acquiring, constructing or
improving such assets;
     (g) Liens created pursuant to the Security Documents;
     (h) Liens constituting any interest or title of a lessor under any lease
entered into by the Borrower or any other Restricted Subsidiary in the ordinary
course of its business and covering only the assets so leased;
     (i) judgment liens in respect of judgments that do not constitute an Event
of Default under clause (h) of Section 8.01;
     (j) Liens under operating agreements, pooling orders and unitization
agreements with respect to obligations that are not yet due and payable or that
are being contested in good faith by appropriate proceedings;
     (k) royalties, overriding royalties, reversionary interests, and similar
burdens not otherwise prohibited hereunder granted by the Borrower or any
Restricted Subsidiary with respect to its Oil and Gas Properties to the extent
such burdens do not reduce the Borrower’s or any Restricted Subsidiary’s net
interests in production in its Oil and Gas Properties below the interests
reflected in each Engineering Report or the interests warranted under this
Agreement or the Mortgages and do not operate to deprive the Borrower or any
Restricted Subsidiary of any material rights in respect of its assets or
properties;
     (l) easements, rights-of-way, restrictions, and other similar encumbrances,
and minor defects in the title that are customarily accepted in the oil and gas
financing industry, none of which interfere with the ordinary conduct of the
business of the Borrower or any Restricted Subsidiary or detract from the value
or use of the property to which they apply; and
     (m) Liens not otherwise permitted by this Section so long as neither
(i) the aggregate outstanding principal amount of the obligations secured
thereby nor (ii) the aggregate fair market value (determined as of the date such
Lien is incurred) of the assets subject thereto at any time exceeds $500,000.
          Nothing contained in this Agreement or in any other Loan Document
shall constitute or be construed as a subordination of the Liens created by the
Security Documents to any Permitted Lien.
     Section 7.04. Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of (in one transaction or in a series of
transactions), all or substantially all of its Property or business, except
that:
     (a) any Restricted Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any other Restricted Subsidiary;
     (b) any Restricted Subsidiary may Dispose of any or all of its assets
(i) to the Borrower or any other Restricted Subsidiary (upon voluntary
liquidation or otherwise) or (ii) pursuant to a Disposition permitted by
Section 7.05; and
     (c) any Investment expressly permitted by Section 7.08 may be structured as
a merger, consolidation or amalgamation, provided that in no event shall the
Borrower or any Restricted Subsidiary participate in a merger, consolidation, or
amalgamation without being the surviving entity.
     Section 7.05. Disposition of Property. Dispose of any of its Property,
whether now owned or hereafter acquired, or, in the case of any Restricted
Subsidiary, issue or sell any of such Restricted Subsidiary’s Equity Interests
to any Person, except:
     (a) the sale of Hydrocarbon production in the ordinary course of business;

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     (b) the Disposition of (i) obsolete or worn out equipment and related
Property in the ordinary course of business and (ii) equipment and related
Property that is being replaced by equipment or related Property of comparable
value and utility;
     (c) the sale of Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries that are not Mortgaged Properties in the ordinary course of
business in an aggregate amount not to exceed $5,000,000 during any Fiscal Year
of the Borrower;
     (d) Dispositions permitted by Section 7.04(b);
     (e) the sale or issuance of any Restricted Subsidiary’s Equity Interests to
the Borrower or any other Restricted Subsidiary; and
     (f) other Dispositions of Property having a fair market value not to exceed
$500,000 in the aggregate for any Fiscal Year of the Borrower.
     Section 7.06. Restricted Payments. Declare or make any Restricted Payment,
or incur any obligation (contingent or otherwise) to do so, except that:
     (a) any Restricted Subsidiary may make Restricted Payments to the Borrower
or any other Restricted Subsidiary; and
     (b) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Borrower may pay dividends to Holdings
to be used by Holdings solely to make regularly scheduled interest payments on
(i) the NGAS Convertible Notes, and (ii) any other unsecured Indebtedness
incurred by Holdings after the date hereof (A) no part of the principal of which
is required to be paid or prepaid prior to the date occurring three (3) months
after the Termination Date and (B) that has been approved in writing by the
Required Lenders prior to the incurrence of such Indebtedness.
     Section 7.07. Investments. Make, purchase, acquire, hold, maintain, or
permit to exist any Investments, except:
     (a) extensions of trade credit in the ordinary course of business;
     (b) Investments in Cash Equivalents;
     (c) Guarantee Obligations permitted by Section 7.02;
     (d) loans and advances to employees of the Borrower or any Restricted
Subsidiary in the ordinary course of business (including for travel,
entertainment and relocation expenses) in an aggregate amount for the Borrower
and all Restricted Subsidiaries not to exceed $100,000 in the aggregate at any
one time outstanding;
     (e) intercompany Investments by the Borrower in any Restricted Subsidiary
or by any Restricted Subsidiary in the Borrower or any other Restricted
Subsidiary;
     (f) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (i) intercompany Investments in NGAS
Securities, Inc. in an aggregate amount not to exceed $100,000 during any Fiscal
Year of the Borrower, and (ii) intercompany Investments in NGAS Gathering, LLC
in an aggregate amount not to exceed $100,000 during any Fiscal Year of the
Borrower; and
     (g) additional Investments by the Borrower or any of its Restricted
Subsidiaries; provided that, on the date any such other Investment is made, the
amount of such Investment, together with all other Investments made pursuant to
this clause (g) (in each case determined based on the cost of such Investment)
since the Closing Date, shall not at any time exceed in the aggregate $500,000.

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     Section 7.08. Optional Payments and Modifications of Certain Instruments;
Synthetic Debt. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of or otherwise optionally or voluntarily
defease or segregate funds with respect to the NGAS Convertible Notes, (b) make
any payment, repurchase or redemption with respect to the NGAS Convertible
Notes, (c) amend, modify, waive or otherwise change, or consent or agree to any
amendment, modification, waiver or other change to, any of the terms of the NGAS
Securities Purchase Documents (other than any such amendment, modification,
waiver or other change that (i) would extend the maturity or reduce the amount
of any payment of principal thereof or reduce the rate or extend any date for
payment of interest thereon and (ii) does not involve the payment of a consent
fee), or (d) incur or be obligated under, or make any payment under, any
Synthetic Debt;
     Section 7.09. Transactions with Affiliates. Enter into any transaction,
including any purchase, sale, lease, transfer or exchange of any asset or
property, the rendering of any service or the payment of any management,
advisory or similar fees, with any Affiliate unless such transaction is (a) in
the ordinary course of business of the relevant Group Member, and (b) upon fair
and reasonable terms and conditions no less favorable to the relevant Group
Member than it would obtain in a comparable arm’s length transaction with a
Person that is not an Affiliate.
     Section 7.10. Sale and Leaseback Transactions. Enter into or permit to
exist any agreement or other arrangement with any Person providing for the
leasing by any Group Member of real or personal property that has been or is to
be sold or transferred by such Group Member to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of such Group Member.
     Section 7.11. Changes in Fiscal Periods. Permit the Fiscal Year of the
Borrower to end on a day other than December 31 or change the Borrower’s method
of determining Fiscal Quarters.
     Section 7.12. Negative Pledge Clauses. Enter into or permit to exist or
become effective any agreement or other arrangement that prohibits, limits or
imposes any condition on the ability of any Loan Party to create, incur, assume
or suffer to exist any Lien upon any of its Property or revenues, whether now
owned or hereafter acquired, other than (a) this Agreement and the other Loan
Documents and (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby).
     Section 7.13. Clauses Restricting Subsidiary Distributions. Enter into or
permit to exist or become effective any agreement or other consensual
encumbrance that prohibits, limits or imposes any condition on the ability of
any Restricted Subsidiary of the Borrower to (a) make Restricted Payments in
respect of any Equity Interests of such Restricted Subsidiary held by, or pay
any Indebtedness owed to, the Borrower or any other Restricted Subsidiary of the
Borrower, (b) make loans or advances to, or other Investments in, the Borrower
or any other Restricted Subsidiary of the Borrower or (c) transfer any of its
assets to the Borrower or any other Restricted Subsidiary of the Borrower,
except for such encumbrances or restrictions existing under or by reason of
(i) any restrictions existing under the Loan Documents and (ii) any restrictions
with respect to a Restricted Subsidiary imposed pursuant to an agreement that
has been entered into in connection with the Disposition of all or substantially
all of the Equity Interests or assets of such Restricted Subsidiary.
     Section 7.14. Lines of Business. Enter into any business, except for those
business in which Holdings, the Borrower and its Subsidiaries are engaged on the
date hereof or that are reasonably related thereto.
     Section 7.15. Hedge Agreements. Purchase, assume, incur, enter into or
maintain any Hedge Agreement with any Person, except for Hedge Agreements (and
derivatives transactions pursuant to any such Hedge Agreement) entered into in
the ordinary course of business with Approved Hedge Counterparties and not for
speculative purposes, and on terms and conditions reasonably satisfactory to the
Administrative Agent, to (a) hedge or manage Hydrocarbon price risks to which
the Borrower or any Restricted Subsidiary has actual exposure as a part of its
normal business operations, and (b) hedge or manage interest rate risk existing
or arising with respect to the outstanding principal amount of any of the Loans;
provided that such Hedge Agreements shall not (i) cause the aggregate notional
amount of Hydrocarbons under all such Hedge Agreements then in effect to exceed
at any time eighty percent (80%) of the “reasonably forecasted production from
Proved Developed Producing Reserves” of the Borrower and the Restricted
Subsidiaries for such month during the period such Hedge Agreement is in effect,
or (ii)

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have a term of more than three (3) years (or, if earlier, the Termination Date).
As used in this Section, “reasonably forecasted production from Proved Developed
Producing Reserves” means the forecasted production of Hydrocarbons attributable
to Proved Developed Producing Reserves of the Borrower and its Restricted
Subsidiaries as reflected in the most recent Engineering Report delivered to the
Administrative Agent pursuant to Section 6.03, after giving effect to any pro
forma adjustments for the consummation of any acquisitions or dispositions of
Proved Developed Producing Reserves of the Borrower and its Restricted
Subsidiaries since the effective date of such Engineering Report. Once the
Borrower or any Restricted Subsidiary enters into any Hedge Agreement (or any
derivatives transaction pursuant to any Hedge Agreement), the terms and
conditions of such Hedge Agreement and such transaction may not be amended or
modified in any material respect, nor may such Hedge Agreement or derivative
transaction be cancelled, without the prior written consent of the
Administrative Agent.
     Section 7.16. Amendments to Organizational Documents. Amend or waive any
right or obligation under any of its Organizational Documents in any manner
adverse to the interests of the Administrative Agent or any Lender.
     Section 7.17. Amendment, Etc., of Material Contracts. (a) Cancel or
terminate any Material Contract or permit, consent to or accept any cancellation
or termination thereof, (b) amend, modify or change in any manner any term or
condition of any Material Contract or give any consent, waiver or approval
thereunder, (c) waive any default or termination event under or any breach or
violation of any term or condition of any Material Contract, (d) agree in any
manner to any other amendment, modification or change of any term or condition
of any Material Contract, (e) fail to perform any of its obligations under any
Material Contract, or (f) take any other action in connection with any Material
Contract that would impair the value of the interest or rights of any Loan Party
thereunder or that would be adverse to the interests of the Administrative Agent
or any Lender, except to the extent that any of the forgoing actions could not
reasonably be expected to have a Material Adverse Effect.
     Section 7.18. Gas Imbalances, Take-or-Pay or other Prepayments. Purchase,
assume, enter into or permit to exist any contracts, agreements or other
arrangements which allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower or any Restricted
Subsidiary which would require the Borrower or any such Restricted Subsidiary to
deliver Hydrocarbons from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor.
     Section 7.19. Terrorism Sanctions Regulations. Become a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or
engage in any dealings or transactions with any such Person.
ARTICLE VIII
EVENTS OF DEFAULT
     Section 8.01. Events of Default. If any of the following events shall occur
and be continuing:
     (a) the Borrower shall fail to pay any principal of any Loan or LC
Reimbursement Obligation when due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan or LC Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within three (3) Business Days after any such interest or other amount
becomes due in accordance with the terms hereof; or
     (b) any representation or warranty made or deemed made by or on behalf of
any Loan Party herein or in any other Loan Document or that is contained in any
certificate, document, report or financial or other statement furnished at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made; or
     (c) any Loan Party shall default in the observance or performance of any
agreement contained in Section 6.01, 6.02, 6.03, clause (i) or (ii) of
Section 6.05(a) (with respect to Holdings and the Borrower only),
Section 6.08(a), Section 6.19 or Article VII of this Agreement or Section 5.05
or 5.07(b) of the Guarantee and

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Collateral Agreement, or Holdings shall default in the observance or performance
of any agreement contained in Section 5(b) of the Holdings Pledge Agreement; or
     (d) any Loan Party shall default in the observance or performance of any
other agreement contained in this Agreement or any other Loan Document (other
than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of thirty (30) days after notice
to the Borrower from the Administrative Agent or any Lender; or
     (e) any Group Member shall (i) default in making any payment of any
principal of or settlement amount arising from or other face amount of any
Indebtedness (including any Guarantee Obligation, but excluding the Loans) on
the scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest or any other regularly scheduled payment on
any such Indebtedness when the same becomes due and payable or (iii) default in
the observance or performance of any other agreement or condition relating to
any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a trustee or agent on
behalf of such holder or beneficiary) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or (in
the case of any such Indebtedness constituting a Guarantee Obligation) to become
payable; provided, that a default, event or condition described in clause (i),
(ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of
Default unless, at such time, one or more defaults, events or conditions of the
type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the outstanding
principal amount (or other outstanding payment amount) of which exceeds in the
aggregate $500,000; or
     (f) (i) any Group Member shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Group Member shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Group Member any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (iii) there shall
be commenced against any Group Member any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets that results in the
entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) any Group Member shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, or fail to
contest, any of the acts set forth in clause (i), (ii), or (iii) above; or
(v) any Group Member shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
     (g) (i) any Person shall engage in any “prohibited transaction” (as defined
in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) Holdings,
the Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
     (h) one or more judgments or decrees for the payment of money in an
aggregate amount (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) in excess of

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$500,000 shall be rendered against any of the Group Members or any combination
thereof and the same shall remain undischarged 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 attach or levy upon
any assets of any Group Member to enforce any such judgment; or
     (i) any non-monetary judgment or order shall be rendered against any Group
Member that could reasonably be expected to have a Material Adverse Effect, and
there shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
     (j) any of the Security Documents shall cease, for any reason, to be in
full force and effect, or any Loan Party or any Affiliate of any Loan Party
shall so assert, or any Lien created by any of the Security Documents shall
cease to be perfected, enforceable and of the same effect and priority purported
to be created thereby; or
     (k) the guarantee of any Loan Party contained in Article II of the
Guarantee and Collateral Agreement shall cease, for any reason, to be in full
force and effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
     (l) the Parent or the Borrower shall, in the reasonable determination of
the Administrative Agent or any Lender, default in the observance or performance
of any agreement contained in Section 6.11(a); or
     (m) (i) any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), shall become, or obtain rights (whether by means or warrants, options or
otherwise) to become, the “beneficial owner” (as defined in Rules 13(d) 3 and
13(d) 5 under the Exchange Act), directly or indirectly, of more than 30% of any
outstanding class of Equity Interests of Holdings having ordinary voting power
for the election of directors of Holdings; (ii) the board of directors of
Holdings shall cease to consist of a majority of Continuing Directors; and
(iii) Holdings shall cease to own and control, of record and beneficially,
directly, 100% of each class of outstanding Equity Interests of the Borrower
free and clear of all Liens (except Liens created by the Security Documents); or
     (n) an Event of Default (as defined in the NGAS Securities Purchase
Agreement and the NGAS Convertible Notes) shall have occurred and be continuing
under the NGAS Securities Purchase Agreement or the NGAS Convertible Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments (including the obligation of the Issuing Bank to
issue Letters of Credit) shall immediately terminate and the Loans hereunder
(with accrued interest thereon) and all other amounts owing under this Agreement
and the other Loan Documents (including all reimbursement obligations in respect
of Letters of Credit, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments (including the obligation of the Issuing
Bank to issue Letters of Credit) to be terminated forthwith, whereupon the
Commitments (including the obligation of the Issuing Bank to issue Letters of
Credit) shall immediately terminate; and (ii) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower, declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including all reimbursement
obligations in respect of Letters of Credit, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, the Borrower waives presentment, demand, protest, notice of
acceleration, notice of intent to accelerate, and all other notices of any kind.
     Section 8.02. Cash Collateralization of Letters of Credit. If any Event of
Default occurs and is continuing, the Administrative Agent shall, at the
request, or may, with the consent, of the Required Lenders require that the
Borrower immediately Cash Collateralize all outstanding LC Obligations. The
Administrative Agent may,

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from time to time after funds are deposited in any Collateral Account, apply
funds then held in such Collateral Account to the payment of any amounts, as
shall have become or shall become due and payable by the Borrower to the Issuing
Bank or the Lenders in respect of LC Obligations.
     Section 8.03. Order of Payment Following an Event of Default. If an Event
of Default shall have occurred and be continuing, the Administrative Agent may,
and, upon either (x) the termination of the Commitments or the acceleration of
the Loans pursuant to Section 8.01, or (y) the requirement of the Administrative
Agent that LC Obligations be Cash Collateralized pursuant to Section 8.02,
shall, apply all payments in respect of any Obligations and all funds on deposit
in any Collateral Account that are held in a Collateral Account pending
application of such proceeds as required hereunder and all other proceeds of
Collateral in the following order:
     (a) First, to pay Obligations constituting expense reimbursements or
indemnities then owing to the Administrative Agent;
     (b) Second, to pay Obligations constituting expense reimbursements or
indemnities then owing to the Lenders and the Issuing Bank, ratably in
accordance with such respective amounts then owing to the Lenders and the
Issuing Bank;
     (c) Third, to pay Obligations constituting fees then owing to the
Administrative Agent, the Lenders and the Issuing Bank, ratably in accordance
with such respective amounts then owing to the Administrative Agent, the Lenders
and the Issuing Bank;
     (d) Fourth, ratably (a) to pay the Secured Parties all other Obligations,
ratably in accordance with the amounts of the Obligations then owing to the
Secured Parties, provided, that for purposes of this Section 8.03, the
settlement amount owing to any Hedge Bank pursuant to any terminated Hedge
Agreement constituting part of the Obligations shall be deemed equal to the
Hedge Termination Value therefor, and (b) to Cash Collateralize all outstanding
LC Obligations; and
     (e) Fifth, the balance, if any, after all of the Obligations have been
indefeasibly paid in full, no Letters of Credit shall be outstanding and the
Commitments have terminated or expired, shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
The order of priority set forth in the clauses above may at any time and from
time to time be changed by the agreement of the Administrative Agent, the
Issuing Bank and the Lenders as required pursuant to Section 10.01 without
necessity of notice to or consent of or approval by the Borrower or any other
Person that is not a Lender.
ARTICLE IX
AGENCY
     Section 9.01. Appointment and Authority. Each of the Lenders and the
Issuing Bank hereby irrevocably appoints the Administrative Agent to act on its
behalf as the Administrative Agent hereunder and under the other Loan Documents
and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof or thereof, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Article are solely for the benefit of
the Administrative Agent, the Lenders and the Issuing Bank, and neither the
Borrower nor any other Group Member shall have rights as a third party
beneficiary of any of such provisions.
     Section 9.02. Rights as a Lender. The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with any Group Member or any Subsidiary or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and
without any duty to account therefor to the Lenders.

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     Section 9.03. Exculpatory Provisions. The Administrative Agent shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents. Without limiting the generality of the foregoing, the
Administrative Agent:
     (a) shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing;
     (b) shall not have any duty to take any discretionary action or exercise
any discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or applicable law; and
     (c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Affiliates that
is communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.
     The Administrative Agent shall not be liable for any action taken or not
taken by it (i) with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 10.01 and 8.01) or (ii) in the absence of
its own gross negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrower, a
Lender or the Issuing Bank.
     The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.
     Section 9.04. Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon. In determining compliance with any condition
hereunder to the making of a Loan, or the issuance of a Letter of Credit, that
by its terms must be fulfilled to the satisfaction of a Lender or the Issuing
Bank, the Administrative Agent may presume that such condition is satisfactory
to such Lender or the Issuing Bank unless the Administrative Agent shall have
received notice to the contrary from such Lender or the Issuing Bank prior to
the making of such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
     Section 9.05. Delegation of Duties. The Administrative Agent may perform
any and all of its duties and exercise its rights and powers hereunder or under
any other Loan Document by or through any one or more sub-agents appointed by
the Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this
Article shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

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     Section 9.06. Resignation of Administrative Agent. The Administrative Agent
may at any time give notice of its resignation to the Lenders, the Issuing Bank
and the Borrower. Upon receipt of any such notice of resignation, the Required
Lenders shall have the right, in consultation with the Borrower, to appoint a
successor. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may on behalf of the Lenders and the Issuing Bank,
appoint a successor Administrative Agent meeting the qualifications set forth
above provided that if the Administrative Agent shall notify the Borrower and
the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice
and (a) the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents (except that in the
case of any collateral security held by the Administrative Agent on behalf of
the Lenders or the Issuing Bank under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such
time as a successor Administrative Agent is appointed) and (b) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the Issuing
Bank directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this Section. Upon the acceptance
of a successor’s appointment as Administrative Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this Section). The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the
other Loan Documents, the provisions of this Article and Section 10.05 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while the retiring Administrative Agent
was acting as Administrative Agent.
     Any resignation by KeyBank as Administrative Agent pursuant to this Section
shall also constitute its resignation as Issuing Bank. Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, (i) such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring Issuing Bank, (ii) the retiring Issuing Bank shall be
discharged from all of their respective duties and obligations hereunder or
under the other Loan Documents, and (iii) the successor Issuing Bank shall issue
letters of credit in substitution for the Letters of Credit, if any, outstanding
at the time of such succession or make other arrangements satisfactory to the
retiring Issuing Bank to effectively assume the obligations of the retiring
Issuing Bank with respect to such Letters of Credit.
     Section 9.07. Non-Reliance on Administrative Agent and Other Lenders. Each
Lender and the Issuing Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and the Issuing Bank also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.
     Section 9.08. No Other Duties, etc. Anything herein to the contrary
notwithstanding, the Bookrunner and the Arranger listed on the cover page hereof
shall not have any powers, duties or responsibilities under this Agreement or
any of the other Loan Documents, except in its capacity, as applicable, as the
Administrative Agent, a Lender or the Issuing Bank hereunder.
     Section 9.09. Administrative Agent May File Proofs of Claim. In case of the
pendency of any case, proceeding or other action of a nature or type referred to
in Section 8.01(f)(i) or any other judicial proceeding relative to any Loan
Party, the Administrative Agent (irrespective of whether the principal of any
Loan or LC Obligation shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Administrative Agent
shall have made any demand on the Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise:

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     (a) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, LC Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders, the Issuing
Bank and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the Issuing
Bank and the Administrative Agent and their respective agents and counsel and
all other amounts due the Lenders, the Issuing Bank and the Administrative Agent
under Sections 2.04, 3.03, and 10.05) allowed in such judicial proceeding; and
     (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the Issuing Bank to make such payments to the Administrative
Agent and, if the Administrative Agent shall consent to the making of such
payments directly to the Lenders and the Issuing Bank, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent and its agents and
counsel, and any other amounts due the Administrative Agent under Sections 2.04
and 10.05.
     Nothing herein contained shall be deemed to authorize the Administrative
Agent to authorize or consent to or accept or adopt on behalf of any Lender or
the Issuing Bank any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender or the Issuing
Bank to authorize the Administrative Agent to vote in respect of the claim of
any Lender or the Issuing Bank or in any such proceeding.
     Section 9.10. Collateral and Guarantee Matters. The Lenders and the Issuing
Bank irrevocably authorize the Administrative Agent, at its option and in its
discretion:
     (a) to release any Lien on any property granted to or held by the
Administrative Agent under any Loan Document (i) upon termination of the
Commitments and payment in full of all Obligations (other than contingent
indemnification obligations and Hedge Bank Obligations) and the expiration or
termination of all Letters of Credit, (ii) that is sold or to be sold as part of
or in connection with any sale expressly permitted hereunder or under any other
Loan Document, or (iii) if approved, authorized or ratified in writing in
accordance with Section 10.01;
     (b) to release any Guarantor from its guarantee under the Guarantee and
Collateral Agreement if such Person ceases to be a Subsidiary as a result of a
transaction expressly permitted hereunder; and
     (c) to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 7.03(f).
     Upon request by the Administrative Agent at any time, the Required Lenders
will confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of property, or to release
any Guarantor from its guarantee under the Guarantee and Collateral Agreement
pursuant to this Section 9.10. In each case as specified in this Section 9.10,
the Administrative Agent will, at the Borrower’s expense, execute and deliver to
the applicable Loan Party such documents as such Loan Party may reasonably
request to evidence the release of such item of Collateral from the Liens
granted under the Collateral Documents or to subordinate its interest in such
item, or to release such Guarantor from its guarantee under the Guarantee and
Collateral Agreement, in each case in accordance with the terms of the Loan
Documents and this Section 9.10.
     Section 9.11. Legal Representation of Administrative Agent. In connection
with the negotiation, drafting, execution and closing of this Agreement and the
other Loan Documents, or in connection with any future legal representation
relating to this Agreement or any of the Loan Documents, Bracewell & Giuliani
LLP has represented only, and shall represent only, KeyBank in its capacity as
Administrative Agent and as a Lender. Each other Lender hereby acknowledges that
Bracewell & Giuliani LLP does not represent it in connection with any such
matters.

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ARTICLE X
MISCELLANEOUS
     Section 10.01. Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.01. The
Required Lenders and each Loan Party to the relevant Loan Document may, or, with
the written consent of the Required Lenders, the Administrative Agent and each
Loan Party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall:
     (i) forgive the principal amount or extend the final scheduled date of
maturity of any Loan or LC Reimbursement Obligation, reduce the stated rate of
any interest or fee payable hereunder or extend the scheduled date of any
payment thereof, or increase the amount or extend the expiration date of any
Lender’s Commitment (or reinstate any Lender’s Commitment terminated pursuant to
Section 8.01), in each case without the written consent of each Lender directly
affected thereby;
     (ii) eliminate or reduce the voting rights of any Lender under this
Section 10.01 without the written consent of such Lender;
     (iii) reduce any percentage specified in the definition of Required
Lenders, consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents,
release all or substantially all of the Collateral in any transaction or series
of related transactions or release all or substantially all of the Subsidiary
Guarantors from their obligations under the Guarantee and Collateral Agreement,
in each case without the written consent of all Lenders;
     (iv) amend or modify the definition of “Borrowing Base,” or amend, modify
or waive any provision of Section 2.02 that would result in an increase in the
Borrowing Base;
     (v) amend, modify or waive any provision of Article IX, or affect the
rights or duties of the Administrative Agent under this Agreement, without the
written consent of the Administrative Agent;
     (vi) amend, modify or waive any provision of Article III, or affect the
rights or duties of the Issuing Bank under this Agreement, without the written
consent of the Issuing Bank;
     (vii) amend, modify or waive Section 10.06(h) without the consent of each
Granting Lender all or part of whose Loans are being funded by an SPC at the
time of such amendment, modification or waiver;
     (viii) amend, modify or waive any provision of Section 8.03 without the
written consent of the Administrative Agent, the Issuing Bank and all of the
Lenders;
     (ix) impose any greater restriction on the ability of any Lender to assign
any of its rights or obligations thereunder without the written consent of the
Required Lenders; or
     (x) amend or modify the definition of Restricted Subsidiary without the
written consent of the Administrative Agent and theLenders.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Loan Parties, the Lenders and the Administrative Agent
shall be restored to

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their former position and rights hereunder and under the other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon. Notwithstanding the
foregoing, the Fee Letter may be amended, and rights or privileges thereunder
may be waived, in a writing executed by the parties thereto. Notwithstanding
anything to the contrary contained in herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that any Commitment of such Lender may not be increased or decreased
without its consent.
     Section 10.02. Notices; Electronic Communication. (a) Except in the case of
notices and other communications expressly permitted to be given by telephone
(and except as provided in paragraph (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier as follows:
          (i) if to the Borrower or any Restricted Subsidiary, to it at 120
Prosperous Place, Suite 201, Lexington, Kentucky 40509, Attention: William G.
Barr, III, Chief Executive Officer (Facsimile No. (859) 263-4228; Telephone No.
(859) 263-3948);
          (ii) if to Holdings, to it at 120 Prosperous Place, Suite 201,
Lexington, Kentucky 40509, Attention: Michael P. Windisch (Facsimile No.
(859) 263-4228; Telephone No. (866) 711-6427);
          (iii) if to the Administrative Agent, to KeyBank National Association
at 8117 Preston Road, Suite 440, Dallas, Texas 75225, Attention: Thomas Rajan,
Senior Vice President (Facsimile No. (214) 414-2610; Telephone No.
(214) 414-2580);
          (iv) if to the Issuing Bank, to it at KeyBank National Association,
Attention: Yvette Dyson-Owens (Facsimile No. (216) 689-5962; Telephone No.
(216) 689-4358); and
          (v) if to a Lender, to it at its address (or telecopier number) set
forth in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).
     (b) Notices and other communications to the Lenders and the Issuing Bank
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent, provided that the foregoing shall not apply to notices to
any Lender or the Issuing Bank pursuant to Article II or Article III if such
Lender or the Issuing Bank, as applicable, has notified the Administrative Agent
that it is incapable of receiving notices under such Article by electronic
communication. The Administrative Agent or the Borrower may, in its discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, provided that approval of
such procedures may be limited to particular notices or communications.
     Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.
     (c) Any party hereto may change its address or telecopier number for
notices and other communications hereunder by notice to the other parties
hereto.

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     Section 10.03. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
     Section 10.04. Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank 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 or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated.
     Section 10.05. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) EACH OF HOLDINGS AND
THE BORROWER SHALL PAY (I) ALL REASONABLE OUT-OF-POCKET EXPENSES INCURRED BY THE
ADMINISTRATIVE AGENT AND ITS AFFILIATES (INCLUDING THE REASONABLE FEES, CHARGES
AND DISBURSEMENTS OF COUNSEL (INCLUDING LOCAL COUNSEL) FOR THE ADMINISTRATIVE
AGENT), AND SHALL PAY ALL FEES AND TIME CHARGES AND DISBURSEMENTS FOR ATTORNEYS
WHO MAY BE EMPLOYEES OF THE ADMINISTRATIVE AGENT, IN CONNECTION WITH THE
SYNDICATION OF THE CREDIT FACILITY PROVIDED FOR HEREIN, THE PREPARATION,
NEGOTIATION, EXECUTION, DELIVERY AND ADMINISTRATION OF THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS OR ANY AMENDMENTS, MODIFICATIONS OR WAIVERS OF THE
PROVISIONS HEREOF OR THEREOF (WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY SHALL BE CONSUMMATED), (II) ALL REASONABLE OUT-OF-POCKET
EXPENSES INCURRED BY THE ISSUING BANK IN CONNECTION WITH THE ISSUANCE,
AMENDMENT, RENEWAL OR EXTENSION OF ANY LETTER OF CREDIT OR ANY DEMAND FOR
PAYMENT THEREUNDER AND (III) ALL OUT-OF-POCKET EXPENSES INCURRED BY THE
ADMINISTRATIVE AGENT, EACH LENDER AND THE ISSUING BANK (INCLUDING THE FEES,
CHARGES AND DISBURSEMENTS OF COUNSEL), IN CONNECTION WITH ANY DEFAULT OR THE
ENFORCEMENT OR PROTECTION OF ITS RIGHTS (A) IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, INCLUDING ITS RIGHTS UNDER THIS SECTION, OR (B) IN
CONNECTION WITH THE LOANS MADE OR LETTERS OF CREDIT ISSUED HEREUNDER, INCLUDING
ALL SUCH OUT-OF-POCKET EXPENSES INCURRED DURING ANY WORKOUT, RESTRUCTURING OR
NEGOTIATIONS IN RESPECT OF SUCH LOANS OR LETTERS OF CREDIT.
     (b) THE BORROWER AND HOLDINGS, JOINTLY AND SEVERALLY, SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE ISSUING
BANK, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM,
ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES, AND DISBURSEMENTS (INCLUDING THE FEES, CHARGES AND
DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), INCURRED BY ANY INDEMNITEE OR
ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER, HOLDINGS
OR ANY OTHER LOAN PARTY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF
(I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (II) ANY LOAN
OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM
(INCLUDING ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A
LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO

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NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL
OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY
OWNED OR OPERATED BY ANY GROUP MEMBER, OR ANY ENVIRONMENTAL LIABILITY RELATED IN
ANY WAY TO ANY GROUP MEMBER, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD
PARTY OR BY ANY GROUP MEMBER, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A
PARTY THERETO, PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE
AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS (X) ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE OR (Y) RESULT FROM A CLAIM BROUGHT BY ANY GROUP MEMBER AGAINST
AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER
OR UNDER ANY OTHER LOAN DOCUMENT, IF SUCH GROUP MEMBER HAS OBTAINED A FINAL
NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF
COMPETENT JURISDICTION. WITHOUT LIMITING THE FOREGOING, AND TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER AND HOLDINGS AGREE NOT TO ASSERT AND
TO CAUSE THE SUBSIDIARIES NOT TO ASSERT, AND HEREBY WAIVES AND AGREES TO CAUSE
THE SUBSIDIARIES TO SO WAIVE, ALL RIGHTS FOR CONTRIBUTION OR ANY OTHER RIGHTS OF
RECOVERY WITH RESPECT TO ALL CLAIMS, DEMANDS, PENALTIES, FINES, LIABILITIES,
SETTLEMENTS, DAMAGES, COSTS AND EXPENSES OF WHATEVER KIND OR NATURE, UNDER OR
RELATED TO ENVIRONMENTAL LAWS, THAT ANY OF THEM MIGHT HAVE BY STATUTE OR
OTHERWISE AGAINST ANY INDEMNITEE.
     (c) TO THE EXTENT THAT THE BORROWER OR HOLDINGS FOR ANY REASON FAILS TO
INDEFEASIBLY PAY ANY AMOUNT REQUIRED UNDER PARAGRAPH (A) OR (B) OF THIS SECTION
TO BE PAID BY IT TO THE ADMINISTRATIVE AGENT (OR ANY SUB-AGENT THEREOF), THE
ISSUING BANK OR ANY RELATED PARTY OF ANY OF THE FOREGOING, EACH LENDER SEVERALLY
AGREES TO PAY TO SUCH AGENT (OR ANY SUCH SUB-AGENT), THE ISSUING BANK OR SUCH
RELATED PARTY, AS THE CASE MAY BE, SUCH LENDER’S APPLICABLE PERCENTAGE
(DETERMINED AS OF THE TIME THAT THE APPLICABLE UNREIMBURSED EXPENSE OR INDEMNITY
PAYMENT IS SOUGHT) OF SUCH UNPAID AMOUNT, PROVIDED THAT THE UNREIMBURSED EXPENSE
OR INDEMNIFIED LOSS, CLAIM, DAMAGE, LIABILITY, PENALTY, ACTION, JUDGMENT, SUIT,
COST, EXPENSE, OR JUDGMENT, AS THE CASE MAY BE, WAS INCURRED BY OR ASSERTED
AGAINST THE ADMINISTRATIVE AGENT (OR ANY SUCH SUB-AGENT) OR THE ISSUING BANK IN
ITS CAPACITY AS SUCH, OR AGAINST ANY RELATED PARTY OF ANY OF THE FOREGOING
ACTING FOR THE ADMINISTRATIVE AGENT (OR ANY SUCH SUB-AGENT) OR THE ISSUING BANK
IN CONNECTION WITH SUCH CAPACITY.
     (d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HOLDINGS AND THE
BORROWER SHALL NOT ASSERT, AND EACH OF HOLDINGS AND THE BORROWER HEREBY WAIVES,
ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL
DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, ANY LOAN OR LETTER OF CREDIT OR THE
USE OF THE PROCEEDS THEREOF. NO INDEMNITEE SHALL BE LIABLE FOR ANY DAMAGES
ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER
MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER
INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
     (e) ALL AMOUNTS DUE UNDER THIS SECTION 10.05 SHALL BE PAYABLE PROMPTLY
AFTER WRITTEN DEMAND THEREFOR. THE AGREEMENTS IN THIS SECTION 10.05 SHALL
SURVIVE REPAYMENT OF THE LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER.

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     Section 10.06. Successors and Assigns; Participations and Assignments.
     (a) Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the neither the
Borrower nor any other Loan Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by way of
participation in accordance with the provisions of paragraph (d) of this
Section, (iii) by way of pledge or assignment of a security interest subject to
the restrictions of paragraph (f) of this Section, or (iv) to an SPC (as defined
in paragraph (h) below) in accordance with the provisions of paragraph (h) of
this Section (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in paragraph (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
     (b) Assignments by Lenders. Any Lender may at any time assign to one or
more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment(s), and the Loans
(including for purposes of this Section 10.06(b), participations in LC
Obligations) at the time owing to it; provided that any such assignment shall be
subject to the following conditions:
          (i) Minimum Amounts.
               (A) in the case of an assignment of the entire remaining amount
of the assigning Lender’s Commitment and the Loans at the time owing to it or in
the case of an assignment to a Lender, an Affiliate of a Lender or an Approved
Fund, no minimum amount need be assigned;
               (B) in any case not described in paragraph (b)(i)(A) of this
Section, the aggregate amount of the Commitment (which for this purpose includes
Loans outstanding thereunder) or, if the applicable Commitment is not then in
effect, the principal outstanding balance of the Loans of the assigning Lender
subject to each such assignment, determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of
the Trade Date) shall not be less than $5,000,000, unless each of the
Administrative Agent and, so long as no Default has occurred and is continuing,
the Borrower otherwise consents (each such consent not to be unreasonably
withheld or delayed);
          (ii) Proportionate Amounts. Each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loan or the Commitment
assigned;
          (iii) Required Consents. No consent shall be required for any
assignment except to the extent required by paragraph (b)(i)(B) of this Section
and, in addition:
               (A) the consent of the Borrower (such consent not to be
unreasonably withheld or delayed) shall be required unless (x) an Event of
Default has occurred and is continuing at the time of such assignment or
(y) such assignment is to a Lender, an Affiliate of a Lender or an Approved
Fund;
               (B) the consent of the Administrative Agent (such consent not to
be unreasonably withheld or delayed) shall be required for assignments in
respect of any Commitment if such assignment is to a Person that is not a
Lender, an Affiliate of such Lender or an Approved Fund with respect to such
Lender; and
               (C) the consent of the Issuing Bank (such consent not to be
unreasonably withheld or delayed) shall be required for any assignment that
increases the obligation of the assignee to participate in exposure under one or
more Letters of Credit (whether or not then outstanding).

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          (iv) Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Assumption,
together with a processing and recordation fee of $3,500; provided, however,
that the Administrative Agent may, in its sole discretion, waive such processing
and recordation fee in the case of an assignment. The assignee, if it is not be
a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire;
          (v) No Assignment to Borrower. No such assignment shall be made to the
Borrower or any of the Borrower’s Affiliates or Subsidiaries;
          (vi) No Assignment to Natural Persons. No such assignment shall be
made to a natural person; and
          (vii) Limitation. No such assignment shall be permitted without the
prior written consent of the Administrative Agent until the Administrative Agent
shall have notified the Lenders that syndication of the Commitments has been
completed.
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Sections 2.15, 2.16, 2.17 and 10.05 with respect to facts and
circumstances occurring prior to the effective date of such assignment. Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph 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 paragraph (d) of this Section.
     (c) Register. The Administrative Agent, acting solely for this purpose as
an agent of the Borrower, shall maintain at one of its offices in Cleveland,
Ohio, a copy of each Assignment and Assumption delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and LC Reimbursement
Obligations owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. Any assignment of any Loan, whether or not evidenced by a Note,
shall be effective only upon appropriate entries with respect thereto being made
in the Register (and each Note shall expressly so provide). The Register shall
be available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
     (d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural person or the Borrower or any of the Borrower’s
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment(s) and/or the Loans owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations and (iii) the Borrower, the Administrative
Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement or any other Loan Document; 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) of Section 10.01 that directly affects such Participant.
Subject to paragraph (e) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Section 2.15 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

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be entitled to the benefits of Section 10.07(b) as though it were a Lender,
provided such Participant agrees to be subject to Section 10.07(a) as though it
were a Lender.
     (e) Limitations Upon Participant Rights. A Participant shall not be
entitled to receive any greater payment under Sections 2.15 and 2.16 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 2.16 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 2.16(e) as though it were a
Lender.
     (f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.
     (h) Special Purpose Funding Vehicles. Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”) may grant to a
special purpose funding vehicle identified as such in writing from time to time
by the Granting Lender to the Administrative Agent and the Borrower (an “SPC”)
the option to provide all or any part of any Loan that such Granting Lender
would otherwise be obligated to make pursuant to this Agreement; provided, that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to make
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof or, if it fails to do so, to make such
payment to the Administrative Agent as is required by Section 2.13(e). The
making of a Loan by an SPC hereunder shall utilize the Commitment of the
Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable
for any indemnity or similar payment obligation under this Agreement for which a
Lender would be liable, (ii) no SPC shall be entitled to the benefits of
Sections 2.15 and 2.16 (or any other increased costs protection provision) and
(iii) the Granting Lender shall for all purposes, including, without limitation,
the approval of any amendment or waiver of any provision of any Loan Document,
remain the Lender of record hereunder. The making of a Loan by a SPC hereunder
shall constitute utilization of the appropriate Commitment of the Granting
Lender to the same extent, and as if, such Loan was made by such Granting
Lender. In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior Indebtedness of any SPC, it will not institute
against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under the laws of the United States or any State thereof. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may (i) with
notice to, but without prior consent of, the Borrower and the Administrative
Agent and without payment of a processing fee therefor, assign all or any
portion of its interest in any Loan to the Granting Lender and (ii) disclose on
a confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or
guarantee or credit or liquidity enhancement to such SPC. This subsection
(h) may not be amended without the prior written consent of each Granting
Lender, all or any part of whose Loans are being funded by the SPC at the time
of such amendment.
     (i) Resignation as Issuing Bank After Assignment. Notwithstanding anything
to the contrary contained herein, if at any time KeyBank assigns all of its
Commitments and Loans pursuant to Section 10.06(b), KeyBank may, upon thirty
(30) days’ notice to the Borrower and the Lenders, resign as Issuing Bank. In
the event of any such resignation as Issuing Bank, the Borrower shall be
entitled to appoint from among the Lenders a

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successor Issuing Bank hereunder; provided, however, that no failure by the
Borrower to appoint any such successor shall affect the resignation of as
Issuing Bank, as the case may be. If KeyBank resigns as Issuing Bank, it shall
retain all the rights, powers, privileges and duties of the Issuing Bank
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as Issuing Bank and all LC Obligations with respect
thereto (including the right to require the Lenders to fund participations
pursuant to Section 3.04(b)). Upon the appointment of a successor Issuing Bank,
(a) such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring Issuing Bank, as the case may be,
and (b) the successor Issuing Bank shall issue letters of Credit in substitution
for the Letters of Credit, if any, outstanding at the time of such succession or
make other arrangements satisfactory to KeyBank to effectively assume the
obligations of KeyBank with respect to such Letters of Credit.
     (j) Notes. The Borrower, upon receipt of written notice from the relevant
Lender, agrees to issue a Note to any Lender requiring a Note to facilitate
transactions of the type described in paragraph (b) above.
     Section 10.07. Adjustments; Set-Off. (a) Except to the extent that this
Agreement expressly provides for payments to be allocated to a particular Lender
or Lenders, if any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans, LC Reimbursement Obligations or other obligations
hereunder resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of its Loans and LC Reimbursement Obligations and accrued
interest thereon or other such obligations greater than its pro rata share
thereof as provided herein, then the Lender receiving such greater proportion
shall (a) notify the Administrative Agent of such fact, and (b) purchase (for
cash at face value) participations in the Loans, LC Reimbursement Obligations
and such other obligations of the other Lenders, or make such other adjustments
as shall be equitable, so that the benefit of all such payments shall be shared
by the Lenders ratably in accordance with the aggregate amount of principal of
and accrued interest on their respective Loans, LC Reimbursement Obligations and
other amounts owing them, 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 (x) any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Reimbursement Obligations to any assignee or
participant, other than to Holdings, the Borrower or any Subsidiary thereof (as
to which the provisions of this paragraph shall apply).
     Each of the Borrower and Holdings 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 Holdings or the Borrower rights of setoff and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of
Holdings or the Borrower in the amount of such participation.
     (b) If an Event of Default shall have occurred and be continuing, each
Lender, the Issuing Bank, and each of their respective Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender, the
Issuing Bank or any such Affiliate to or for the credit or the account of
Holdings or the Borrower against any and all of the obligations of Holdings or
the Borrower now or hereafter existing under this Agreement or any other Loan
Document to such Lender or the Issuing Bank, irrespective of whether or not such
Lender or the Issuing Bank shall have made any demand under this Agreement or
any other Loan Document and although such obligations of Holdings or the
Borrower may be contingent or unmatured or are owed to a branch or office of
such Lender or the Issuing Bank different from the branch or office holding such
deposit or obligated on such indebtedness. The rights of each Lender, the
Issuing Bank and their respective Affiliates under this Section are in addition
to other rights and remedies (including other rights of setoff) that such
Lender, the Issuing Bank or their respective Affiliates may have. Each Lender
and the Issuing Bank agrees to notify the Borrower and the Administrative Agent
promptly after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

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     Section 10.08. Counterparts; Integration; Effectiveness; Electronic
Execution. This Agreement may be executed in counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Agreement and the other Loan Documents, and any separate letter
agreements with respect to fees payable to the Administrative Agent, constitute
the entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
     Section 10.09. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
     Section 10.10. Governing Law; Jurisdiction, Etc. (a) This Agreement shall
be governed by, and construed in accordance with, the law of the State of Ohio.
     (b) Each of Holdings and the Borrower irrevocably and unconditionally
submits, for itself and its Property, to the nonexclusive jurisdiction of the
courts of the State of Ohio sitting in Cuyahoga County and of the United States
District Court for the Northern District of Ohio, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such Ohio State court or, to the fullest extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or in any other Loan Document shall
affect any right that the Administrative Agent, any Lender or the Issuing Bank
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against Holdings, the Borrower or any other Loan
Party or its properties in the courts of any jurisdiction.
     (c) Each of Holdings and the Borrower irrevocably and unconditionally
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
     (d) Each party hereto irrevocably consents to service of process in the
manner provided for notices in Section 10.02. Nothing in this Agreement will
affect the right of any party hereto to serve process in any other manner
permitted by applicable law.
     Section 10.11. Acknowledgements. Each of Holdings and the Borrower hereby
acknowledges that:
     (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
     (b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to Holdings or the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and Holdings
and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
     (c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among Holdings, the Borrower and the Lenders.

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     Section 10.12. Treatment of Certain Information; Confidentiality. (a) Each
of the Administrative Agent, the Lenders and the Issuing Bank agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and other representatives (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Lender, the Issuing Bank or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrower.
     For purposes of this Section, “Information” means all information received
from the Borrower or any of its Subsidiaries relating to the Borrower or any of
its Subsidiaries or any of their respective businesses, other than any such
information that is available to the Administrative Agent, any Lender or the
Issuing Bank on a nonconfidential basis prior to disclosure by the Borrower or
any of its Subsidiaries, provided that, in the case of information received from
the Borrower or any of its Subsidiaries after the date hereof, such information
is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
     Section 10.13. Interest Rate Limitation. (a) It is the intent of the
Administrative Agent, the Lenders and the Borrower to conform to and contract in
strict compliance with all applicable usury laws from time to time in effect.
Notwithstanding anything to the contrary contained in any Loan Document, the
interest paid or agreed to be paid under the Loan Documents shall not exceed the
Highest Lawful Rate. If the Administrative Agent or any Lender shall receive
interest in an amount that exceeds the Highest Lawful Rate, the excess interest
shall be applied to the principal of the Loans and LC Reimbursement Obligations
or, if it exceeds such unpaid principal, refunded to the Borrower. In
determining whether the interest contracted for, charged, or received by any
Agent or any Lender exceeds the Highest Lawful Rate, such Person may, to the
extent permitted by applicable law, (a) characterize any payment that is not
principal as an expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations hereunder. The right to
accelerate maturity of the Loans and the other Obligations does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and the Administrative Agent and the Lenders do not intend to
charge or receive any unearned interest in the event of acceleration.
     (b) If at any time the interest rate (the “Stated Rate”) called for under
this Agreement or any other Loan Document exceeds or would exceed the Highest
Lawful Rate, the rate at which interest shall accrue thereunder shall
automatically be limited to the Highest Lawful Rate, and shall remain at the
Highest Lawful Rate until the total amount of interest accrued equals the total
amount of interest which would have accrued but for the operation of this
sentence. Thereafter, interest shall accrue at the Stated Rate unless and until
the Stated Rate would again exceed the Highest Lawful Rate, in which case the
immediately preceding sentence shall apply.
     Section 10.14. 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 10.15. Time of the Essence. Time is the essence of this Agreement
and the other Loan Documents.

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     Section 10.16. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
     Section 10.17. USA PATRIOT Act Notice. Each Lender that is subject to the
Act (as hereinafter defined) and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of each Loan Party and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify each Loan Party in
accordance with the Act.
     Section 10.18. No Advisory or Fiduciary Responsibility. In connection with
all aspects of each transaction contemplated hereby, the Borrower and Holdings
each acknowledge and agree, and acknowledge their respective Affiliates’
understanding, that: (i) the credit facility provided for hereunder and any
related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the
Borrower, Holdings and their respective Affiliates, on the one hand, and the
Administrative Agent and, the Arranger, on the other hand, and each of the
Borrower and Holdings is capable of evaluating and understanding and understands
and accepts the terms, risks and conditions of the transactions contemplated
hereby and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, the Administrative Agent and the Arranger each is and has been
acting solely as a principal and is not the financial advisor, agent or
fiduciary, for the Borrower, Holdings or any of their respective Affiliates,
stockholders, creditors or employees or any other Person; (iii) neither the
Administrative Agent nor the Arranger has assumed or will assume an advisory,
agency or fiduciary responsibility in favor of the Borrower or Holdings with
respect to any of the transactions contemplated hereby or the process leading
thereto, including with respect to any amendment, waiver or other modification
hereof or of any other Loan Document (irrespective of whether the Administrative
Agent or the Arranger has advised or is currently advising the Borrower,
Holdings or any of their respective Affiliates on other matters) and neither the
Administrative Agent nor, the Arranger has any obligation to the Borrower,
Holdings or any of their respective Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; (iv) the Administrative Agent and, the Arranger and
their respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Borrower, Holdings and their
respective Affiliates, and neither the Administrative Agent nor the Arranger has
any obligation to disclose any of such interests by virtue of any advisory,
agency or fiduciary relationship; and (v) the Administrative Agent and the
Arranger have not provided and will not provide any legal, accounting,
regulatory or tax advice with respect to any of the transactions contemplated
hereby (including any amendment, waiver or other modification hereof or of any
other Loan Document) and each of the Borrower and Holdings has consulted its own
legal, accounting, regulatory and tax advisors to the extent it has deemed
appropriate. Each of the Borrower and Holdings hereby waives and releases, to
the fullest extent permitted by law, any claims that it may have against the
Administrative Agent and the Arranger with respect to any breach or alleged
breach of agency or fiduciary duty.
     Section 10.19. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

              NGAS RESOURCES, INC.,
a British Columbia corporation

 
  By:   /s/ Michael P. Windisch
 
       
 
      Michael P. Windisch,
Chief Financial Officer

    DAUGHERTY PETROLEUM, INC.,
a Kentucky corporation

 
  By:   /s/ Michael P. Windisch
 
       
 
      Michael P. Windisch,
Chief Financial Officer

    KEYBANK NATIONAL ASSOCIATION,
as the Administrative Agent, a Lender and the Issuing Bank

 
  By:   /s/ Thomas Rajan
 
       
 
      Thomas Rajan,
Senior Vice President

    COMERICA BANK,
as a Lender

 
  By:   /s/ Huma Vadgama
 
       
 
      Huma Vadgama,
Vice President