exv10w1



 





Exhibit 10.1




 

 






SECOND AMENDED AND RESTATED CREDIT AGREEMENT




Dated as of December 15, 2006




among




COMSTOCK RESOURCES, INC.,

as the Borrower,




BANK OF MONTREAL,

as Administrative Agent and Issuing Bank,




BANK OF AMERICA, N.A.,

as Syndication Agent




COMERICA BANK, FORTIS CAPITAL CORP.,

and UNION BANK OF CALIFORNIA, N.A.,

as Co-Documentation Agents




The Other Lenders Party Hereto,




BMO CAPITAL MARKETS, INC.

as Arranger




 

 






 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
	 	 	2	 
	 
	 	 	 	 
	SECTION 1.1  Defined Terms
	 	 	2	 
	SECTION 1.2   Other Interpretive Provisions
	 	 	20	 
	SECTION 1.3   Accounting Terms
	 	 	21	 
	SECTION 1.4   Rounding
	 	 	21	 
	SECTION 1.5   References to Agreements and Laws
	 	 	21	 
	SECTION 1.6   Designation and Conversion of Restricted and Unrestricted Subsidiaries
	 	 	21	 
	 
	 	 	 	 
	ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS
	 	 	22	 
	 
	 	 	 	 
	SECTION 2.1   Loans
	 	 	22	 
	SECTION 2.2   Borrowings, Conversions and Continuations of Loans
	 	 	23	 
	SECTION 2.3   Letters of Credit
	 	 	24	 
	SECTION 2.4   Prepayments
	 	 	32	 
	SECTION 2.5   Reduction or Termination of Commitments and Maximum Loan Amount
	 	 	34	 
	SECTION 2.6   Repayment of Loans
	 	 	34	 
	SECTION 2.7   Initial Borrowing Base
	 	 	34	 
	SECTION 2.8   Subsequent Determinations of Borrowing Base
	 	 	34	 
	SECTION 2.9   Interest
	 	 	36	 
	SECTION 2.10 Fees
	 	 	36	 
	SECTION 2.11 Computation of Interest and Fees
	 	 	37	 
	SECTION 2.12 Notes and Other Evidence of Debt
	 	 	37	 
	SECTION 2.13 Payments Generally
	 	 	38	 
	SECTION 2.14 Sharing of Payments
	 	 	39	 
	SECTION 2.15 Increase in Commitment Amounts and Aggregate Commitments
	 	 	40	 
	 
	 	 	 	 
	ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	41	 
	 
	 	 	 	 
	SECTION 3.1   Taxes
	 	 	41	 
	SECTION 3.2   Illegality
	 	 	42	 
	SECTION 3.3   Inability to Determine Rates
	 	 	43	 
	SECTION 3.4   Increased Cost and Reduced Return; Capital Adequacy
	 	 	43	 
	SECTION 3.5   Funding Losses
	 	 	44	 






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(continued)





	 	 	 	 	 
	 	 	Page
	SECTION 3.6   Matters Applicable to all Requests for Compensation
	 	 	44	 
	SECTION 3.7   Survival
	 	 	45	 
	SECTION 3.8   Foreign Lenders
	 	 	45	 
	SECTION 3.9   Removal and Replacement of Lenders
	 	 	45	 
	 
	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
	 	 	46	 
	 
	 	 	 	 
	SECTION 4.1   Conditions of Initial Credit Extension
	 	 	46	 
	SECTION 4.2   Conditions to all Credit Extensions
	 	 	49	 
	 
	 	 	 	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES
	 	 	49	 
	 
	 	 	 	 
	SECTION 5.1   Existence, Qualification and Power; Compliance with Laws
	 	 	49	 
	SECTION 5.2   Authorization; No Contravention
	 	 	50	 
	SECTION 5.3   Governmental Authorization; Consents
	 	 	50	 
	SECTION 5.4   Binding Effect
	 	 	50	 
	SECTION 5.5   Financial Statements; No Material Adverse Effect
	 	 	50	 
	SECTION 5.6   Litigation
	 	 	50	 
	SECTION 5.7   No Default
	 	 	51	 
	SECTION 5.8   Ownership of Property; Liens
	 	 	51	 
	SECTION 5.9   Environmental Matters
	 	 	51	 
	SECTION 5.10  Insurance
	 	 	52	 
	SECTION 5.11  Taxes
	 	 	52	 
	SECTION 5.12  ERISA Compliance
	 	 	52	 
	SECTION 5.13  Subsidiaries
	 	 	53	 
	SECTION 5.14  Margin Regulations; Investment Company Act
	 	 	53	 
	SECTION 5.15  Disclosure
	 	 	53	 
	SECTION 5.16  Intellectual Property; Licenses, Etc
	 	 	54	 
	SECTION 5.17  Direct Benefit
	 	 	54	 
	SECTION 5.18  Solvency
	 	 	54	 
	SECTION 5.19  Indenture Debt Documents
	 	 	54	 
	 
	 	 	 	 
	ARTICLE VI. AFFIRMATIVE COVENANTS
	 	 	55	 
	 
	 	 	 	 
	SECTION 6.1   Financial Statements
	 	 	55	 
	SECTION 6.2   Certificates; Other Information
	 	 	55	 
	SECTION 6.3   Notices
	 	 	57	 






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TABLE OF CONTENTS

(continued)





	 	 	 	 	 
	 	 	Page
	SECTION 6.4   Payment of Obligations
	 	 	58	 
	SECTION 6.5   Preservation of Existence, Etc
	 	 	58	 
	SECTION 6.6   Maintenance of Properties
	 	 	58	 
	SECTION 6.7   Maintenance of Insurance
	 	 	58	 
	SECTION 6.8   Compliance with Laws
	 	 	58	 
	SECTION 6.9   Books and Records
	 	 	58	 
	SECTION 6.10  Inspection Rights
	 	 	58	 
	SECTION 6.11  Compliance with ERISA
	 	 	59	 
	SECTION 6.12  Use of Proceeds
	 	 	59	 
	SECTION 6.13  Title Materials
	 	 	59	 
	SECTION 6.14  [Intentionally Omitted]
	 	 	59	 
	SECTION 6.15  Additional Covenants
	 	 	59	 
	SECTION 6.16  Security
	 	 	60	 
	SECTION 6.17  [Intentionally Omitted]
	 	 	62	 
	SECTION 6.18 Unrestricted Subsidiaries
	 	 	62	 
	 
	 	 	 	 
	ARTICLE VII. NEGATIVE COVENANTS
	 	 	63	 
	 
	 	 	 	 
	SECTION 7.1   Liens
	 	 	63	 
	SECTION 7.2   Investments
	 	 	64	 
	SECTION 7.3   Indebtedness
	 	 	65	 
	SECTION 7.4   Fundamental Changes
	 	 	66	 
	SECTION 7.5   Dispositions
	 	 	66	 
	SECTION 7.6   Restricted Payments
	 	 	67	 
	SECTION 7.7   ERISA
	 	 	68	 
	SECTION 7.8   Change in Nature of Business
	 	 	68	 
	SECTION 7.9   Transactions with Affiliates
	 	 	68	 
	SECTION 7.10 Burdensome Agreements
	 	 	68	 
	SECTION 7.11 Use of Proceeds
	 	 	68	 
	SECTION 7.12 Payments and Modification of Indenture Debt Documents
	 	 	69	 
	SECTION 7.13 Financial Covenants
	 	 	69	 
	SECTION 7.14 Limitation on Hedges
	 	 	70	 






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(continued)





	 	 	 	 	 
	 	 	Page
	ARTICLE
VIII. EVENTS OF DEFAULT AND REMEDIES
	 	 	70	 
	 
	 	 	 	 
	SECTION 8.1   Events of Default
	 	 	70	 
	SECTION 8.2   Remedies Upon Event of Default
	 	 	72	 
	SECTION 8.3   Distribution of Proceeds
	 	 	73	 
	 
	 	 	 	 
	ARTICLE IX. ADMINISTRATIVE AGENT
	 	 	73	 
	 
	 	 	 	 
	SECTION 9.1   Appointment and Authorization of Administrative Agent
	 	 	73	 
	SECTION 9.2   Delegation of Duties
	 	 	74	 
	SECTION 9.3   Liability of Administrative Agent
	 	 	74	 
	SECTION 9.4   Reliance by Administrative Agent
	 	 	75	 
	SECTION 9.5   Notice of Default
	 	 	75	 
	SECTION 9.6   Credit Decision; Disclosure of Information by Administrative Agent
	 	 	75	 
	SECTION 9.7   Indemnification of Administrative Agent
	 	 	76	 
	SECTION 9.8   Administrative Agent in its Individual Capacity
	 	 	76	 
	SECTION 9.9   Successor Administrative Agent
	 	 	77	 
	SECTION 9.10
Other Agents; Lead Managers
	 	 	77	 
	SECTION 9.11 Hedging Arrangements
	 	 	77	 
	 
	 	 	 	 
	ARTICLE X. MISCELLANEOUS
	 	 	78	 
	 
	 	 	 	 
	SECTION 10.1   Amendments, Etc
	 	 	78	 
	SECTION 10.2   Notices and Other Communications; Facsimile Copies
	 	 	79	 
	SECTION 10.3   No Waiver; Cumulative Remedies
	 	 	80	 
	SECTION 10.4   Attorney Costs, Expenses and Taxes
	 	 	80	 
	SECTION 10.5   Indemnification by the Borrower
	 	 	81	 
	SECTION 10.6   Payments Set Aside
	 	 	81	 
	SECTION 10.7   Successors and Assigns; Assignments; Participations
	 	 	82	 
	SECTION 10.8   Confidentiality
	 	 	85	 
	SECTION 10.9   Set-off
	 	 	85	 
	SECTION 10.10 Interest Rate Limitation
	 	 	86	 
	SECTION 10.11 Counterparts
	 	 	87	 
	SECTION 10.12 Survival of Representations and Warranties
	 	 	87	 
	SECTION 10.13 Collateral Matters; Hedges
	 	 	87	 
	SECTION 10.14 Renewal and Continuation of Prior Indebtedness
	 	 	87	 






-iv-









 




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(continued)





	 	 	 	 	 
	 	 	Page
	SECTION 10.15 Severability
	 	 	87	 
	SECTION 10.16 Authorization to Release Subordinate Mortgages
	 	 	88	 
	SECTION 10.17 USA PATRIOT Act Notice
	 	 	88	 
	SECTION 10.18 Governing Law
	 	 	88	 
	SECTION 10.19 Waiver of Right to Trial by Jury
	 	 	89	 
	SECTION 10.20 Consents to Renewals, Modifications and Other Actions and Events

	 	 	89	 
	
SECTION 10.21 ENTIRE AGREEMENT
	 	 	90	 






-v-









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	 	 	Page
	SCHEDULES	 	 
	 
	 	 	 	 
	2.1

	 	Commitment Amounts and Percentage Shares	 	 
	4.1

	 	Security Schedule	 	 
	5.6

	 	Litigation	 	 
	5.13

	 	Subsidiaries and Other Equity Investments	 	 
	7.1

	 	Existing Liens	 	 
	7.2

	 	Existing Investments	 	 
	7.3

	 	Prior Indebtedness	 	 
	7.10

	 	Permitted Restrictions on Lien Incurrence	 	 
	10.2

	 	Eurodollar and Domestic Lending Offices, Addresses for Notices	 	 
	 
	 	 	 	 
	EXHIBITS	 	 
	 
	 	 	 	 
	 

	 	Form of	 	 
	 
	 	 	 	 
	A

	 	Notice of Advance	 	 
	B

	 	Note	 	 
	C

	 	Compliance Certificate	 	 
	D

	 	Lender Assignment	 	 
	E

	 	[Amended and Restated] Subsidiary Guaranty	 	 
	F-1

	 	Opinion of Borrower’s Counsel	 	 
	F-2

	 	Opinion of New York Local Counsel to Borrower	 	 
	F-3

	 	Opinion of Texas Local Counsel to Borrower	 	 
	F-4

	 	Opinion of Louisiana Local Counsel to Borrower	 	 
	F-5

	 	Opinion of Oklahoma Local Counsel to Borrower	 	 
	F-6

	 	Opinion of Mississippi Local Counsel to Borrower	 	 
	G

	 	[Amended and Restated] Subordination Agreement	 	 
	H

	 	[Amended and Restated] Pledge Agreement and Irrevocable Proxy	 	 
	I

	 	[Amended and Restated] Security Agreement	 	 
	J

	 	Additional Lender Certificate	 	 







-vi-









 






SECOND AMENDED AND RESTATED CREDIT AGREEMENT




     This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of December 15, 2006, among
COMSTOCK RESOURCES, INC., a Nevada corporation (“Borrower”), each lender from time to time
party hereto (collectively, the “Lenders” and each individually, a “Lender”), BANK
OF MONTREAL, as Administrative Agent and Issuing Bank, BANK OF AMERICA, N.A., as syndication agent,
and COMERICA BANK, FORTIS CAPITAL CORP., and UNION BANK OF CALIFORNIA, N.A., as co-documentation
agents.



PRELIMINARY STATEMENTS




     Borrower, Bank of Montreal, as administrative agent and as issuing bank, and certain lenders
party thereto (the “Prior Lenders”) have heretofore entered into an Amended and Restated
Credit Agreement dated as of February 25, 2004, as amended, modified or supplemented (the
“Prior Credit Facility”).



     Borrower desires to amend and restate the Prior Credit Facility in order to restructure,
rearrange, renew, extend and continue all indebtedness evidenced by and outstanding under the Prior
Credit Facility (the “Prior Indebtedness”), and to modify the commitments from the Lenders
pursuant to which Loans will be made by the Lenders to the Borrower from time to time prior to the
Maturity Date and Letters of Credit will be issued by the Issuing Bank under the several
responsibilities of the Lenders for the account of the Borrower from time to time prior to the
Letter of Credit Availability Expiration Date.



     Borrower has delivered to Bank of Montreal, as administrative agent, certain collateral
documents to secure the repayment of the Prior Indebtedness to the Prior Lenders, which collateral
documents are being amended or amended and restated in connection with, and concurrently with, the
restructuring, rearrangement, renewal, extension and continuation of the Prior Indebtedness
pursuant to this Agreement.



     The Administrative Agent, the Lenders and the Issuing Bank are willing, on the terms and
subject to the conditions hereinafter set forth (including Article IV), to amend and
restate the Prior Credit Facility in order to restructure, rearrange, renew, extend and continue
all Prior Indebtedness and to modify the commitments and make such Loans to the Borrower and issue
and participate in such Letters of Credit for the account of the Borrower.



     It is in the best interest of each of the Guarantors to execute and deliver a Guaranty as each
Guarantor will receive substantial benefits as a result of the Borrower entering into the borrowing
base, revolving credit facility with the Administrative Agent, the Issuing Bank and the Lenders.



     In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:



 









 





ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS




     SECTION 1.1 Defined Terms. As used in this Agreement, the following terms shall have the
meanings set forth below:



     “2004 Senior Notes” means those certain 67/8% senior unsecured
notes due 2012, issued by the Borrower in an aggregate principal amount of $175,000,000 on the date
of issuance thereof under the 2004 Senior Notes Indenture.



     “2004 Senior Notes Indenture” means that certain Indenture dated as of February 25,
2004, by and between Borrower and The Bank of New York Trust Company, N.A., as trustee, as
supplemented by the First Supplemental Indenture dated as of February 25, 2004, and related
documentation entered into in connection therewith pursuant to which the 2004 Senior Notes shall
have been issued, as the same may be amended, restated, modified or supplemented from time to time.



     “Adjusted LIBO Rate” means, with respect to each particular Borrowing comprised of
LIBO Rate Loans and the associated LIBO Rate and Reserve Percentage, the rate per annum calculated
by the Administrative Agent (rounded upwards, if necessary, to the next higher 1/100%) determined
on a daily basis pursuant to the following formula:



	 	 	 	 	 	 	 
	Adjusted LIBO Rate

	 	=
	 	LIBO Rate
 

(1.00% – Reserve Percentage)
	 	 






     “Administrative Agent” means Bank of Montreal in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent.



     “Administrative Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.2, or such other address or account as the
Administrative Agent may from time to time designate to the Borrower, the Issuing Bank, and the
Lenders.



     “Affiliate” means, as to any Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, such Person. A Person
shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or
indirectly, the power (a) to vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general partners; or (b) to direct
or cause the direction of the management and policies of such Person whether by contract or
otherwise.



     “Agent and Arranger Fee Letter” has the meaning set forth in Section 2.10(b).



     “Agent-Related Persons” means the Administrative Agent (including any successor
administrative agent), together with its Affiliates (including, in the case of BMO in its capacity
as the Administrative Agent, the Issuing Bank and the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.



2









 





     “Aggregate Commitments” means, as of any date, the sum of the Commitment Amounts of
all the Lenders.



     “Agreement” means this Amended and Restated Credit Agreement, as amended, restated,
amended and restated, supplemented or otherwise modified from time to time.



     “Arranger” means BMO Capital Markets, Inc., in its capacity as sole arranger.



     “Attorney Costs” means and includes all reasonable fees and disbursements of any law
firm or other external counsel.



     “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of
any Person, the capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease
Obligation, the capitalized amount of the remaining lease payments under the relevant lease that
would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.



     “Base Rate” means, on any date and with respect to all Base Rate Loans, a fluctuating
rate of interest per annum equal to the higher of (a) the rate of interest most recently announced
by Bank of Montreal at its Chicago, Illinois office as its base rate for dollar advances made in
the United States or (b) the Federal Funds Rate most recently determined by the Administrative
Agent plus 1/2% (0.5%) per annum. The Base Rate is not necessarily intended to be the lowest
rate of interest determined by Bank of Montreal or any Lender in connection with extensions of
credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans
will take effect simultaneously with each change in the Base Rate. The Administrative Agent will
give notice to the Borrower of changes in the Base Rate promptly upon receipt of notice of any such
change from Bank of Montreal.



     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.



     “Base Rate Spread” means, with respect to any Base Rate Loan for any time prior to the
Maturity Date, the percentage per annum set forth below under the caption “Base Rate Spread”,
determined by reference to the percentage of the Borrowing Base that the sum of all Loans
outstanding plus all L/C Obligations represents at that time.



	 	 	 	 	 
	Percentage of	 	 
	Borrowing Base	 	 
	Usage	 	Base Rate Spread
	3  90%
	 	 	0.250	%
	375% but <90%
	 	 	0.000	%
	350% but <75%
	 	 	0.000	%
	<50%
	 	 	0.000	%






3









 





     “BMO” means Bank of Montreal and its successors and assigns.



     “Board” means the Board of Governors of the Federal Reserve System of the United
States of America.



     “Bois d’Arc Energy” means Bois d’Arc Energy, Inc., a Nevada corporation, successor by
conversion to Bois d’Arc Energy, LLC, a Nevada limited liability company.



     “Bois d’Arc Entities” means Bois d’Arc Energy, Bois d’Arc Properties, LP, a Nevada
limited partnership, Bois d’Arc Holdings, LLC, a Nevada limited liability company, Bois d’Arc
Offshore, Ltd., a Texas limited partnership, Bois d’Arc Oil & Gas Company, LLC, a Texas limited
liability company, and any other Subsidiary of Bois d’Arc Energy.



     “Borrower” has the meaning set forth in the introductory paragraph hereto.



     “Borrowing” means a borrowing consisting of simultaneous Loans of the same Type and
having the same Interest Period made by Lenders pursuant to Section 2.1.



     “Borrowing Base” means, at the particular time in question, either the amount provided
for in Section 2.7 or the amount determined by the Administrative Agent and approved by the
Required Borrowing Base Lenders or all of the Lenders, as applicable, in accordance with the
provisions of Section 2.8; provided, however, that in no event shall the
Borrowing Base ever exceed the Maximum Loan Amount.



     “Borrowing Base Deficiency” has the meaning set forth in Section 2.4.2(ii).



     “Borrowing Base Deficiency Rate” means an interest rate equal to the Base Rate
plus 0.50% per annum; provided, however, that with respect to a LIBO Rate
Loan, the Borrowing Base Deficiency Rate shall be an interest rate equal to the LIBO Rate otherwise
applicable to such Loan plus 2.0% per annum, in each case to the fullest extent permitted
by applicable Laws.



     “Business Day” means any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, Chicago,
Illinois or Houston, Texas and, if such day relates to any LIBO Rate Loan, means any such day on
which dealings in Dollar deposits are conducted in London, England.



     “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative
Agent, for the benefit of the Issuing Bank and the Lenders, as collateral for the L/C Obligations,
cash or deposit account balances pursuant to documentation in form and substance satisfactory to
the Administrative Agent and the Issuing Bank (which documents are hereby consented to by the
Lenders). Derivatives of such term shall have corresponding meaning. The Borrower hereby grants
the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, a Lien on all such
cash and deposit account balances. Cash collateral shall be maintained in a blocked account at BMO
or other institutions satisfactory to BMO.



4









 





     “Change of Control” means, with respect to any Person, an event or series of events by
which:



     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of such Person or its
subsidiaries, or any Person acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan), becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that a person shall be deemed to have
“beneficial ownership” of all securities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or indirectly, of 50%
or more of the equity interests of such Person; or



     (b) during any period of 12 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of such Person cease to be composed of individuals (i)
who were members of that board or equivalent governing body on the first day of such period, (ii)
whose election or nomination to that board or equivalent governing body was approved by individuals
referred to in clause (i) above constituting at the time of such election or nomination at
least a majority of that board or equivalent governing body or (iii) whose election or nomination
to that board or other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or nomination
at least a majority of that board or equivalent governing body.



     “Closing Date” means the first date all the conditions precedent in Section
4.1 are satisfied or waived in accordance with Section 4.1 (or, in the case of
Section 4.1(b), waived by the Person entitled to receive the applicable payment).



     “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated thereunder.



     “COGI” means Comstock Oil & Gas, LP, a Nevada limited partnership,
successor-by-conversion to Comstock Oil & Gas, Inc.



     “COGI GP” means Comstock Oil & Gas GP, LLC, a Nevada limited liability company.



     “COGI LP” means Comstock Oil & Gas Investments, LLC, a Nevada limited partnership.



     “COGH” means Comstock Oil & Gas Holdings, Inc., a Nevada corporation.



     “COGLA” means Comstock Oil & Gas – Louisiana, LLC, a Nevada limited liability company,
successor-by-conversion to Comstock Oil & Gas – Louisiana, Inc., a Nevada corporation.



     “COL” means Comstock Offshore, LLC, a Nevada limited liability company.



     “Commitment” means, as to each Lender, its obligation to (a) make Loans to the
Borrower pursuant to Section 2.1, and (b) purchase participations in L/C Obligations
pursuant to



5









 




Section 2.3, in an aggregate principal amount at any one time outstanding not to
exceed the lesser of (x) such Lender’s Commitment Amount and (y) such Lender’s Percentage Share of
the Borrowing Base.




     “Commitment Amount” means, as to each Lender, the amount set forth opposite such
Lender’s name on Schedule 2.1, as such amount may be increased, reduced or adjusted from
time to time in accordance with this Agreement.



     “Commitment Fee Rate” means for any time prior to the Maturity Date, the percentage
per annum set forth below under the caption “Commitment Fee Rate”, determined by reference to the
percentage of the Borrowing Base that the sum of all Loans outstanding plus all L/C
Obligations represents at that time.



	 	 	 	 	 
	Percentage of	 	 
	Borrowing Base	 	Commitment
	Usage	 	Fee Rate
	3 90%
	 	 	0.375	%
	375% but <90%
	 	 	0.375	%
	3 50% but <75%
	 	 	0.375	%
	<50%
	 	 	0.250	%






     “Compliance Certificate” means a certificate substantially in the form of Exhibit
C.



     “Consolidated Net Income” means, for any period, for Borrower and its Subsidiaries on
a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations
after extraordinary items (excluding gains or losses from Dispositions of assets) for that period.



     “Consolidated Tangible Net Worth” means, as of any date of determination, for Borrower
and its Subsidiaries on a consolidated basis, Shareholders’ Equity of Borrower and its Subsidiaries
on that date minus the Intangible Assets of Borrower and its Subsidiaries on that date.



     “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 each of the following: (a) a Borrowing, and (b) an L/C Credit
Extension.



     “Current Assets” and “Current Liabilities” shall mean all assets or
liabilities of Borrower and its Restricted Subsidiaries on a consolidated basis, respectively, that
should be classified as current assets and current liabilities in accordance with GAAP;
provided that the calculation of Current Assets shall not include receivables of the
Borrower owing by any Affiliate in excess of 120 days or subject to any dispute or offset, advances
by the Borrower to any Affiliate or any



6









 







asset classified as a Current Asset solely because it is held for sale; and provided further that
Current Liabilities shall not include the current maturities of any Indebtedness of the
Borrower for borrowed money that by its terms has a final maturity more than one year from the date
of any calculation of Current Liabilities.



     “Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and
all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws
of the United States of America or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.



     “Default” means any event that, with the giving of any notice, the passage of time, or
both, would be an Event of Default.



     “Default Rate” means an interest rate equal to (a) the Base Rate plus (b) the
Base Rate Spread, if any, applicable to Base Rate Loans plus (c) 2% per annum;
provided, however, that with respect to a LIBO Rate Loan, the Default Rate shall be
an interest rate equal to the interest rate (including any LIBOR Spread) otherwise applicable to
such Loan plus 2% per annum, in each case to the fullest extent permitted by applicable
Laws.



     “Determination Date” has the meaning set forth in Section 2.8.



     “Disqualified Stock” means any capital stock that, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in part.



     “Disposition” or “Dispose” means the sale, transfer, license or other
disposition (including any sale and leaseback transaction) of any property by any Person, including
any sale, assignment, transfer or other disposal, with or without recourse, of any notes or
accounts receivable or any rights and claims associated therewith.



     “Dollar” and “$” means lawful money of the United States of America.



     “Eligible Assignee” has the meaning specified in Section 10.7.6.



     “Engineering Report” means the Initial Engineering Report and each engineering report
delivered pursuant to Section 6.2(g).



     “Environmental Laws” means all Laws relating to environmental, health, safety and land
use matters applicable to any property.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any regulations issued pursuant thereto.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with the Borrower or any Guarantor within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section
412 of the Code).



7









 





     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e)
of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a termination under
Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Borrower or any ERISA Affiliate.



     “Evaluation Date” means each of the following:



     (a) Each date which either the Borrower or the Required Borrowing Base Lenders, at their
respective options, specify as a date as of which the Borrowing Base is to be redetermined
(provided that neither the Borrower nor the Required Borrowing Base Lenders shall be
entitled to request any such redetermination more than once each between any two consecutive dates
described in clause (b) of this definition of “Evaluation Date”); and



     (b) May 1 and November 1 of each year occurring prior to the Final Maturity Date, beginning
May 1, 2007.



     “Event of Default” means any of the events or circumstances specified in Article
VIII.



     “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards to the
nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate charged to BMO on such
day on such transactions as determined by the Administrative Agent.



     “Foreign Lender” has the meaning specified in Section 3.8.



     “GAAP” means generally accepted accounting principles and practices that are
recognized as such by the Financial Accounting Standards Board (or any generally recognized
successor). If at any time any change in GAAP would affect the computation of any financial ratio
or requirement set forth in any Loan Document, and the Borrower or the Majority Lenders



8









 







or the Administrative Agent shall so request, the Administrative Agent, the Lenders and the Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP; provided that, until so amended, (a) such
ratio or requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (b) the Borrower shall provide to the Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.



     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative
tribunal, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.



     “Governmental Requirements” means all judgment, orders, writs, injunctions, decrees,
awards, laws, ordinances, statutes, regulations, rules, franchises, permits, certificates,
licenses, authorizations and the like and any other requirements of any government or any
commission, board, court, agency, instrumentality or political subdivision thereof.



     “Guarantors” means each of the Subsidiaries listed in Part (b) of Schedule
5.13 and each other Subsidiary of the Borrower that shall have executed and delivered a
Guaranty to the Administrative Agent for the benefit of the Lenders; provided that upon the release
of any Subsidiary’s Guaranty in accordance with this Agreement, such Subsidiary shall thereafter be
excluded from the definition of “Guarantors” (unless and until such Subsidiary shall thereafter
deliver another Guaranty).



     “Guaranty” means (a) each subsidiary guaranty (including any amended and restated
subsidiary guaranty) dated as of the date hereof made by each of the Guarantors in favor of the
Administrative Agent on behalf of the Lenders, substantially in the form of Exhibit E and
(b) each other guaranty (which shall also be substantially in the form of Exhibit E) in
favor of the Administrative Agent on behalf of the Lenders delivered in accordance with this
Agreement.



     “Guaranty Obligation” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guarantying or having the economic effect of guarantying any Indebtedness
or other obligation payable or performable by another Person (the “primary obligor”) in any manner,
whether directly or indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the
payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into
for the purpose of assuring in any other manner the obligees in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such obligees against loss in
respect thereof (in whole or in part), or (b) any Lien on any



9









 







assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person; provided, however, that the term “Guaranty
Obligation” shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the related primary
obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guarantying Person in good faith.



     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.



     “Hedging Agreement” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or governed by, any
form of master agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement.



     “Highest Lawful Rate” has the meaning given to it in Section 10.10.



     “Honor Date” has the meaning set forth in Section 2.3.3(i).



     “Hydrocarbon Interest” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases or other liquid or
gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests,
operating rights, net profit interests, production payment interests and other similar types of
interests, including any reserved or residual interest of whatever nature.



     “Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or
separated therefrom.



     “ICC” has the meaning set forth in Section 2.3.7.



10









 





     “Indebtedness” means, as to any Person at a particular time, all of the following:



     (a) all obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes, loan agreements or other similar instruments;



     (b) any direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), banker’s acceptances, bank guaranties, surety bonds and similar
instruments;



     (c) net obligations under any Hedging Agreement in an amount equal to (i) if such Hedging
Agreement has been closed out, the termination value thereof, or (ii) if such Hedging Agreement has
not been closed out, the mark-to-market value thereof determined on the basis of readily available
quotations provided by any recognized dealer in such Hedging Agreement;



     (d) whether or not so included as liabilities in accordance with GAAP, all obligations of such
Person to pay the deferred purchase price of property or services, and indebtedness (excluding
prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;



     (e) capital leases and Synthetic Lease Obligations; and



     (f) all Guaranty Obligations of such Person in respect of any of the foregoing.



     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person except for customary exceptions
acceptable to the Majority Lenders. The amount of any capital lease or Synthetic Lease Obligation
as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as
of such date.



     “Indemnified Liabilities” has the meaning set forth in Section 10.5.



     “Indemnitees” has the meaning set forth in Section 10.5.



     “Indenture Debt” means all present and future Indebtedness and other liabilities owing
pursuant to the Indenture Debt Documents.



     “Indenture Debt Documents” means the 2004 Senior Notes Indenture and any documents
related to or delivered in connection with any refinancings, refundings, renewals or extensions of
the facilities described in the 2004 Senior Notes Indenture.



     “Initial Audited Financial Statements” means each of the audited consolidated balance
sheet of the Borrower and its Subsidiaries as of December 31, 2005 and the related consolidated
statements of income and cash flows of the Borrower for the fiscal year ended December 31, 2005.



11









 





     “Initial Engineering Report” means, collectively, the engineering report dated as of
July 1, 2006 concerning Oil and Gas Properties of the Borrower, COGI, COGH, COGLA and COL, prepared
by the Borrower.



     “Intangible Assets” means assets that are considered to be intangible assets under
GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks,
patents, unamortized deferred charges, unamortized debt discount and capitalized research and
development costs.



     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan; provided, however, that
if any Interest Period for a LIBO Rate Loan exceeds three months, the respective dates that fall
every three months after the beginning of such Interest Period shall also be Interest Payment
Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and
December and the Maturity Date.



     “Interest Period” means as to each LIBO Rate Loan, the period commencing on the date
such LIBO Rate Loan is disbursed or (in the case of any Base Rate Loan) converted to or continued
as a LIBO Rate Loan and ending on the date one, two, three or six months thereafter, as selected by
the Borrower in its Notice of Advance; provided that:




     (i) any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless, in the case of a LIBO Rate
Loan, such Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;




     (ii) any Interest Period pertaining to a LIBO Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest Period; and




     (iii) no Interest Period shall extend beyond the scheduled Maturity Date.



     “Investment” means, as to any Person, any acquisition or investment by such Person,
whether by means of (a) the purchase or other acquisition of capital stock or other securities of
another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in, another Person,
including any partnership or joint venture interest in such other Person, or (c) the purchase or
other acquisition (in one transaction or a series of transactions) of assets of another Person that
constitute a business unit. For purposes of covenant compliance, the amount of any Investment
shall be the amount actually invested, without adjustment for subsequent increases or decreases in
the value of such Investment.



     “IRS” means the United States Internal Revenue Service.



     “Issuing Bank” means Bank of Montreal in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder.



12









 





     “Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.



     “L/C Advance” means, with respect to any Lender, such Lender’s participation in any
L/C Borrowing in accordance with its Percentage Share.



     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter
of Credit that has not been reimbursed on the date when made or refinanced as a Borrowing.



     “L/C Collateral” has the meaning set forth in Section 2.3.11.



     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.



     “L/C Obligations” means, as at any date of determination, the aggregate undrawn face
amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts,
including all L/C Borrowings.



     “Lender” has the meaning set forth in the introductory paragraph hereto and, as the
context requires, includes the Issuing Bank.



     “Lender Assignment” means a Lender Assignment substantially in the form of Exhibit
D.



     “Lending Office” means, as to any Lender, the office or offices of such Lender
described as such on Schedule 10.2, or such other office or offices as a Lender may from
time to time designate to the Borrower and the Administrative Agent.



     “Letter of Credit” means any standby or commercial letter of credit issued hereunder.



     “Letter of Credit Application” means an application and agreement for the issuance or
amendment of a letter of credit in the form from time to time in use by the Issuing Bank.



     “Letter of Credit Availability Expiration Date” means the day that is seven days prior
to the Maturity Date (or, if such day is not a Business Day, the next preceding Business Day).



     “Letter of Credit Sublimit” means an amount equal to the lowest of (x) the Aggregate
Commitments, (y) $50,000,000, and (z) the Borrowing Base. The Letter of Credit Sublimit is part
of, and not in addition to, the Aggregate Commitments.



     “LIBO Rate” shall mean, with respect to any LIBO Rate Loan within a Borrowing and with
respect to the related Interest Period, the rate of interest per annum equal to the offered
quotation appearing on Telerate Page 3750 at approximately 11:00 a.m. (London time) on the date
which is two Business Days prior to the beginning of the relevant Interest Period (or if such



13









 







Telerate Page shall not be available, the rate per annum determined by the Administrative
Agent by reference to the British Bankers’ Association Interest Settlement Rate for deposits in
U.S. dollars as set forth by any service which has been nominated by the British Bankers’
Association as an authorized information vendor for the purpose of displaying such rates) for a
period most closely approximating such Interest Period, provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provision of this definition, the
“LIBO Rate” shall be the interest rate per annum, determined by the Administrative Agent to be the
average of the rates per annum at which deposits in U.S. dollars are offered for such relevant
Interest Period to major banks in the London interbank market in London, England by the
Administrative Agent at approximately 11:00 a.m. (London time) on the date which is two Business
Days prior to the beginning of such Interest Period.



     “LIBO Rate Loan” means a Loan that bears interest at the Adjusted LIBO Rate.



     “LIBOR Spread” means with respect to any LIBO Rate Loan for any time prior to the
Maturity Date, the percentage per annum set forth below under the caption “LIBOR Spread,”
determined by reference to the percentage of the Borrowing Base that the sum of all Loans
outstanding plus all L/C Obligations represents at that time.



	 	 	 	 	 
	Percentage of	 	 
	Borrowing Base	 	 
	Usage	 	LIBOR Spread
	3 90%
	 	 	1.750	%
	375% but <90%
	 	 	1.500	%
	3 50% but < 75%
	 	 	1.250	%
	< 50%
	 	 	1.000	%






     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease having substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the Uniform Commercial
Code or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts
receivable.



     “Loan” has the meaning set forth in Section 2.1.



     “Loan Documents” means this Agreement, each Note, the Agent and Arranger Fee Letter,
each Notice of Advance, each Letter of Credit Application, each Letter of Credit, each of the
Security Documents, each Compliance Certificate, each Guaranty, each Subordination Agreement and
all other written agreements, certificates, documents, instruments and writings at any time
delivered in connection herewith or therewith.



     “Loan Parties” means, collectively, the Borrower and each Guarantor.



14









 





     “Majority Lenders” means, as of any date of determination, Lenders whose Voting
Percentages aggregate to greater than 50.0%.



     “Mandatory Prepayment Amount” has the meaning set forth in Section 2.4.2(ii).



     “Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of
the Borrower and its Restricted Subsidiaries taken as a whole; (b) a material impairment of the
ability of any Loan Party to perform its obligations under any Loan Document to which it is a
party; or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against any Loan Party of any Loan Document to which it is a party or upon the
rights and remedies of the Administrative Agent, the Issuing Bank, or any Lender under any Loan
Document.



     “Matured L/C Obligations” means all amounts paid by Issuing Bank on drafts or demands
for payment drawn or made under or purported to be under any Letter of Credit (or under or in
connection with any L/C Application) that have not been repaid to the Issuing Bank (with the
proceeds of a Loan or otherwise).



     “Maturity Date” means (a) December 15, 2011, or (b) such earlier date upon which the
Commitments may be terminated in accordance with the terms hereof.



     “Maximum Loan Amount” means $850,000,000 as such amount may be reduced from time to
time pursuant to Section 2.5.



     “Mortgage” means (i) each Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement and Fixture Filing dated as December 17, 2001 described in the Security
Schedule as (or as intended to be) assigned and amended pursuant to that certain Assignment of
Secured Indebtedness and that certain Assignment and Amendment of Mortgage, Deed of Trust,
Assignment, Security Agreement, Financing Statement and Fixture Filing, each dated as of February
25, 2004, (ii) each Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement
and Fixture Filing dated as February 25, 2004 described in the Security Schedule, and (iii) any
mortgage, deed of trust or similar document delivered pursuant to this Agreement, in each case, as
amended, supplemented, restated or otherwise modified from time to time.



     “Mortgaged Property” has the meaning set forth in the Mortgage.



     “Multiemployer Plan” means any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding three calendar years, has made or been obligated to make
contributions.



     “Net Sale Proceeds” means, with respect to any sale, lease, transfer or other
disposition of any asset by the Borrower or any Restricted Subsidiary, the aggregate amount of cash
or cash equivalents received by or paid to or for the account of the Borrower or such Restricted
Subsidiary from time to time (whether as initial consideration or through payment or disposition



15









 







of deferred consideration) by or on behalf of such Person in connection with such transaction
after deducting therefrom only (without duplication) (a) reasonable out-of-pocket costs and fees,
(b) the amount of taxes payable in connection with or as a result of such transaction and (c) the
amount of any Indebtedness permitted by Section 7.3 hereof secured by a Lien on such asset
permitted by Section 7.1 hereof that, by the terms of the agreement or instrument governing
such Indebtedness, is required to be repaid or may be prepaid upon such disposition, in each case,
to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid to a Person that is not an Affiliate of the Borrower or such Restricted
Subsidiary and are properly attributable to such transaction or to the asset that is the subject
thereof.



     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing
Loans made by such Lender, substantially in the form of Exhibit B.



     “Notice of Advance” means a notice, which, if in writing, shall be substantially in
the form of Exhibit A, of (a) a Borrowing, (b) a conversion of Loans from one Type to the
other, or (c) a continuation of Loans as the same Type, pursuant to Section 2.2(a).



     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document, whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest that accrues after the commencement by or
against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws
naming such Person as the debtor in such proceeding.



     “Oil and Gas Properties” means Hydrocarbon Interests; the properties now or hereafter
pooled or unitized with Hydrocarbon Interests; all presently existing or 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 have jurisdiction) that may affect all or any portion of the Hydrocarbon Interests; all
operating agreements, contracts and other agreements that relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interest; all Hydrocarbons in and under and which may be produced
and saved or attributable to the Hydrocarbon Interests, the lands covered thereby and all oil in
tanks and all rents, issues, profits, proceeds, products, revenues and other income from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests, properties, rights, titles, interests and estates described or referred to above,
including any and all property, real or personal, now owned or hereinafter 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 drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of drilling a well or for other
similar temporary uses) and including any and all oil wells, gas wells, injection wells or 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,



16









 







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.



     “Optional Indebtedness Payment” has the meaning set forth in Section 7.12.



     “Organization Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the
articles of formation 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 and any agreement, instrument, filing or notice with respect thereto filed
in connection with its formation with the secretary of state or other department in the state of
its formation, in each case as amended from time to time.



     “Outstanding Amount” means (i) with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any Borrowings and prepayments or
repayments of Loans occurring on such date; and (ii) with respect to any L/C Obligations on any
date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit
Extension occurring on such date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any reimbursements of outstanding unpaid
drawings under any Letters of Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.



     “Participant” has the meaning set forth in Section 10.7.3.



     “PBGC” means the Pension Benefit Guaranty Corporation.



     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any
ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.



     “Percentage Share” means, with respect to each Lender, the percentage (carried out to
the ninth decimal place) set forth opposite the name of such Lender on Schedule 2.1 (as
amended or modified from time to time) or on the relevant Lender Assignment, as the case may be, as
such percentage share may be adjusted as provided herein (including pursuant to Section
2.15).



     “Person” means any individual, trustee, corporation, general partnership, limited
partnership, limited liability company, joint stock company, trust, unincorporated organization,
bank, business association, firm, joint venture or Governmental Authority.



     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by the Borrower or any ERISA Affiliate.



17









 





     “Pledge Agreement” means each amended and restated Pledge Agreement and Irrevocable
Proxy dated as of the date hereof in favor of the Administrative Agent for the benefit of the
Lenders in the form of Exhibit H and each other pledge agreement in substantially the same
form in favor of the Administrative Agent for the benefit of the Lenders delivered in accordance
with this Agreement.



     “Pledged Note” mean each Pledged Note described in a Pledge Agreement pledged to the
Administrative Agent for the benefit of the Lenders and the Issuing Bank.



     “Prior Credit Facility” is defined in the first preliminary statement hereto.



     “Prior Indebtedness” is defined in the second preliminary statement hereto.



     “Prior Lenders” is defined in the first preliminary statement hereto.



     “Proved Reserves” means those Hydrocarbons that have been estimated with reasonable
certainty, as demonstrated by geological and engineering data, to be economically recoverable from
the Oil and Gas Properties by existing producing methods under existing economic conditions.



     “Register” has the meaning set forth in Section 10.7.2(b).



     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived.



     “Required Borrowing Base Lenders” means, as of any date of determination, Lenders
whose Voting Percentages aggregate to 66-2/3% or more.



     “Reserve Percentage” means, on any day with respect to each particular Borrowing
comprised of LIBO Rate Loans, the maximum reserve requirement as determined by the Administrative
Agent (including without limitation any basic, supplemental, marginal, emergency or similar
reserves and taking into account any transitional adjustments or other scheduled changes in reserve
requirements), expressed as a percentage, which would then apply under Regulation D with respect to
“Eurocurrency liabilities” (as such term is defined in Regulation D) equal in amount to each
Lender’s LIBO Rate Loan in such Borrowing, were such Lender to have any such “Eurocurrency
liabilities”. If such reserve requirement shall change after the date hereof, the Reserve
Percentage shall be automatically increased or decreased, as the case may be, from time to time as
of the effective time of each such change in such reserve requirement.



     “Responsible Officer” means the president, chief financial officer, treasurer or
assistant treasurer 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.



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     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock of the Borrower, any Guarantor or
any Restricted Subsidiary, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such capital stock or of any option, warrant or
other right to acquire any such capital stock.



     “Restricted Subsidiary” means (a) each of COGI GP, COGI LP, COGI, COGH, COGLA, COL and
(b) each other Subsidiary of the Borrower that is not designated as an Unrestricted Subsidiary
pursuant to Section 1.6.



     “Secured Obligations” means, collectively, the Obligations and all liabilities and
obligations of the Borrower or any Restricted Subsidiary arising under any Hedging Agreement now or
hereafter existing between or among the Borrower or any Restricted Subsidiary and any Lender or any
Affiliate of any Lender.



     “Security Agreement” means (a) each amended and restated Security Agreement dated as
of the date hereof in favor of the Administrative Agent for the benefit of the Lenders
substantially in the form of Exhibit I, and (b) each other security agreement (which shall
also be substantially in the form of Exhibit I) in favor of the Administrative Agent on
behalf of the Lender delivered in accordance with this Agreement.



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



     “Security Schedule” means Schedule 4.1 hereto.



     “Shareholders’ Equity” means, as of any date of determination for the Borrower and its
Subsidiaries on a consolidated basis, shareholders’ equity as of that date determined in accordance
with GAAP.



     “Subordinate Mortgages” means each Subordinate Mortgage, Deed of Trust, Assignment,
Security Agreement, Financing Statement and Fixture Filing heretofore delivered by a Guarantor in
favor of the Borrower to secure any Indebtedness of such Guarantor owing to the Borrower
outstanding including, without limitation, (i) each Subordinate Mortgage, Deed of Trust,
Assignment, Security Agreement, Financing Statement and Fixture Filing dated as December 17, 2001,
as assigned and amended, and (ii) each Subordinate Mortgage, Deed of Trust, Assignment, Security
Agreement, Financing Statement and Fixture Filing dated as February 25, 2004.



     “Subordination Agreement” means the Second Amended and Restated Intercompany
Subordination Agreement dated the date hereof and substantially in the form of Exhibit G,
as the same may be amended, modified, supplemented or restated from time to time.



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     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other governing body (other
than securities or interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of the Borrower.



     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property creating obligations that do not appear on the balance sheet of such Person
but which, upon the insolvency or bankruptcy of such Person, would be characterized as the
indebtedness of such Person (without regard to accounting treatment).



     “Type” means with respect to a Loan, its character as a Base Rate Loan or a LIBO Rate
Loan.



     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets,
determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section
412 of the Code for the applicable plan year.



     “Unreimbursed Amount” has the meaning set forth in Section 2.3.3(i).



     “Unrestricted Subsidiary” means (a) so long as it otherwise constitutes a Subsidiary,
Bois d’Arc Energy and each of the other Bois d’Arc Entities, and (b) each other Subsidiary of the
Borrower designated by the Borrower as an Unrestricted Subsidiary in accordance with, and subject
to the satisfaction of the conditions set forth in, Section 1.6.



     “Voting Percentage” means, as to any Lender, (a) at any time when the Commitments are
in effect, such Lender’s Percentage Share and (b) at any time after the termination of the
Commitments, the percentage (carried out to the ninth decimal place) which (i) the sum of (A) the
Outstanding Amount of such Lender’s Loans, plus (B) such Lender’s Percentage Share of the
Outstanding Amount of L/C Obligations, then constitutes of (ii) the sum of Outstanding Amount of
all Loans and L/C Obligations.



     SECTION 1.2 Other Interpretive Provisions.



     (a) The meanings of defined terms are equally applicable to the singular and plural forms of
the defined terms.



     (b) (i) The words “herein” and “hereunder” and words of similar import when
used in any Loan Document shall refer to such Loan Document as a whole and not to any particular
provision thereof.



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     (ii) Unless otherwise specified herein, Article, Section, Exhibit and Schedule
references are to this Agreement.




     (iii) The term “including” is by way of example and not limitation.




     (iv) The term “documents” includes any and all instruments, documents,
agreements, certificates, notices, reports, financial statements and other writings, however
evidenced.



     (c) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to and
including.”



     (d) Section headings herein and the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.



     (e) Pronouns in masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.



     SECTION 1.3 Accounting Terms. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent
basis, as in effect from time to time, applied in a manner consistent with that used in preparing
the Initial Audited Financial Statements, except as otherwise specifically prescribed
herein.



     SECTION 1.4 Rounding. Any financial ratios required to be maintained by the Borrower pursuant
to this Agreement shall be calculated by dividing the appropriate component by the other component,
carrying the result to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a rounding-up if there is no
nearest number).



     SECTION 1.5 References to Agreements and Laws. Unless otherwise expressly provided herein,
(a) references to agreements (including the Loan Documents) and other contractual instruments shall
be deemed to include all subsequent amendments, restatements, extensions, supplements and other
modifications thereto, but only to the extent that such amendments, restatements, extensions,
supplements and other modifications are not prohibited by any Loan Document; and (b) references to
any Law shall include all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such Law.



     SECTION 1.6 Designation and Conversion of Restricted and Unrestricted Subsidiaries.



     (a) Unless designated in writing to the Administrative Agent by the Borrower and approved by
the Administrative Agent and the Majority Lenders in accordance with clause (b)



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below, any Person that becomes a Subsidiary of the Borrower or any of its Restricted
Subsidiaries (whether by formation, acquisition or merger) shall be classified as a Restricted
Subsidiary; provided, however, that Bois d’Arc Energy and the other Bois d’Arc Entities shall be
classified and designated as Unrestricted Subsidiaries unless redesignated as Restricted
Subsidiaries in accordance with clause (c) below.




     (b) Any Subsidiary of the Borrower (including a newly formed or newly acquired Subsidiary) may
be designated (or redesignated) as an Unrestricted Subsidiary if (i) the Administrative Agent shall
have received (1) a written request from the Borrower specifying the applicable Subsidiary and such
other information as the Administrative Agent may reasonably request, (2) the written consent of
the Administrative Agent and the Majority Lenders approving such designation, and (3) a certificate
of a Responsible Officer of the Borrower certifying that no Default or Event of Default shall then
exist or would result from such designation (after giving effect to such designation), and (ii)
such designation is deemed to be an Investment in an amount equal to the fair market value of
Borrower’s direct and indirect ownership interest in such Subsidiary and such Investment would be
permitted under Section 7.2 to be made at the time of such designation. Except as provided
in this Section 1.6(b), no Subsidiary may be designated (and no Restricted Subsidiary may
be redesignated) as an Unrestricted Subsidiary.



     (c) Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if after
giving effect to such designation, (i) the representations and warranties of Borrower and its
Restricted Subsidiaries contained in each of the Loan Documents are true and correct on and as of
such date as if made on and as of the date of such redesignation (or, if stated to have been made
expressly as of an earlier date, were true and correct as of such date), (ii) no Default or Event
of Default then exists or would result from such redesignation (after giving effect to such
redesignation), and (iii) the Borrower complies, or causes such Subsidiary to comply, with the
requirements of Sections 6.16 and 6.18.



ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS




     SECTION 2.1 Loans. Subject to the terms and conditions set forth herein, each Lender
severally agrees to make loans (each such loan, a “Loan”) to the Borrower from time to time
on any Business Day during the period from the Closing Date to the Maturity Date, in an aggregate
amount not to exceed at any time outstanding the lesser of (x) such Lender’s Percentage Share of
the aggregate amount of the Loans requested by the Borrower on such day and (y) such Lender’s
Commitment Amount; provided, however, that after giving effect to any borrowing,
(i) the aggregate Outstanding Amount of all Loans and L/C Obligations shall not exceed the lesser
of (A) the Aggregate Commitments on such date and (B) the Borrowing Base then in effect, and (ii)
the aggregate Outstanding Amount of the Loans of any Lender, plus such Lender’s Percentage
Share of the Outstanding Amount of all L/C Obligations shall not exceed the lesser of such Lender’s
Commitment Amount or such Lender’s Percentage Share of the Borrowing Base. Within the limits of
each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrower may
borrow under this Section 2.1, prepay under Section 2.4 and reborrow under this
Section 2.1.



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     SECTION 2.2 Borrowings, Conversions and Continuations of Loans.



     (a) Each Borrowing, each conversion of Loans from one Type to the other, and each continuation
of Loans as the same Type shall be made upon the Borrower’s irrevocable prior written notice to the
Administrative Agent in the form of a Notice of Advance. Each such notice must be received by the
Administrative Agent not later than 12:00 p.m., central time, (i) three Business Days prior to the
requested date of any Borrowing of, conversion to or continuation of LIBO Rate Loans or of any
conversion of LIBO Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing
of Base Rate Loans. Each Notice of Advance shall be appropriately completed and signed by a
Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of LIBO Rate
Loans shall be in a principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess
thereof. Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof. Each Notice of Advance shall specify
(i) whether the Borrower is requesting a Borrowing, a conversion of Loans from one Type to the
other, or a continuation of Loans as the same Type, (ii) the requested date of the Borrowing,
conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal
amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to
which existing Loans are to be converted, and (v) if applicable, the duration of the Interest
Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Notice of
Advance or if the Borrower fails to give a timely notice requesting a conversion or continuation,
then the applicable Loans shall be made or continued as, or converted to, Base Rate Loans. Any
such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest
Period then in effect with respect to the applicable LIBO Rate Loans. If the Borrower requests a
Borrowing of, conversion to, or continuation of LIBO Rate Loans in any such Notice of Advance, but
fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one
month.



     (b) Following receipt of a Notice of Advance, the Administrative Agent shall promptly notify
each Lender of its Percentage Share of the applicable Loans, and if no timely notice of a
conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each
Lender of the details of any automatic conversion to Base Rate Loans described in the preceding
subsection. Each Lender shall make the amount of its Loan available to the Administrative Agent in
immediately available funds at the Administrative Agent’s Office not later than 2:00 p.m. central
time, on the Business Day specified in the applicable Notice of Advance. Upon satisfaction of the
applicable conditions set forth in Section 4.2 (and, if such Borrowing is the initial
Credit Extension, Section 4.1), the Administrative Agent shall make all funds so received
available to the Borrower in like funds as received by the Administrative Agent either by (i)
crediting the account of the Borrower on the books of BMO with the amount of such funds or (ii)
wire transfer of such funds, in each case in accordance with instructions provided to the
Administrative Agent by the Borrower; provided, however, that if, on the date of
the Borrowing there are L/C Borrowings outstanding, then the proceeds of such Borrowing shall be
applied, first, to the payment in full of any such L/C Borrowings, and second, to
the Borrower as provided above. Unless the Administrative Agent shall have received prompt notice
from a Lender that such Lender will not make available to the Administrative Agent such Lender’s
Loans, the Administrative Agent may in its discretion assume that such Lender has made such



23









 







Loans available to the Administrative Agent in accordance with this section and the
Administrative Agent may if it chooses, in reliance upon such assumption, make such Loan available
to the Borrower. If and to the extent such Lender shall not so make its Loan available to the
Administrative Agent, such Lender and the Borrower severally agree to pay or repay to the
Administrative Agent within two Business Days after demand the amount of such Loan together with
interest thereon, for each day from the date such amount is made available to the Borrower until
the date such amount is paid or repaid to the Administrative Agent, to be calculated as to such
Lender at the Federal Funds Rate, and to be calculated as to the Borrower at the interest rate
applicable at the time to the other Loans made on such date. If any Lender fails to make such
payment to the Administrative Agent within such two Business Day period, such Lender shall in
addition to such amount pay interest thereon, for each day from the date such Loan is made
available to the Borrower until the date such amount is paid or repaid to the Administrative Agent,
at the interest rate applicable at the time to the other Loans made on such date. The failure of
any Lender to make any Loan to be made by it hereunder shall not relieve any other Lender of its
obligation hereunder, if any, to make its Loan, but no Lender shall be responsible for the failure
of any other Lender to make any Loan to be made by such other Lender.



     (c) Except as otherwise provided herein, a LIBO Rate Loan may be continued or converted only
on the last day of the Interest Period for such LIBO Rate Loan. During the existence of a Default,
Event of Default or Borrowing Base Deficiency, no Loans may be requested as, converted to or
continued as LIBO Rate Loans.



     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the
interest rate applicable to any LIBO Rate Loan upon determination of such interest rate. The
determination of the LIBO Rate by the Administrative Agent shall be conclusive in the absence of
manifest error. The Administrative Agent shall notify the Borrower and the Lenders of any change
in BMO’s prime rate used in determining the Base Rate promptly following the public announcement of
such change.



     (e) After giving effect to all Borrowings, all conversions of Loans from one Type to the
other, and all continuations of Loans as the same Type, there shall not be more than ten (10) LIBO
Interest Periods in effect with respect to Loans.



     SECTION
2.3 Letters of Credit.



     2.3.1 The Letter of Credit Commitment.




     (i) Subject to the terms and conditions set forth herein, (A) the Issuing Bank agrees,
in reliance upon the agreements of the other Lenders set forth in this Section 2.3,
(1) from time to time on any Business Day during the period from the Closing Date until the
Letter of Credit Availability Expiration Date, to issue Letters of Credit for the account of
the Borrower and in the name of the Borrower or any of its Restricted Subsidiaries, and to
amend or renew Letters of Credit previously issued by it, in accordance with subsection
2.3.2 below, and (2) to honor drafts under the Letters of Credit; and (B) the Lenders
severally agree to participate in Letters of Credit issued for the account of the Borrower;
provided that the Issuing Bank shall not be obligated to make any L/C Credit
Extension with respect to any Letter of Credit, and no Lender shall be obligated to



24









 







participate in, any Letter of Credit if as of the date of such L/C Credit Extension,
(w) with respect to any renewal, extension or amendment to any previously issued Letter of
Credit, the Restricted Subsidiary in whose name such Letter of Credit was originally issued
(or was most recently renewed, extended or amended, if applicable) has become, or been
redesignated as, an Unrestricted Subsidiary, (x) the Outstanding Amount of all L/C
Obligations and all Loans would exceed the lesser of (A) the Aggregate Commitments on such
date and (B) the Borrowing Base then in effect, (y) the aggregate Outstanding Amount of the
Loans of any Lender, plus such Lender’s Percentage Share of the Outstanding Amount
of all L/C Obligations would exceed the lesser of (A) such Lender’s Commitment Amount or (B)
such Lender’s Percentage Share of the Borrowing Base then in effect, or (z) the Outstanding
Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the
foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to
obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during
the foregoing period, obtain Letters of Credit to replace Letters of Credit that have
expired or that have been drawn upon and reimbursed.




     (ii) The Issuing Bank shall be under no obligation to issue any Letter of Credit if:




     (A) the expiry date of such requested Letter of Credit would occur more
than twelve months after the date of issuance or last renewal, unless the
Majority Lenders acting in their sole discretion have approved in writing
such expiry date;




     (B) the expiry date of such requested Letter of Credit would occur
after the Letter of Credit Availability Expiration Date, unless all the
Lenders acting in their sole discretion have approved in writing such expiry
date;




     (C) the issuance of such Letter of Credit would violate one or more
policies of the Issuing Bank;




     (D) such Letter of Credit is in a face amount less than $100,000, or
denominated in a currency other than Dollars, unless all the Lenders acting
in their sole discretion have approved in writing the issuance of Letters of
Credit denominated in a currency other than Dollars; or




     (E) such Letter of Credit is to be used directly or indirectly to
assure payment of or otherwise support any Person’s Indebtedness for
borrowed money;




     (F) the issuance of such Letter of Credit is not in compliance with all
applicable governmental restrictions, policies, and guidelines (whether or
not having the force of law) or it subjects the Issuing Bank to any cost not
anticipated by the Issuing Bank on the date hereof;



25









 






     (G) the form and terms of such Letter of Credit are not acceptable to
the Administrative Agent and Issuing Bank in their sole and absolute
discretion; and




     (H) any other condition in this Agreement to the issuance of such
Letter of Credit has not been satisfied.




     (iii) The Issuing Bank shall be under no obligation to amend any Letter of Credit if
(A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit
does not accept the proposed amendment to such Letter of Credit.



     2.3.2 Procedures for Issuance and Amendment of Letters of Credit.




     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Borrower delivered to the Issuing Bank (with a copy to the Administrative
Agent) in the form of a Letter of Credit Application, appropriately completed and signed by
a Responsible Officer of the Borrower. Such Letter of Credit Application must be received
by the Issuing Bank and the Administrative Agent not later than 12:00 p.m., central time at
least two Business Days (or such later date and time as the Issuing Bank may agree in a
particular instance in its sole discretion) prior to the proposed issuance date or date of
amendment, as the case may be. In the case of a request for an initial issuance of a Letter
of Credit, such Letter of Credit Application shall specify in form and detail satisfactory
to the Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which
shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name
and address of the beneficiary thereof; (E) the documents to be presented by such
beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such other matters
as the Issuing Bank may require. In the case of a request for an amendment of any
outstanding Letter of Credit, such Letter of Credit Application shall specify in form and
detail satisfactory to the Issuing Bank (w) the Letter of Credit to be amended; (x) the
proposed date of amendment thereof (which shall be a Business Day); (y) the nature of the
proposed amendment; and (z) such other matters as the Issuing Bank may require.




     (ii) Promptly after receipt of any Letter of Credit Application, the Issuing Bank will
confirm with the Administrative Agent (by telephone or in writing) that the Administrative
Agent has received a copy of such Letter of Credit Application from the Borrower and, if
not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Upon
receipt by the Issuing Bank of confirmation from the Administrative Agent that the requested
issuance or amendment is permitted in accordance with the terms hereof, then, subject to the
terms and conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter
of Credit for the account of the Borrower or enter into the applicable amendment, as the
case may be, in each case in accordance with the Issuing Bank’s usual and customary business
practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to and hereby does, purchase
from the Issuing Bank a



26









 







participation in such Letter of Credit in an amount equal to the product of such
Lender’s Percentage Share times the amount of such Letter of Credit.



     2.3.3 Drawings and Reimbursements; Funding of Participations.




     (i) Upon any drawing under any Letter of Credit, the Issuing Bank shall notify the
Borrower and the Administrative Agent thereof. Not later than 12:00 p.m., central time, on
the date of any payment by the Issuing Bank under a Letter of Credit (each such date, an
“Honor Date”), the Borrower shall reimburse the Issuing Bank through the
Administrative Agent in an amount equal to the amount of such drawing. If the Borrower
fails to so reimburse the Issuing Bank by such time, the Administrative Agent shall promptly
notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the
“Unreimbursed Amount”), and such Lender’s Percentage Share thereof. In such event,
the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be
disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to
the minimum and multiples specified in Section 2.2 for the principal amount of Base
Rate Loans, but subject to the amount of the unutilized portion of the lesser of (x) the
Aggregate Commitments and (y) the Borrowing Base then in effect and the conditions set forth
in Section 4.2 (other than the delivery of a Notice of Advance). Any notice given
by the Issuing Bank or the Administrative Agent pursuant to this Section 2.3.3(i)
may be given by telephone if immediately confirmed in writing; provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or binding effect
of such notice.




     (ii) Each Lender (including the Lender acting as Issuing Bank) shall upon any notice
from the Administrative Agent pursuant to Section 2.3.3(i) make funds available to
the Administrative Agent for the account of the Issuing Bank at the Administrative Agent’s
Office in an amount equal to such Lender’s Percentage Share of the Unreimbursed Amount not
later than 1:00 p.m., central time, on the Business Day specified in such notice by the
Administrative Agent, whereupon, subject to the provisions of Section 2.3.3(iii),
each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to
the Borrower in such amount. The Administrative Agent shall remit the funds so received to
the Issuing Bank.




     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Borrowing of Base Rate Loans because the conditions set forth in Section 4.2 cannot
be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the
Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so
refinanced, which L/C Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at the Default Rate. In such event, each Lender’s payment to the
Administrative Agent for the account of the Issuing Bank pursuant to Section
2.3.3(ii) shall be deemed payment in respect of its participation in such L/C Borrowing
and shall constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 2.3.3.




     (iv) Until each Lender funds its Loan or L/C Advance pursuant to this Section
2.3.3 to reimburse the Issuing Bank for any amount drawn under any Letter of



27









 







Credit, interest in respect of such Lender’s Percentage Share of such amount shall be
solely for the account of the Issuing Bank.




     (v) Each Lender’s obligation to make Loans or L/C Advances to reimburse the Issuing
Bank for amounts drawn under Letters of Credit, as contemplated by this Section
2.3.3, shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Issuing Bank, the Borrower or any other Person for
any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default,
or (C) any other occurrence, event or condition, whether or not similar to any of the
foregoing. Any such reimbursement shall not relieve or otherwise impair the obligation of
the Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing
Bank under any Letter of Credit, together with interest as provided herein.




     (vi) If any Lender fails to make available to the Administrative Agent for the account
of the Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.3.3 by the time specified in Section 2.3.3(ii),
the Issuing Bank shall be entitled to recover from such Lender (acting through the
Administrative Agent), on demand, such amount with interest thereon for the period from the
date such payment is required to the date on which such payment is immediately available to
the Issuing Bank at a rate per annum equal to (1) for the first two Business Days
immediately following the date such payment is required, the Federal Funds Rate from time to
time in effect, and (2) for each day thereafter, the Base Rate from time to time in effect.
A certificate of the Issuing Bank submitted to any Lender (through the Administrative Agent)
with respect to any amounts owing under this clause (vi) shall be conclusive absent
manifest error.



     2.3.4 Repayment of Participations.




     (i) At any time after the Issuing Bank has made a payment under any Letter of Credit
and has received from any Lender such Lender’s L/C Advance in respect of such payment in
accordance with Section 2.3.3, if the Administrative Agent receives for the account
of the Issuing Bank any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the
Administrative Agent), or any payment of interest thereon, the Administrative Agent will
distribute to such Lender its Percentage Share thereof in the same funds as those received
by the Administrative Agent.




     (ii) If any payment received by the Administrative Agent for the account of the Issuing
Bank pursuant to Section 2.3.3 is required to be returned, each Lender shall pay to
the Administrative Agent for the account of the Issuing Bank its Percentage Share thereof on
demand of the Administrative Agent, plus interest thereon from the date of such
demand to the date such amount is returned by such Lender, at a rate per annum equal to (1)
with respect to the first two Business Days immediately following such demand, the Federal
Funds Rate from time to time in effect, and (2) with respect to each day thereafter, the
Base Rate from time to time in effect.



28









 





     2.3.5 Obligations Absolute. The obligation of the Borrower to reimburse the Issuing
Bank for each drawing under each Letter of Credit, and to repay each L/C Borrowing and each drawing
under a Letter of Credit that is refinanced by a Borrowing of Loans, shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following:




     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or
any other agreement or instrument relating thereto;




     (ii) the existence of any claim, counterclaim, set-off, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of such Letter of
Credit (or any Person for whom any such beneficiary or any such transferee may be acting),
the Issuing Bank or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;




     (iii) any draft, demand, certificate or other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under such
Letter of Credit;




     (iv) any payment by the Issuing Bank under such Letter of Credit against presentation
of a draft or certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the Issuing Bank under such Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit, including any arising in connection with any
proceeding under any Debtor Relief Law; or




     (v) any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower.




     The Borrower shall promptly examine a copy of each Letter of Credit and each amendment
thereto that is delivered to it and, in the event of any claim of noncompliance with the
Borrower’s instructions or other irregularity, the Borrower will promptly notify the Issuing
Bank. The Borrower shall be conclusively deemed to have waived any such claim against the
Issuing Bank and its correspondents unless such notice is given as aforesaid.



     2.3.6 Role of Issuing Bank; Indemnity. Each Lender and the Borrower agree that, in
paying any drawing under a Letter of Credit, the Issuing Bank shall not have any responsibility to
obtain any document (other than any sight draft, certificates and documents expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such document. No
Agent-Related Person nor any of the respective correspondents, participants or assignees of the
Issuing



29









 







Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith
at the request or with the approval of the Lenders or the Majority Lenders, as applicable; (ii) any
action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any document or instrument related to any
Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the
acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit.
No Agent-Related Person, nor any of the respective correspondents, participants or assignees of
the Issuing Bank, shall be liable or responsible for any of the matters described in clauses
(i) through (v) of Section 2.3.5. The Borrower agrees to hold Issuing Bank and
each Lender harmless and indemnified against any liability or claim in connection with or arising
out of the subject matter of this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH
LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT
OR OMISSION OF ANY KIND BY ISSUING BANK OR ANY LENDER, provided only that the Issuing Bank or such
Lender shall not be entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful misconduct as
determined in a final judgment. In furtherance and not in limitation of the foregoing, the Issuing
Bank may accept documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary, and the Issuing
Bank shall not be responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective
for any reason. If any Letter of Credit provides that it is transferable, the Issuing Bank shall
have no duty to determine the proper identity of anyone appearing as transferee of such Letter of
Credit, nor shall the Issuing Bank be charged with responsibility of any nature or character for
the validity or correctness of any transfer or successive transfers, and payment by the Issuing
Bank to any purported transferee or transferees as determined by the Issuing Bank is hereby
authorized and approved, and the Borrower further agrees to hold the Issuing Bank and each Lender
harmless and indemnified against any liability or claim in connection with or arising out of the
foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR
TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY THE
ISSUING BANK OR ANY LENDER, provided only that the Issuing Bank or such Lender shall not be
entitled to indemnification for that portion, if any, of any liability or claim which is caused by
its own individual gross negligence or willful misconduct. All of Borrower’s Obligations under
this Section 2.3.6 shall survive termination of the Commitments or of this Agreement and
repayment in full of the Obligations.



     2.3.7 Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the
Issuing Bank and the Borrower when a Letter of Credit is issued, (i) the rules of the
“International Standby Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to
each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of Commerce (the
“ICC”) at the time of issuance (including the ICC decision published by the Commission on



30









 







Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro))
shall apply to each commercial Letter of Credit.



     2.3.8 Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for
the account of each Lender in accordance with its Percentage Share a Letter of Credit fee for each
Letter of Credit equal to the LIBOR Spread then in effect with respect to Loans after giving effect
to the L/C Obligations incurred with respect to such Letter of Credit times the actual
daily maximum amount available to be drawn under such Letter of Credit. Such fee for each Letter
of Credit shall be due and payable on the last Business Day of each March, June, September and
December, commencing with the first such date to occur after the issuance of such Letter of Credit,
and on the Letter of Credit Availability Expiration Date. If there is any change in the LIBOR
Spread during any quarter, the actual daily amount of each Letter of Credit shall be computed and
multiplied by the LIBOR Spread with respect to Letters of Credit separately for each period during
such quarter that such LIBOR Spread was in effect.



     2.3.9 Letter of Credit Fronting Fee and Documentary and Processing Charges Payable to
Issuing Bank. The Borrower shall pay directly to the Issuing Bank for its own account a
fronting fee in an amount equal to 0.1875% per annum on the daily maximum amount available to be
drawn thereunder, due and payable quarterly in arrears on the last Business Day of each March,
June, September and December, commencing with the first such date to occur after the issuance of
such Letter of Credit, and on the Letter of Credit Availability Expiration Date; provided
that all such fees shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable on demand. In
addition, the Borrower shall pay directly to the Issuing Bank for its own account the customary
issuance, presentation, amendment and other processing fees, and other standard costs and charges,
of the Issuing Bank relating to letters of credit as from time to time in effect. Such fees and
charges are due and payable on demand and are nonrefundable. All participation fees and fronting
fees shall be computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).



     2.3.10 Conflict with Letter of Credit Application. In the event of any conflict
between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall
control.



     2.3.11 L/C Collateral.



     (a) L/C Obligations in Excess of Borrowing Base. (i) If, after the making of all
mandatory prepayments required under Section 2.4.2, the aggregate amount of all Loans
outstanding plus all L/C Obligations outstanding excluding L/C Obligations secured by cash
collateral pursuant to this Section 2.3.11 will exceed the Borrowing Base, then the
Borrower will immediately pay to the Issuing Bank an amount in cash equal to such excess, or (ii)
should any L/C Obligations remain outstanding on the Maturity Date, then the Borrower will
immediately pay the Issuing Bank an amount in cash equal to the aggregate amount of such Issuing
Bank’s L/C Obligations. The Issuing Bank will hold such amount as security for the remaining L/C
Obligations (“L/C Collateral”) until such L/C Obligations become Matured L/C Obligations,
at which time such L/C Collateral may be applied to such Matured L/C Obligations. Neither this
subsection nor the following subsection shall, however, limit or impair any rights which the
Issuing Bank may have under any other document or agreement relating to any Letter of Credit



31









 







or L/C Obligation, including any Letter of Credit Application, or any rights which the Issuing
Bank or Lenders may have to otherwise apply any payments by the Borrower and L/C Collateral under
Section 2.3.11.



     (b) Acceleration of L/C Obligations. If the Obligations or any part thereof become
immediately due and payable pursuant to Section 8.2 then, unless the Majority Lenders
otherwise specifically elect to the contrary (which election may thereafter be retracted by the
Majority Lenders at any time), all L/C Obligations shall become immediately due and payable without
regard to whether or not actual drawings or payments on the Letters of Credit have occurred, and
the Borrower shall be obligated to pay to the Issuing Bank immediately an amount equal to the
aggregate L/C Obligations which are then outstanding. All amounts so paid shall first be applied
to Matured L/C Obligations and then held by the Issuing Bank as L/C Collateral until such L/C
Obligations become Matured L/C Obligations, at which time such L/C Collateral shall be applied to
such Matured L/C Obligations.



     (c) Investment of L/C Collateral. Pending application thereof, all L/C Collateral
shall be invested by the Issuing Bank in such blocked account as the Issuing Bank may choose in its
sole discretion reasonably exercised. All interest on such investments shall be reinvested or
applied to Matured L/C Obligations. When all Obligations have been satisfied in full, including
all L/C Obligations, all Letters of Credit have expired or been terminated, and all of the
Borrower’s reimbursement obligations in connection therewith have been satisfied in full, the
Issuing Bank shall release any remaining L/C Collateral. The Borrower hereby assigns and grants to
the Issuing Bank a continuing security interest in all L/C Collateral paid by it to the Issuing
Bank, all investments purchased with such L/C Collateral, and all proceeds thereof to secure its
Matured L/C Obligations and its Obligations under this Agreement, the Notes, and the other Loan
Documents, and the Borrower agrees that such L/C Collateral and investments shall be subject to all
of the terms and conditions of the Borrower’s Security Agreement. The Borrower further agrees that
the Issuing Bank shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of New York with respect to such security interest and that
an Event of Default under this Agreement shall constitute a default for purposes of such security
interest.



     2.3.12 Calculations. A written advice setting forth in reasonable detail the amounts
owing under this section, submitted by the Issuing Bank to the Borrower or any Lender from time to
time, shall be conclusive, absent manifest error, as to the amounts thereof.



     SECTION 2.4 Prepayments.



     2.4.1 Voluntary Prepayments. The Borrower may, upon notice to the Administrative
Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without
premium or penalty; provided that (i) such notice must be received by the Administrative
Agent not later than 12:00 p.m., central time, (A) three Business Days prior to any date of
prepayment of LIBO Rate Loans, and (B) on the date of prepayment of Base Rate Loans; (ii) any
prepayment of LIBO Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$1,000,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each such notice shall
specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The



32









 







Administrative Agent will promptly notify each Lender of its receipt of each such notice, and
of such Lender’s Percentage Share of such prepayment. If such notice is given by the Borrower, the
Borrower shall make such prepayment and the payment amount specified in such notice shall be due
and payable on the date specified therein. Any prepayment of a LIBO Rate Loan shall be accompanied
by all accrued interest thereon, together with any additional amounts required pursuant to
Section 3.5. Each such prepayment shall be applied to the Loans of the Lenders in
accordance with their respective Percentage Shares.



     2.4.2 Mandatory Prepayments. The Borrower shall make the following prepayments of the
Loans:




     (i) Outstandings Exceed Commitments. If for any reason the Outstanding Amount
of all Loans and L/C Obligations at any time exceeds the Aggregate Commitments then in
effect, the Borrower shall first immediately prepay Loans and second following repayment of
the Loans, Cash Collateralize the L/C Obligations in an aggregate amount equal to such
excess.




     (ii) Borrowing Base Deficiency.




     (A) If at any time the aggregate unpaid principal balance of the Loans
plus the aggregate amount of L/C Obligations exceeds the Borrowing
Base (a “Borrowing Base Deficiency”), the Borrower shall, within
thirty (30) days after the Administrative Agent sends written notice of such
fact to the Borrower, (1) prepay the principal of the Loans (and, upon
prepayment of all Loans, shall, to the extent required, provide L/C
Collateral as set forth in Section 2.3.11) in an aggregate amount at
least equal to such Borrowing Base Deficiency (in this section, a
“Mandatory Prepayment Amount”), or (2) give notice to the
Administrative Agent electing to prepay such Mandatory Prepayment Amount in
six (6) (or fewer) monthly installments. Each such installment shall equal
or exceed one-sixth of such Borrowing Base Deficiency; the first such
installment shall be paid within thirty (30) days of the giving of such
notice of the Borrowing Base Deficiency by the Administrative Agent to the
Borrower and the five (or fewer) subsequent installments shall be due and
payable at one month intervals thereafter until such Borrowing Base
Deficiency has been eliminated.




     (B) If (1) at any time during the existence or continuation of a
Borrowing Base Deficiency, the Borrower or any Guarantor makes a Disposition
of assets (other than those described in clauses (a) through
(d) of Section 7.5 hereof), or (2) a Disposition of assets
included in the Borrowing Base results in a reduction of the Borrowing Base
in accordance with Section 7.5(e) such that a Borrowing Base
Deficiency occurs, then, in either case, the Borrower shall, or shall cause
such Guarantor to, use the Net Sale Proceeds from such Disposition (whether
or not such assets are included in the Borrowing Base) to prepay the Loans
and, upon prepayment of all Loans, shall provide L/C Collateral as set



33









 







forth in Section 2.3.11, within one (1) Business Day of such
Disposition in an amount equal to 100% of the Borrowing Base Deficiency then
existing or occurring as a result of such disposition. Application of such
Net Sale Proceeds shall be applied to the principal amount of the Loans
until the Loans are paid in full and then shall be held as L/C Collateral in
an amount equal to the aggregate amount of L/C Obligations pursuant to
Section 2.3.11.



     SECTION 2.5 Reduction or Termination of Commitments and Maximum Loan Amount. The Borrower
may, upon notice to the Administrative Agent, terminate the Aggregate Commitments and the Maximum
Loan Amount, or permanently reduce the Aggregate Commitments and the Maximum Loan Amount to an
amount not less than the then Outstanding Amount of all Loans and L/C Obligations; provided
that (i) any such notice shall be received by the Administrative Agent not later than 12:00 p.m.,
central time three (3) Business Days prior to the date of termination or reduction, and (ii) any
such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of
$1,000,000 in excess thereof. The Administrative Agent shall promptly notify the Lenders of any
such notice of reduction or termination of the Aggregate Commitments and the Maximum Loan Amount.
Once reduced in accordance with this Section, the Commitments may not be increased except in
accordance with Section 2.15. Any reduction of the Aggregate Commitments shall be applied
to the Commitment Amount of each Lender according to its Percentage Share. All commitment fees
accrued until the effective date of any termination of the Aggregate Commitments shall be paid on
the effective date of such termination.



     SECTION 2.6 Repayment of Loans. The Borrower shall repay to the Lenders on the Maturity Date
the aggregate principal amount of Loans outstanding on such date.



     SECTION 2.7 Initial Borrowing Base. On any date during the period from the Closing Date to
the first Evaluation Date, the Borrowing Base shall be an amount equal to $400,000,000.



     SECTION 2.8 Subsequent Determinations of Borrowing Base.



     (a) By each Evaluation Date, the Borrower shall furnish to the Administrative Agent and each
Lender all information, reports and data which the Administrative Agent has then reasonably
requested concerning the Borrower’s and the Guarantors’ businesses and properties (including
Borrower’s and the Guarantors’ Oil and Gas Properties and interests and the reserves and production
relating thereto), together with the Engineering Report described in Section 6.2(g), if an
Engineering Report is then due. Within thirty (30) days after receiving such information, reports
and data, or as promptly thereafter as practicable, the Administrative Agent shall recommend a
redetermined Borrowing Base to the Lenders. Such recommended Borrowing Base shall become effective
upon the receipt by the Administrative Agent of the approval of the Required Borrowing Base
Lenders. The failure of a Lender to respond or object to the recommended Borrowing Base within
fifteen (15) days after notice thereof is given to such Lender by the Administrative Agent shall be
deemed an acceptance and approval of such recommended Borrowing Base by such Lender. If such
recommended Borrowing Base is not approved by Required Borrowing Base Lenders within fifteen (15)
days after the Administrative



34









 







Agent submits the recommended Borrowing Base to the Lenders, then each Lender shall submit in
writing to the Administrative Agent, on or within fifteen (15) days after the Administrative Agent
notifies the Lenders that the Lenders have not approved any such recommended Borrowing Base, such
Lender’s determination of the redetermined Borrowing Base; in such case, the redetermined Borrowing
Base shall be the highest amount approved by the Required Borrowing Base Lenders. NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, WITHOUT THE PRIOR WRITTEN APPROVAL OF ALL OF THE LENDERS, SUCH
APPROVAL TO BE IN EACH LENDER’S SOLE DISCRETION, THE REDETERMINED BORROWING BASE SHALL NOT BE
INCREASED ABOVE THE AMOUNT OF THE BORROWING BASE IN EFFECT IMMEDIATELY PRIOR TO SUCH
REDETERMINATION. The Administrative Agent shall by notice to the Borrower and the Lenders
designate the amount of the Borrowing Base (determined by the Required Borrowing Base Lenders or
all of the Lenders, as applicable, in accordance with the foregoing procedures) available to the
Borrower hereunder, which designation shall take effect immediately on the date such notice is sent
(a “Determination Date”) and shall remain in effect until but not including the next date
as of which the Borrowing Base is redetermined. If the Borrower does not furnish all such
information, reports and data by the date specified in the first sentence of this section, the
Administrative Agent may nonetheless designate the Borrowing Base at any amount which the Lenders
determine, and may redesignate the Borrowing Base from time to time thereafter at any amount which
all Lenders redetermine, until each Lender receives all such information, reports and data,
whereupon Lenders shall designate a new Borrowing Base as described above. The Lenders shall
determine the amount of the Borrowing Base based upon the loan collateral value which they, in
their sole discretion and in accordance with their respective normal practices and standards for
oil and gas loans as such practices and standards exist at the particular time, assign to the
various Oil and Gas Properties of the Borrower or the Guarantors at the time in question and based
upon such other factors (including without limitation the assets, liabilities, fixed charges, cash
flow, business, properties, prospects, management and ownership of any of the Borrower or the
Guarantors or any Subsidiary of any of the Borrower or the Guarantors) as they, in their sole
discretion and in accordance with their respective normal practices and standards for oil and gas
loans as such practices and standards exist at the particular time, deem significant. It is
expressly understood that Lenders and the Administrative Agent have no obligation to agree upon or
designate the Borrowing Base at any particular amount, whether in relation to the Maximum Loan
Amount or otherwise, and that the Lenders’ commitments to advance funds hereunder is determined by
reference to the Borrowing Base from time to time in effect, which Borrowing Base shall be used for
calculating commitment fees under Section 2.10(a). Additional redeterminations at the
request of the Lenders, the Administrative Agent or the Borrower shall be subject to a $5,000
engineering fee payable by Borrower to the Administrative Agent for its own account.



     (b) The Borrower may include additional Oil and Gas Properties of the Borrower or the
Guarantors acquired from time to time as Collateral for the Secured Obligations, which may then be
included in the calculation of the Borrowing Base, by the Borrower or such Guarantor (A) giving
written notice to the Administrative Agent of such properties to be included, (B) subjecting such
properties to Liens securing the Secured Obligations (pursuant to Security Documents satisfactory
to the Administrative Agent) if necessary to comply with the provisions of Section 6.16,
(C) including such properties in an Engineering Report submitted to the



35









 







Administrative Agent and (D) delivering to the Administrative Agent title opinions (or other
title reports or title information acceptable to the Administrative Agent) covering at least 80% of
the additional value of such properties addressed to the Administrative Agent for the benefit of
the Lenders covering all of such properties and other legal opinions from counsel acceptable to the
Administrative Agent, in its sole discretion, in form, scope and substance acceptable to the
Administrative Agent opining favorably as to, among such other matters as may be required by the
Administrative Agent, (1) the Borrower’s or the appropriate Guarantor’s ownership of such
properties and (2) matters of the type covered by the opinions delivered pursuant to Section
4.1(a)(vi).



     (c) In addition to the any scheduled determination or discretionary determination of the
Borrowing Base, the Borrowing Base shall be automatically reduced from time to time as set forth in
Section 7.5(e).



     SECTION 2.9 Interest.



     (a) Subject to the provisions of subsection (b) below, (i) each LIBO Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the Adjusted LIBO Rate for such Interest Period plus the LIBOR Spread; and
(ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the Base Rate
Spread.



     (b) (i) While any Event of Default exists or after acceleration, the Borrower shall pay
interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per
annum at all times equal to the Default Rate, and (ii) while any Borrowing Base Deficiency exists,
the Borrower shall pay interest on the principal amount of all outstanding Obligations at a
fluctuating interest rate per annum at all times equal to the Borrowing Base Deficiency Rate, in
each case, to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past
due amounts (including interest on past due interest) shall be due and payable upon demand.



     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment, and before and after
the commencement of any proceeding under any Debtor Relief Law.



     SECTION 2.10 Fees. In addition to certain fees described in Sections 2.3.8 and
2.3.9:



     (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the
account of each Lender in accordance with its Percentage Share, a commitment fee equal to the
Commitment Fee Rate times the actual daily amount by which the lesser of the Aggregate
Commitments and the Borrowing Base then in effect exceeds the sum of (i) the Outstanding Amount of
Loans and (ii) the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all
times from the Closing Date until the Maturity Date and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December, commencing with the
first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee
shall be calculated quarterly in arrears, and if there is any



36









 







change in the Commitment Fee Rate with respect to commitment fees during any quarter, the
actual daily amount shall be computed and multiplied by the Commitment Fee Rate with respect to
commitment fees separately for each period during such quarter that such Commitment Fee Rate was in
effect. The commitment fee shall accrue at all times, including at any time during which one or
more of the conditions in Article IV is not met.



     (b) Arrangement and Agency Fees. The Borrower shall pay an arrangement fee to the
Arranger for the Arranger’s own account, and shall pay an agency fee to the Administrative Agent
for the Administrative Agent’s own account, in the amounts and at the times specified in the letter
agreement, dated December 15, 2006 (the “Agent and Arranger Fee Letter”), among the
Borrower, the Arranger and the Administrative Agent. Such fees shall be fully earned when paid and
shall be nonrefundable for any reason whatsoever.



     SECTION 2.11 Computation of Interest and Fees. Computation of interest on Base Rate Loans and
commitment fees shall be calculated on the basis of a year of 365 or 366 days, as the case may be,
and the actual number of days elapsed. Computation of all other types of interest and all fees
shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which
results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days.
Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a
Loan, or any portion thereof, for the day on which the Loan or such portion is paid,
provided that any Loan that is repaid on the same day on which it is made shall bear
interest for one day.



     SECTION 2.12 Notes and Other Evidence of Debt.



     (a) The obligation of the Borrower to repay to each Lender the aggregate amount of all Loans
made by such Lender (such Lender’s “Loan”), together with interest accruing in connection
therewith, shall be evidenced by a single promissory note (such Lender’s “Note”) made by the
Borrower in the amount of such Lender’s Commitment Amount payable to the order of such Lender,
which Note shall be substantially in the form of Exhibit B with appropriate insertions.
Each Lender may record the date, Type (if applicable), amount and maturity of the applicable Loans
and payments with respect thereto in one or more schedules to its Note or on one or more accounts
or records maintained by such Lender and by the Administrative Agent in the ordinary course of
business. The accounts or records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the
Borrower and the interest and payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any
amount owing with respect to the Loans and L/C Obligations.



     (b) In addition to the accounts and records referred to in subsection (a), each Lender
and the Administrative Agent shall maintain in accordance with its usual practice accounts or
records evidencing the purchases and sales by such Lender of participations in Letters of Credit.
In the event of any conflict between the accounts and records maintained by the Administrative
Agent and the accounts and records of any Lender in respect of such matters, the accounts and
records of the Administrative Agent shall control.



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     SECTION 2.13 Payments Generally.



     (a) All payments to be made by the Borrower shall be made without condition or deduction for
any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein,
all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account
of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in immediately available funds not later than 12:00 noon, central time, on the date
specified herein. The Administrative Agent will promptly distribute to each Lender its Percentage
Share (or other applicable share as provided herein) of such payment in like funds as received by
wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent
after 12:00 noon, central time, shall be deemed received on the next succeeding Business Day and
any applicable interest or fee shall continue to accrue.



     (b) Subject to the definition of “Interest Period,” if any payment to be made by the Borrower
shall come due on a day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing interest or fees, as the
case may be.



     (c) Unless the Borrower or any Lender has notified the Administrative Agent prior to the date
any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower
or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume
that the Borrower or such Lender, as the case may be, has timely made such payment and may (but
shall not be so required to), in reliance thereon, make available a corresponding amount to the
Person entitled thereto. If and to the extent that such payment was not in fact made to the
Administrative Agent in immediately available funds, then:




     (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand
repay to the Administrative Agent the portion of such assumed payment that was made
available to such Lender in immediately available funds, together with interest thereon (1)
in respect of each of the first two Business Days from and including the date such amount
was made available by the Administrative Agent to such Lender to the date such amount is
repaid to the Administrative Agent in immediately available funds, at the Federal Funds Rate
from time to time in effect, and (2) in respect of each day after the first two Business
Days from and including the date such amount was made available by the Administrative Agent
to such Lender to the date such amount is repaid to the Administrative Agent in immediately
available funds, at the Base Rate from time to time in effect; and




     (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand
pay to the Administrative Agent the amount thereof in immediately available funds, together
with interest thereon for the period from the date such amount was made available by the
Administrative Agent to the Borrower to the date such amount is recovered by the
Administrative Agent (the “Compensation Period”) at a rate per annum equal to (1)
for the first two Business Days of any Compensation Period, the Federal Funds Rate from time
to time in effect, and (2) for each other day of any Compensation Period, the interest rate
applicable to the applicable Borrowing. If such Lender pays such



38









 







amount to the Administrative Agent, then such amount shall constitute such Lender’s
Loan included in the applicable Borrowing. If such Lender does not pay such amount
forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make
a demand therefor upon the Borrower, and the Borrower shall pay such amount to the
Administrative Agent, together with interest thereon for the Compensation Period at a rate
per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing
herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment
or to prejudice any rights that the Administrative Agent or the Borrower may have against
any Lender as a result of any default by such Lender hereunder.



     A notice of the Administrative Agent to any Lender with respect to any amount owing under this
subsection (c) shall be conclusive, absent manifest error.



     (d) If any Lender makes available to the Administrative Agent funds for any Loan to be made by
such Lender as provided in the foregoing provisions of this Article II, and the conditions
to the applicable Credit Extension set forth in Article IV are not satisfied or waived in
accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds
as received from such Lender) to such Lender, without interest.



     (e) The obligations of the Lenders hereunder to make Loans and to fund participations in
Letters of Credit are several and not joint. The failure of any Lender to make any Loan or to fund
any such participation on any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be responsible for the failure
of any other Lender to so make its Loan or purchase its participation.



     (f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in
any particular place or manner or to constitute a representation by any Lender that it has obtained
or will obtain the funds for any Loan in any particular place or manner.



     SECTION 2.14 Sharing of Payments. If, other than as expressly provided elsewhere herein, any
Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations
held by it, any payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder)
thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b)
purchase from the other Lenders such participations in the Loans made by them and/or such
subparticipations in the participations in L/C Obligations held by them, as the case may be, as
shall be necessary to cause such purchasing Lender to share the excess payment in respect of such
Loan or such participations, as the case may be, pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall
repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to
such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying
Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a participation from
another Lender may, to the fullest extent permitted by law, exercise all its



39









 







rights of payment (including the right of set-off, but subject to Section 10.9) with
respect to such participation as fully as if such Lender were the direct creditor of the Borrower
in the amount of such participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or repayments. Each
Lender that purchases a participation pursuant to this Section shall from and after such purchase
have the right to give all notices, requests, demands, directions and other communications under
this Agreement with respect to the portion of the Obligations purchased to the same extent as
though the purchasing Lender were the original owner of the Obligations purchased.



     SECTION 2.15 Increase in Commitment Amounts and Aggregate Commitments.



     (a) Upon prior notice to, and the written consent (which consent shall not be unreasonably
withheld or delayed) of, the Administrative Agent (which shall promptly notify the Lenders), the
Borrower may from time to time, (i) request that the Lenders increase the Aggregate Commitments pro
rata among the Lenders up to an amount not exceeding the Maximum Loan Amount or (ii) invite one or
more Lenders to increase its respective Commitment Amount or one or more additional Eligible
Assignees to become Lenders party to the Agreement, in each case so as to increase the Aggregate
Commitments to an amount not exceeding the Maximum Loan Amount. At the time of sending such notice
to the Lenders or any Lender or invitee, the Borrower (in consultation with the Administrative
Agent) shall specify the time period within which each Lender or invitee, as applicable, is
requested to respond (which shall in no event be less than ten (10) Business Days from the date of
delivery of such notice to the Lenders). If the Borrower has requested that the Lenders increase
their respective Commitment Amounts pro rata hereunder, each Lender shall notify the Administrative
Agent within such time period whether or not it agrees to increase its respective Commitment Amount
and, if so, whether by an amount equal to, greater than, or less than its then current Percentage
Share of such requested increase and any Lender not responding within such time period shall be
deemed to have declined to increase its respective Commitment Amount. Anything herein contained to
the contrary notwithstanding, no Lender shall have any obligation whatsoever to increase its
respective Commitment Amount hereunder. The consent of the Lenders shall not be required in order
for one or more Lender to increase its Commitment Amount hereunder or for any Eligible Assignee to
become a party to this Agreement pursuant to this Section 2.15.



     (b) If the Aggregate Commitments are increased in accordance with this Section 2.15,
the Administrative Agent and the Borrower shall determine the effective date of such increase (the
“Increase Effective Date”). The Administrative Agent and the Borrower shall promptly
notify the Lenders of the final allocation of such increase and the Increase Effective Date. Each
existing Lender that increases its Commitment Amount and each additional Lender, if any, and the
Borrower shall execute and deliver to the Administrative Agent (which the Administrative Agent
shall also execute to acknowledge its acceptance thereof) a certificate substantially in the form
of Exhibit J hereto (an “Additional Lender Certificate”). Upon receipt by the
Administrative Agent of Additional Lender Certificates from existing Lenders or additional Lenders,
if any, in an amount sufficient to effectuate the increase requested by the Borrower: (1) the
Aggregate Commitments shall be increased, (2) the Administrative Agent shall amend and distribute
to the Borrower and the Lenders a revised Schedule 2.1 of the Commitment



40









 







Amounts and Percentage Shares of each Lender adding or amending, as applicable, the Commitment
Amount and Percentage Share of any Lender executing the Additional Lender Certificate and the
revised Percentage Shares of the other Lenders, as applicable (which shall be deemed incorporated
into this Agreement), (3) any additional Lender shall be deemed to be a party in all respects to
this Agreement and the other Loan Documents to which the Lenders are party as of the Increase
Effective Date and (4) upon the Increase Effective Date, any increasing or additional Lender party
to the Additional Lender Certificate shall purchase from each of the (other) Lenders party to the
Agreement immediately prior to the Increase Effective Date a pro rata portion of the outstanding
Loans (and participations L/C Obligations) of each such (other) Lender such that each Lender
(including any additional Lender, if any) shall hold its respective Percentage Share of the
outstanding Loans (and participations in L/C Obligations) as reflected in the revised Schedule
2.1 required by this Section 2.15, provided that the Borrower shall pay any amounts due
under Section 3.5 to the extent that any such purchase gives rise to the costs indemnified
thereby.



     (c) As a condition precedent to such increase, the Borrower shall deliver to the
Administrative Agent a certificate dated as of the Increase Effective Date (in sufficient copies
for each Lender) signed by a Responsible Officer of the Borrower (i) certifying and attaching the
resolutions adopted by the Borrower approving or consenting to such increase, (ii) including a
Compliance Certificate demonstrating pro forma compliance with Section 7.13 after giving
effect to such increase and (iii) certifying that, before and after giving effect to such increase,
the representations and warranties contained in Article V are true and correct on and as of
the Increase Effective Date and no Default or Event of Default exists. The Borrower shall execute
and deliver (1) replacement Notes in accordance with Section 2.12 reflecting such Lender’s
Commitment Amount, which Notes shall be dated as of the date of this Agreement and shall otherwise
comply with the provisions of Section 2.12, (2) if requested by the Administrative Agent in
its sole discretion, amendments or supplements to any of the Security Documents as may be necessary
or desirable to reflect the increase in the Aggregate Commitment Amount, and (3) a Form U-1 or an
amendment to any previously delivered Form U-1, together with all annexes or schedules thereto and
any other documents or information related thereto as may be requested by the Administrative Agent
or any Lender, for each Lender duly completed and executed by the Borrower in form and substance
acceptable to each Lender (as evidenced by each Lender having executed and returned a copy of its
respective Form U-1) demonstrating compliance with Regulation U issued by the Board after giving
effect to any increase in the Aggregate Commitments.



     (d) This Section shall supersede any provision in Section 10.1 to the contrary but
shall be subject to Section 2.5.



ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY




     SECTION 3.1 Taxes.



     (a) Any and all payments by the Borrower to or for the account of the Administrative Agent or
any Lender under any Loan Document shall be made free and clear of and without deduction for any
and all present or future taxes, duties, levies, imposts, deductions, assessments,



41









 







fees, withholdings or similar charges, and all liabilities with respect thereto,
excluding, in the case of the Administrative Agent and each Lender, taxes imposed on or
measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative
Agent or such Lender, as the case may be, is organized or maintains a lending office (all such
non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall
be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan
Document to the Administrative Agent or any Lender, (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 and such Lender receives an
amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days
after the date of such payment, the Borrower shall furnish to the Administrative Agent (which shall
forward the same to such Lender) the original or a certified copy of a receipt evidencing payment
thereof.



     (b) In addition, the Borrower agrees to pay any and all present or future stamp, court or
documentary taxes and any other excise or property taxes or charges or similar levies which arise
from any payment made under any Loan Document or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as “Other Taxes”).



     (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in
respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the
Borrower shall also pay to the Administrative Agent (for the account of such Lender) or to such
Lender, at the time interest is paid, such additional amount that such Lender specifies as
necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on
or measured by net income) such Lender would have received if such Taxes or Other Taxes had not
been imposed.



     (d) The Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such
Lender, (ii) amounts payable under Section 3.1(c) and (iii) any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether
or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. Payment under this subsection (d) shall be made within 30 days
after the date the Lender or the Administrative Agent makes a demand therefor.



     SECTION 3.2 Illegality. If any Lender determines that any Law has made it unlawful, or that
any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund LIBO Rate Loans, or materially restricts the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the applicable offshore Dollar
market, or to determine or charge interest rates based upon the LIBO Rate, then,



42









 







on notice thereof by such Lender to the Borrower through the Administrative Agent, any
obligation of such Lender to make or continue LIBO Rate Loans or to convert Base Rate Loans to LIBO
Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower
that the circumstances giving rise to such determination no longer exist. Upon receipt of such
notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent),
prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Base Rate Loans, either on
the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such
LIBO Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain
such LIBO Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay interest
on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office
if such designation will avoid the need for such notice and will not, in the good faith judgment of
such Lender, otherwise be materially disadvantageous to such Lender.



     SECTION 3.3 Inability to Determine Rates. If the Administrative Agent determines in
connection with any request for a LIBO Rate Loan or a conversion to or continuation thereof that
(a) Dollar deposits are not being offered to banks in the applicable offshore Dollar market for the
applicable amount and Interest Period of such LIBO Rate Loan, (b) adequate and reasonable means do
not exist for determining the LIBO Rate for such LIBO Rate Loan, or (c) the Adjusted LIBO Rate for
such LIBO Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such
LIBO Rate Loan, the Administrative Agent will promptly notify the Borrower and all Lenders.
Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended
until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrower may
revoke any pending request for a Borrowing, conversion or continuation of LIBO Rate Loans or,
failing that, will be deemed to have converted such request into a request for a Borrowing of Base
Rate Loans in the amount specified therein.



     SECTION 3.4 Increased Cost and Reduced Return; Capital Adequacy.



     (a) If any Lender determines that, as a result of the introduction of, or any change in, or in
the interpretation of any Law, or such Lender’s compliance therewith, there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining LIBO Rate Loans or
(as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount
received or receivable by such Lender in connection with any of the foregoing (excluding for
purposes of this subsection (a) any such increased costs or reduction in amount resulting
from (i) Taxes or Other Taxes (as to which Section 3.1 shall govern), (ii) changes in the
basis of taxation of overall net income or overall gross income by the United States or any foreign
jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is
organized or has its Lending Office, and (iii) reserve requirements utilized, as to LIBO Rate
Loans, in the determination of the Adjusted LIBO Rate), then from time to time upon demand of such
Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such
Lender such additional amounts as will compensate such Lender for such increased cost or reduction.



43









 





     (b) If any Lender determines that the introduction of any Law regarding capital adequacy or
any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending
Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of such Lender’s obligations hereunder
(taking into consideration its policies with respect to capital adequacy and such Lender’s desired
return on capital), then from time to time upon demand of such Lender (with a copy of such demand
to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will
compensate such Lender for such reduction.



     SECTION 3.5 Funding Losses. Upon demand of any Lender (with a copy to the Administrative
Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:



     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate
Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise); or



     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a
Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in
the amount notified by the Borrower; or



     (c) any assignment of a LIBO Rate Loan on a day other than the last day of the Interest Period
therefor as a result of a request by the Borrower pursuant to Section 3.9;


including any loss of anticipated profits and any loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing.



For purposes of calculating amounts payable by the Borrower to the Lenders under this Section
3.5, each Lender shall be deemed to have funded each LIBO Rate Loan made by it at the LIBO Rate
for such Loan by a matching deposit or other borrowing in the applicable offshore Dollar interbank
market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan was
in fact so funded.




     SECTION 3.6 Matters Applicable to all Requests for Compensation.



     (a) A certificate of the Administrative Agent or any Lender claiming compensation under this
Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, the Administrative Agent
or such Lender may use any reasonable averaging and attribution methods.



     (b) Upon any Lender’s making a claim for compensation under Section 3.1 or
3.4, the Borrower may remove or replace such Lender in accordance with Section 3.9;
provided that the Borrower shall have the right to replace such Lender only if they also
replace any other Lender who has made or is making a similar claim for compensation under
Section 3.1 or 3.4.



44









 





     SECTION 3.7 Survival. All of the Borrower’s obligations under this Article III shall
survive termination of the Commitments and of this Agreement and payment in full of all the other
Obligations.



     SECTION 3.8 Foreign Lenders. Each Lender that is a “foreign corporation, partnership or
trust” within the meaning of the Code (a “Foreign Lender”) shall deliver to the
Administrative Agent, prior to receipt of any payment subject to withholding under the Code (or
after accepting an assignment of an interest herein), two duly signed completed copies of either
IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption
from, or reduction of, withholding tax on all payments to be made to such Person by the Borrower
pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments
to be made to such Person by the Borrower pursuant to this Agreement) or such other evidence
satisfactory to the Borrower and the Administrative Agent that such Person is entitled to an
exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such
Person shall (a) promptly submit to the Administrative Agent such additional duly completed and
signed copies of one of such forms (or such successor forms as shall be adopted from time to time
by the relevant United States taxing authorities) as may then be available under then current
United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower
and the Administrative Agent of any available exemption from or reduction of, United States
withholding taxes in respect of all payments to be made to such Person by the Borrower pursuant to
this Agreement, (b) promptly notify the Administrative Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction, and (c) take such steps as shall
not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement
of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts
payable to such Person. If such Person fails to deliver the above forms or other documentation,
then the Administrative Agent may withhold from any interest payment to such Person an amount
equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction. If any Governmental Authority asserts that the Administrative Agent did not properly
withhold any tax or other amount from payments made in respect of such Person, such Person shall
indemnify the Administrative Agent therefor, including all penalties and interest, any taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section,
and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of
the Lenders under this Section shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.



     SECTION 3.9 Removal and Replacement of Lenders.



     (a) Under any circumstances set forth herein providing that the Borrower shall have the right
to remove or replace a Lender as a party to this Agreement, the Borrower may, upon notice to such
Lender and the Administrative Agent, (i) remove such Lender by terminating such Lender’s Commitment
or (ii) replace such Lender by causing such Lender to assign its Commitment (and Commitment Amount)
(without payment of any assignment fee) pursuant to Section 10.7.2(a) to one or more other
Lenders or Eligible Assignees procured by the Borrower; provided, however, that if
the Borrower elects to exercise such right with respect to any Lender



45









 







pursuant to Section 3.6(b), it shall be obligated to remove or replace, as the case
may be, all Lenders that have made similar requests for compensation pursuant to Section
3.1 or 3.4. The Borrower shall (x) pay in full all principal, interest, fees and other
amounts owing to such Lender through the date of termination or assignment (including any amounts
payable pursuant to Section 3.5), (y) provide appropriate assurances and indemnities (which
may include letters of credit) to the Issuing Bank as may reasonably be required with respect to
any continuing obligation to purchase participation interests in any L/C Obligations then
outstanding, and (z) release such Lender from its obligations under the Loan Documents. Any Lender
being replaced shall execute and deliver an Lender Assignment with respect to such Lender’s
Commitment, Commitment Amount and outstanding Credit Extensions. The Administrative Agent shall
distribute an amended Schedule 2.1, which shall be deemed incorporated into this Agreement,
to reflect changes in the identities of the Lenders and adjustments of their respective Commitment
Amounts and/or Percentage Shares resulting from any such removal or replacement.



     (b) In order to make all the Lenders’ interests in any outstanding Credit Extensions ratable
in accordance with any revised Percentage Shares after giving effect to the removal or replacement
of a Lender, the Borrower shall pay or prepay, if necessary, on the effective date thereof, all
outstanding Loans of all Lenders, together with any amounts due under Section 3.5. The
Borrower may then request Loans from the Lenders in accordance with their revised Percentage
Shares. The Borrower may net any payments required hereunder against any funds being provided by
any Lender or Eligible Assignee replacing a terminating Lender. The effect for purposes of this
Agreement shall be the same as if separate transfers of funds had been made with respect thereto.



     (c) This section shall supersede any provision in Section 10.1 to the contrary.



ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS




     SECTION 4.1 Conditions of Initial Credit Extension. The obligation of each Lender to make its
initial Credit Extension hereunder is subject to satisfaction of the following conditions
precedent:



     (a) Unless waived by all the Lenders (or by the Administrative Agent with respect to
immaterial matters or items specified in clause (v) or (vi) below with respect to
which the Borrower has given assurances satisfactory to the Administrative Agent that such items
shall be delivered promptly following the Closing Date), the Administrative Agent’s receipt of the
following, each of which shall be originals or facsimiles (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party,
each dated the Closing Date (or, in the case of certificates of governmental officials, a recent
date before the Closing Date) and each in form and substance satisfactory to the Administrative
Agent and its legal counsel:




     (i) executed counterparts of this Agreement, an amended and restated Guaranty
substantially in the form of Exhibit E from each of the Guarantors, the Second
Amended and Restated Subordination Agreement substantially in the form of Exhibit G



46









 







from each of the Guarantors, an amended and restated Security Agreement substantially
in the form of Exhibit I from each of the Loan Parties, an amended and restated
Pledge Agreement and Irrevocable Proxy substantially in the form of Exhibit H from
each Loan Party (other than COL), and each Mortgage dated as of the date hereof and each of
the Mortgage Amendments described in the Security Schedule, sufficient in number for
distribution to the Administrative Agent, each Lender and the Borrower, and, in the case of
the Security Documents, in form and in sufficient number of counterparts for the prompt
completion of all recording and filing of the Security Documents as may be necessary or, in
the opinion of the Administrative Agent, desirable to create or continue, as appropriate, a
valid perfected first Lien against the collateral covered by such Security Documents, and
together with stock certificates, membership interest certificates or such other
certificated security as may be part of the collateral covered by the Security Documents and
with stock powers or other transfer powers or instruments executed in blank for each such
certificate, interest or security;




     (ii) Notes executed by the Borrower in favor of each Lender, each in a principal amount
equal to such Lender’s Commitment Amount;




     (iii) such certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the Administrative Agent
may require to establish the identities of and verify the authority and capacity of each
Responsible Officer thereof authorized to act as a Responsible Officer in connection with
this Agreement and the other Loan Documents to which such Loan Party is a party;




     (iv) such evidence as the Administrative Agent may reasonably require to verify that
each Loan Party is duly organized or formed, validly existing, in good standing and
qualified to engage in business in each jurisdiction in which it is required to be qualified
to engage in business, including certified copies of each Loan Party’s Organization
Documents (unless previously delivered pursuant to the Prior Credit Facility), certificates
of good standing and/or qualification to engage in business and tax clearance certificates;




     (v) a certificate signed by a Responsible Officer of the Borrower certifying (A) that
the conditions specified in Sections 4.2(a) and (b) have been satisfied, and
(B) that there has been no event or circumstance since the date of the Initial Audited
Financial Statements that has or could be reasonably expected to have a Material Adverse
Effect;




     (vi) an opinion of counsel to each Loan Party substantially in the form of Exhibits
F-1, F-2, F-3, F-4, F-5 and F-6;




     (vii) a Form U-1, together with all annexes or schedules thereto and any other
documents or information related thereto as may be requested by the Administrative Agent or
any Lender, for each Lender duly completed and executed by the Borrower in form and
substance acceptable to each Lender (as evidenced by each Lender having executed and
returned a copy of its respective Form U-1) demonstrating compliance with Regulation U
issued by the Board (including with respect to those certain loans in an



47









 







aggregate principal amount of $40,000,000 advanced by the Prior Lenders under the Prior
Credit Facility on or about August 28, 2006);




     (viii) a certificate of insurance of the Borrower and its Restricted Subsidiaries
evidencing that the Borrower and its Restricted Subsidiaries are carrying insurance in
accordance with Section 6.7 and that such insurance is in full force and effect;




     (ix) the Initial Engineering Report;




     (x) the Initial Audited Financial Statements;




     (xi) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as
of September 30, 2006 and the related unaudited consolidated statements of income and cash
flows of the Borrower for the fiscal quarter ended September 30, 2006, all in form and
substance satisfactory to the Administrative Agent;




     (xii) proper financing statements (form UCC-1) or amendments to existing financing
statements (form UCC-3), as appropriate, to be filed on or promptly after the date of the
initial Borrowing, and, in the case of form UCC-1, naming the Borrower as debtor and the
Administrative Agent as secured party, describing all of the Collateral in which the
Borrower has granted or purported to grant an interest, filed in the appropriate
jurisdictions; proper financing statements (form UCC-1) or amendments to existing financing
statements (form UCC-3), as appropriate, to be filed on or promptly after the date of the
initial Borrowing, and, in the case of form UCC-1, naming one or more of the Guarantors as
debtor(s) and the Administrative Agent as secured party, describing all of the Collateral in
which the Guarantor or Guarantors have granted or purported to grant an interest, filed in
the appropriate jurisdictions; together with copies of search reports in such jurisdictions
as the Administrative Agent may reasonably request, listing all effective financing
statements that name any of the Borrower or the Guarantors as debtor and any other documents
or instruments as may be necessary or desirable (in the opinion of the Administrative Agent)
to perfect or continue the perfection of the Administrative Agent’s interest in the
Collateral; and




     (xiii) such other assurances, certificates, documents, consents or opinions as the
Administrative Agent, the Issuing Bank or the Majority Lenders reasonably may require.



     (b) Any fees required to be paid on or before the Closing Date pursuant to any of the Loan
Documents shall have been paid.



     (c) Unless waived by the Administrative Agent, the Borrower shall have paid all costs and
expenses payable to the Administrative Agent pursuant to Section 10.4 to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of costs and
expenses as shall constitute the Administrative Agent’s reasonable estimate of the costs and
expenses described in Section 10.4 incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts
between the Borrower and the Administrative Agent).



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     SECTION 4.2 Conditions to all Credit Extensions. The obligation of each Lender to honor any
Notice of Advance or Letter of Credit Application (other than a Notice of Advance requesting only a
conversion of Loans to the other Type, or a continuation of Loans as the same Type) is subject to
the following conditions precedent:



     (a) The representations and warranties of the Borrower contained in Article V, or
which are contained in any document furnished at any time under or in connection herewith, shall be
true and correct on and as of the date of such Credit Extension, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they shall be
true and correct as of such earlier date.



     (b) No Default or Event of Default shall exist, or would result from such proposed Credit
Extension.



     (c) The Administrative Agent or, if applicable, the Issuing Bank shall have received a Notice
of Advance or Letter of Credit Application in accordance with the requirements hereof.



     (d) The Administrative Agent shall have received, in form and substance satisfactory to it,
such other assurances, certificates, documents or consents related to the foregoing as the
Administrative Agent or the Majority Lenders reasonably may require.



     (e) If all or any portion of the proceeds of the Credit Extension will be used (or is intended
to be used) by the Borrower to make any Investment pursuant to Section 7.2(g), the Borrower
shall have satisfied the conditions set forth in such Section.



     Each Notice of Advance or Letter of Credit Application (other than a Notice of Advance
requesting only a conversion of Loans to the other Type or a continuation of Loans as the same
Type) submitted by the Borrower shall be deemed to be a representation and warranty that the
conditions specified in Section 4.2 have been satisfied on and as of the date of the
applicable Credit Extension.



ARTICLE V.

REPRESENTATIONS AND WARRANTIES




     The Borrower represents and warrants to the Administrative Agent and the Lenders that:



     SECTION 5.1 Existence, Qualification and Power; Compliance with Laws. Each Loan Party (a) is
a corporation, partnership or limited liability company duly organized or formed, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b)
has all requisite power and authority and all governmental licenses, authorizations, consents and
approvals to own its assets, carry on its business and to execute, deliver, and perform its
obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed
and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification or license, and (d) is in
compliance with all Laws, except in each case referred to in clause (c) or this clause
(d), to the extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect.




49










 





     SECTION 5.2 Authorization; No Contravention. The execution, delivery and performance by each
Loan Party of each Loan Document to which such Person is a party, have been duly authorized by all
necessary corporate or other organizational action, and do not and will not (a) contravene the
terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any Contractual Obligation to which such
Person is a party or any order, injunction, writ or decree of any Governmental Authority to which
such Person or its property is subject; or (c) violate any Law.



     SECTION 5.3 Governmental Authorization; Consents. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person or entity (including, without limitation, any creditor or stockholder of the Borrower
or any Guarantor) is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, any Loan Party of this Agreement or any other Loan
Document.



     SECTION 5.4 Binding Effect. This Agreement has been, and each other Loan Document, when
delivered hereunder, will have been, duly executed and delivered by each Loan Party that is a party
thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan
Party that is a party thereto in accordance with its terms except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors’ rights generally and by general principles of equity.



     SECTION 5.5 Financial Statements; No Material Adverse Effect.



     (a) The Initial Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise expressly noted
therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the
date thereof and their results of operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise expressly noted
therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of
the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material
commitments and Indebtedness in accordance with GAAP consistently applied throughout the period
covered thereby.



     (b) Since the date of the Initial Audited Financial Statements, there has been no event or
circumstance that has or could reasonably be expected to have a Material Adverse Effect.



     SECTION 5.6 Litigation. Except as specifically disclosed in Schedule 5.6, there are
no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower,
threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority,
by or against the Borrower or any of its Restricted Subsidiaries or against any of their properties
or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby, or (b) if determined adversely, could reasonably be
expected to have a Material Adverse Effect.



50









 





     SECTION 5.7 No Default. Neither the Borrower nor any Subsidiary is in default under or with
respect to any Contractual Obligation that could be reasonably expected to have a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing or would result from the
consummation of the transactions contemplated by this Agreement or any other Loan Document.



     SECTION 5.8 Ownership of Property; Liens. The Borrower and each Restricted Subsidiary has
good record and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of its business, except for such defects in
title as would not, individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Borrower and its Restricted Subsidiaries is subject to no Liens,
other than Liens permitted by Section 7.1.



     SECTION 5.9 Environmental Matters. The Borrower and its Subsidiaries conduct in the ordinary
course of business a review of the effect of existing Environmental Laws and claims alleging
potential liability or responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof the Borrower has reasonably
concluded that, except as would not have a Material Adverse Effect (or with respect to (c), (d) and
(e) below, where the failure to take such actions would not have a Material Adverse Effect):



     (a) neither any property of any Loan Party or any Subsidiary, nor the operations conducted
thereon violate any Environmental Laws;



     (b) without limitation of clause (a) above, no property of any Loan Party or any
Subsidiary, nor the operations currently conducted thereon or, to the best knowledge of the
Borrower, by any prior owner or operator of such property or operation, are in violation of or
subject to any existing, pending or, to the Borrower’s knowledge, threatened action, suit,
investigation, inquiry or proceeding by or before any Governmental Authority or to any remedial
obligations under Environmental Laws;



     (c) all notices, permits, licenses or similar authorizations, if any, required pursuant to
Environmental Laws to be obtained or filed in connection with the operation or use of the property
of any Loan Party and each Subsidiary have been duly obtained or filed, and the Loan Party and each
Subsidiary are in compliance with the terms and conditions of all such notices, permits, licenses
and similar authorizations;



     (d) all Hazardous Materials, solid waste, and oil and gas exploration and production wastes,
if any, generated at the property of any Loan Party or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the environment, and, to the
best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities
have been and are operating in compliance with Environmental Laws and so as not to pose an imminent
and substantial endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or, to the Borrower’s knowledge, threatened action, investigation
or inquiry by any Governmental Authority in connection with any Environmental Laws;



51









 





     (e) the Loan Parties and their Subsidiaries have taken all steps reasonably necessary to
determine and have determined that no Hazardous Materials, solid waste, or oil and gas exploration
and production wastes, have been disposed of or otherwise released and there has been no threatened
release of any Hazardous Materials on or to any property of the Loan Parties or any Subsidiary
except, in each case, in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment; and



     (f) none of the Loan Parties nor any Subsidiary has any known contingent liability in
connection with any release or threatened release of any oil, Hazardous Materials or solid waste
into the environment.



     SECTION 5.10 Insurance. The properties of the Borrower and its Restricted Subsidiaries are
insured with financially sound and reputable insurance companies that are not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried
by companies engaged in similar businesses and owning similar properties in localities where the
Borrower or its Restricted Subsidiaries operate.



     SECTION 5.11 Taxes. The Borrower, its Restricted Subsidiaries and each of the Borrower’s
other Subsidiaries that is a member of Borrower’s consolidated U.S. federal income tax group, have
filed all Federal, state and other material tax returns and reports required to be filed, and have
paid all Federal, state and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due and payable, except
those which are being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax assessment against
the Borrower, any Restricted Subsidiary or any of the Borrower’s other Subsidiaries that is a
member of Borrower’s consolidated U.S. federal income tax group, that would, if made, have a
Material Adverse Effect.



     SECTION 5.12 ERISA Compliance.



     (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with respect thereto and, to
the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of,
such qualification. The Borrower and each ERISA Affiliate of the Borrower have made all required
contributions to each Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.



     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be
reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or
could be reasonably expected to result in a Material Adverse Effect.



52









 





     (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan
has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate of the
Borrower has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Borrower nor any ERISA Affiliate of the Borrower has incurred, or
reasonably expects to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate of
the Borrower has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of
ERISA.



     SECTION 5.13 Subsidiaries.



     (a) The Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of
Schedule 5.13. All Restricted Subsidiaries of Borrower are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions of organization and
are duly qualified to do business in each jurisdiction where failure to so qualify would have an
Material Adverse Effect. All outstanding shares of stock of each class of each Restricted
Subsidiary of Borrower have been and will be validly issued and are and will be fully paid and
nonassessable. Except as otherwise set forth on Schedule 5.13, all outstanding shares of
stock of each class of each Restricted Subsidiary of Borrower are and will be owned, beneficially
and of record, by Borrower or a wholly-owned Subsidiary of Borrower. All outstanding shares of
stock of each class of (i) Bois d’Arc Energy owned by the Borrower or any Restricted Subsidiary and
(ii) each Restricted Subsidiary of Borrower, are and will be free and clear of any Liens (other
than Liens permitted by Section 7.1).



     (b) Part (b) of Schedule 5.13 sets forth each of the Subsidiaries of the Borrower that
shall have delivered a Guaranty on the Closing Date. Each such Guarantor is and will remain a
wholly-owned Subsidiary of the Borrower.



     (c) The Borrower has no equity investments in any other corporation or entity other than those
specifically disclosed in Part (c) of Schedule 5.13.



     SECTION 5.14 Margin Regulations; Investment Company Act.



     (a) Neither the Borrower nor any of its Subsidiaries is not engaged, and will not engage,
principally or as one of its important activities, in the business of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board), or extending credit for the purpose
of purchasing or carrying margin stock.



     (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment Company Act of 1940.



     SECTION 5.15 Disclosure. No statement, information, report, representation, or warranty made
in writing by any Loan Party in any Loan Document or furnished to the Administrative Agent or any
Lender by or on behalf of any Loan Party in connection with any



53









 







Loan Document contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. There is no fact known to the Borrower
which has caused, or which likely would in the future in the reasonable judgment of the Borrower
cause, a Material Adverse Effect (except for any economic conditions which affect generally the
industry in which the Borrower and its Restricted Subsidiaries conduct business), that has not been
set forth in this Agreement or in the other documents, certificates, statements, reports and other
information furnished in writing to the Lenders by or on behalf of the Borrower or any other Loan
Party in connection with the transactions contemplated hereby.



     SECTION 5.16 Intellectual Property; Licenses, Etc. The Borrower and its Restricted
Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names,
copyrights, patents, patent rights, franchises, licenses and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict with the rights of any
other Person. To the best knowledge of the Borrower, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now contemplated to be
employed, by the Borrower or any Restricted Subsidiary infringes upon any rights held by any other
Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge
of the Borrower, threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower,
proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.



     SECTION 5.17 Direct Benefit. The initial Loans and Letters of Credit hereunder and all
additional Loans and Letters of Credit hereunder are for the direct benefit of the Borrower, or in
the case of any initial or additional Letters of Credit, one or more of the Restricted Subsidiaries
of the Borrower, and the initial Loans and Letters of Credit hereunder are used to refinance and
replace indebtedness owing, directly or indirectly, by the Borrower and certain of the Guarantors
to the Lenders under the Prior Credit Facility. The Borrower and the Guarantors are engaged as an
integrated group in the business of oil and gas exploration and related fields, and any benefits to
the Borrower or any Guarantor is a benefit to all of them, both directly or indirectly, inasmuch as
the successful operation and condition of the Borrower and the Guarantors is dependent upon the
continued successful performance of the functions of the integrated group as a whole.



     SECTION 5.18 Solvency. Each of the following is true for the Borrower, each Guarantor and the
Borrower and the Guarantors on a consolidated basis: (a) the fair saleable value of its or their
property is (i) greater than the total amount of its liabilities (including contingent
liabilities), and (ii) greater than the amount that would be required to pay its probable aggregate
liability on its then existing debts as they become absolute and matured; (b) its or their property
is not unreasonable in relation to its business or any contemplated or undertaken transaction; and
(c) it or they do not intend to incur, or believe that it or they will incur, debts beyond its or
their ability to pay such debts as they become due.



     SECTION 5.19 Indenture Debt Documents. Before and after giving effect to all the Credit
Extensions contemplated hereunder, all representations and warranties of the Borrower or



54









 







any Guarantor contained in any Indenture Debt Document are true and correct in all material
respects (except to the extent such representations or warranties relate or refer to a specified,
earlier date). Before and after giving effect to all the Credit Extensions contemplated hereunder,
there is no event of default or event or condition that could become an event of default with
notice or lapse of time or both, under the Indenture Debt Documents and each of the Indenture Debt
Documents is in full force and effect.



ARTICLE VI.

AFFIRMATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation shall
remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall,
and shall (except in the case of the covenants set forth in Sections 6.1, 6.2,
6.3 and 6.11) cause each of its Restricted Subsidiaries to:



     SECTION 6.1 Financial Statements. Deliver to the Administrative Agent and each Lender, in
form and detail satisfactory to the Administrative Agent and the Majority Lenders:



     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of
the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such fiscal year, and the related consolidated statements of income and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail, audited and accompanied by a report and opinion of an independent certified
public accountant of nationally recognized standing reasonably acceptable to the Majority Lenders,
which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any
qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions
not reasonably acceptable to the Majority Lenders; and



     (b) as soon as available, but in any event within 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated
statements of income and cash flows for such fiscal quarter and for the portion of the Borrower’s
fiscal year then ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the
previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the
Borrower as fairly presenting the financial condition, results of operations and cash flows of the
Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.



     SECTION 6.2 Certificates; Other Information. Deliver to the Administrative Agent and each
Lender, in form and detail satisfactory to the Administrative Agent and the Majority Lenders:



     (a) concurrently with the delivery of the financial statements referred to in Section
6.1(a), a certificate of its independent certified public accountants certifying such financial
statements and stating that in making the examination necessary therefor no knowledge



55









 







was obtained of any Default or Event of Default or, if any such Default or Event of Default
shall exist, stating the nature and status of such event;



     (b) concurrently with the delivery of the financial statements referred to in Sections
6.1(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer
of the Borrower;



     (c) promptly after requested by the Administrative Agent or any Lender, copies of any detailed
audit reports, management letters or recommendations submitted to the board of directors (or the
audit committee of the board of directors) of the Borrower by independent accountants in connection
with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them;



     (d) promptly after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of the Borrower, and copies of
all annual, regular, periodic and special reports and registration statements which the Borrower
may file or be required to file with the Securities and Exchange Commission under Section 13 or
15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the
Administrative Agent pursuant hereto;



     (e) upon the reasonable request of the Majority Lenders or the Administrative Agent, a
schedule of all oil, gas, and other mineral production attributable to all material Oil and Gas
Properties of the Borrower and the Guarantors, and in any event all such Oil and Gas Properties
included in the Borrowing Base;



     (f) promptly, all title or other information received after the Closing Date by the Borrower
or any Guarantor which discloses any material defect in the title to any material asset included in
the Borrowing Base;



     (g) (A) as soon as available and in any event within 90 days after each January 1, commencing
with January 1, 2007, an annual reserve report as of each such January 1 with respect to all
Hydrocarbons attributable to the Oil and Gas Properties of the Borrower and the Guarantors prepared
by an independent engineering firm of recognized standing acceptable to the Majority Lenders in
accordance with accepted industry practices and otherwise acceptable and in form and substance
satisfactory to the Majority Lenders, and including without limitation all assets included in the
Borrowing Base, and (B) within 90 days after each July 1 commencing with July 1, 2007, a reserve
report as of such July 1, with respect to all Hydrocarbons attributable to the Oil and Gas
Properties of the Borrower and the Guarantors prepared by the Borrower in accordance with accepted
industry practices and otherwise acceptable and in form and substance satisfactory to the Majority
Lenders, and including without limitation all assets included in the Borrowing Base;



     (h) on or within 30 days after the request of the Administrative Agent or the Majority
Lenders, in connection with a redetermination of the Borrowing Base permitted under Section
2.8 an updated reserve report with respect to all Hydrocarbons attributable to the Oil and Gas
Properties of the Borrower and the Guarantors prepared by an independent engineering firm of
recognized standing acceptable to the Majority Lenders in accordance with accepted industry



56









 







practices and otherwise acceptable and in form and substance satisfactory to the Majority
Lenders, and including without limitation all assets included in the Borrowing Base;



     (i) promptly, any management letter from the auditors for the Borrower or any Guarantor and
all other information respecting the business, properties or the condition or operations, financial
or otherwise, including, without limitation, geological and engineering data of the Borrower or an
Guarantor and any title work with respect to any Oil and Gas Properties of the Borrower or any
Guarantor as any Bank may from time to time reasonably request;



     (j) if requested by the Majority Lenders, title opinions (or other title reports or title
information acceptable to the Majority Lenders) and other opinions of counsel, in each case in form
and substance acceptable to the Majority Lenders, with respect to at least eighty (80%) percent of
the value of the assets included in the Borrowing Base for which satisfactory title reports have
not been previously delivered to the Administrative Agent, if any; and



     (k) promptly, such additional information regarding the business, financial or corporate
affairs of the Borrower or any Subsidiary as the Administrative Agent, at the request of any
Lender, may from time to time reasonably request (including, without limitation, updated or
supplemental Forms U-1, together with all annexes, schedules and other information, as may be
necessary for each Lender to confirm compliance with Regulation U issued by the Board).



     SECTION 6.3 Notices. Promptly notify the Administrative Agent and each Lender:



     (a) of the occurrence of any Default or Event of Default;



     (b) of any matter that has resulted or may reasonably be expected to result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual
Obligation of the Borrower or any Restricted Subsidiary; (ii) any dispute, litigation,
investigation, proceeding or suspension between the Borrower or any Restricted Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material development in, any
litigation or proceeding affecting any of the Borrower or any Restricted Subsidiary, including
pursuant to any applicable Environmental Laws;



     (c) of any litigation, investigation or proceeding affecting any Loan Party in which the
amount involved exceeds $10,000,000 or in which injunctive relief or similar relief is sought,
which relief, if granted, could be reasonably expected to have a Material Adverse Effect;



     (d) of the occurrence of any ERISA Event; and



     (e) of any material change in accounting policies or financial reporting practices by the
Borrower or any Subsidiary.



     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the Borrower setting forth details of the occurrence referred to therein and stating
what action the Borrower or the relevant Subsidiary has taken and proposes to take with respect
thereto. Each notice pursuant to Section 6.3(a) shall describe with particularity any and
all provisions of this Agreement or other Loan Document that have been breached.



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     SECTION 6.4 Payment of Obligations. Pay and discharge as the same shall become due and
payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Borrower or such Restricted Subsidiary; (b) all lawful claims which, if
unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and
payable, but subject to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.



     SECTION 6.5 Preservation of Existence, Etc. Preserve, renew and maintain in full force and
effect its legal existence and good standing under the Laws of the jurisdiction of its
organization; take all reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, except in a transaction
permitted by Section 7.4 or 7.5; and preserve or renew all of its registered
patents, trademarks, trade names and service marks, the non-preservation of which could reasonably
be expected to have a Material Adverse Effect.



     SECTION 6.6 Maintenance of Properties. (a) Maintain, preserve and protect all of its material
properties and equipment necessary in the operation of its business in good working order and
condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation
and maintenance of its facilities.



     SECTION 6.7 Maintenance of Insurance. Maintain with financially sound and reputable insurance
companies not Affiliates of the Borrower, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons engaged in the same or
similar business, of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.



     SECTION 6.8 Compliance with Laws. Comply in all material respects with the requirements of
all Laws applicable to it or to its business or property, except in such instances in which (i)
such requirement of Law is being contested in good faith or a bona fide dispute exists with respect
thereto; or (ii) the failure to comply therewith could not be reasonably expected to have a
Material Adverse Effect.



     SECTION 6.9 Books and Records. (a) Maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the Borrower or its
Subsidiaries, as the case may be; and (b) maintain such books of record and account in material
conformity with all applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Borrower or any Subsidiary, as the case may be.



     SECTION 6.10 Inspection Rights. Permit representatives and independent contractors of the
Administrative Agent and each Lender to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers,



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and independent public accountants, all at the expense of the Borrower and at such reasonable
times during normal business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Borrower; provided, however, that when an Event of Default
exists the Administrative Agent or any Lender (or any of their respective representatives or
independent contractors) may do any of the foregoing at the expense of the Borrower at any time
during normal business hours and without advance notice.



     SECTION 6.11 Compliance with ERISA. Do, and cause each of its ERISA Affiliates to do, each of
the following: (a) maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all
required contributions to any Plan subject to Section 412 of the Code.



     SECTION 6.12 Use of Proceeds. Use the proceeds of the Credit Extensions for working capital
and other general corporate purposes, in each case, in compliance with, and not in contravention
of, Section 7.11, any Law, any Loan Document, or any other Contractual Obligation.



     SECTION 6.13 Title Materials. Not later than ninety (90) days following the Closing Date, the
Borrower agrees to deliver, or to cause to be delivered, to the Administrative Agent favorable
title reports or other title materials (including, if reasonably requested by the Administrative
Agent, title opinions) in form and substance satisfactory to the Administrative Agent with respect
to such of Borrower’s and the Guarantor’s Oil and Gas Properties as the Administrative Agent shall
reasonably determine or request and for which satisfactory title reports or other title materials
have not been previously delivered to the Administrative Agent, if any, and demonstrating that the
Borrower or a Guarantor, as applicable, has good and defensible title to such properties and
interests that is at least equal to the interest included in the Initial Engineering Report, free
and clear of all Liens (other than those permitted by Section 7.1) and covering such other
matters as the Administrative Agent may reasonably request.



     SECTION 6.14 [Intentionally Omitted].



     SECTION 6.15 Additional Covenants. If at any time the Borrower shall enter into or be a party
to any instrument or agreement, including all such instruments or agreements in existence as of the
date hereof and all such instruments or agreements entered into after the date hereof, relating to
or amending any terms or conditions applicable to any of its Indebtedness which includes covenants,
terms, conditions or defaults not substantially provided for in this Agreement or more favorable to
the lender or lenders thereunder than those provided for in this Agreement, then the Borrower shall
promptly so advise the Administrative Agent and the Lenders. Thereupon, if the Administrative
Agent shall request, upon notice to the Borrower, the Administrative Agent and the Lenders shall
enter into an amendment to this Agreement or an additional agreement (as the Administrative Agent
may request), providing for substantially the same covenants, terms, conditions and defaults as
those provided for in such instrument or agreement to the extent required and as may be selected by
the Administrative Agent. In addition to the foregoing, any covenants, terms, conditions or
defaults in any existing agreements or other documents evidencing or relating to any Indebtedness
of the Borrower or any Guarantor (including without limitation the Indenture Debt Documents) not
substantially provided for in



59









 







this Agreement or more favorable to the holders of such Indebtedness, are hereby incorporated
by reference into this Agreement to the same extent as if set forth fully herein, and no subsequent
amendment, waiver or modification thereof shall affect any such covenants, terms, conditions or
defaults as incorporated herein.



     SECTION 6.16 Security.



     (a) The Security. The Secured Obligations will be secured by the Security Documents
listed in the Security Schedule and any additional Security Documents hereafter delivered by any
Loan Party or any Affiliate of any Loan Party.



     (b) Agreement to Deliver Security Documents. The Borrower shall promptly deliver, and
to cause each of the Guarantors to deliver, to further secure the Secured Obligations, deeds of
trust, mortgages, chattel mortgages, security agreements, financing statements and other Security
Documents in form and substance satisfactory to the Administrative Agent for the purpose of
granting, confirming, and perfecting first and prior liens or security interests in (i) prior to
the occurrence of a Default (A) at least eighty percent (80%) of the present value of the
Borrower’s and the Guarantors’ Oil and Gas Properties constituting proved reserves to which value
is given in the determination of the then current Borrowing Base, (B) after the occurrence of a
Default, at least ninety-five percent (95%) of the present value of the Borrower’s and the
Guarantors’ Oil and Gas Properties, (ii) all of the equity interests of the Borrower or any
Guarantor in any other Guarantor now owned or hereafter acquired by the Borrower or any Guarantor,
and (iii) all property of the Borrower or any Guarantor of the type described in the Security
Agreement attached hereto as Exhibit I. The Borrower also agrees to deliver, or to cause
to be delivered, to the extent not already delivered, whenever requested by the Administrative
Agent in its sole and absolute discretion (a) favorable title information (including, if reasonably
requested by the Administrative Agent, title opinions) acceptable to the Administrative Agent with
respect to the Borrower’s or any Guarantor’s Oil and Gas Properties constituting at least eighty
percent (80%) of the present value, determined by the Lenders in their sole and absolute discretion
and in accordance with their normal practices and standards for oil and gas loans as it exists at
the particular time, of the Borrower’s and the Guarantors’ properties and demonstrating that the
Borrower or a Guarantor, as applicable, have good and defensible title to such properties and
interests, free and clear of all Liens (other than those permitted by Section 7.1) and
covering such other matters as the Administrative Agent may reasonably request and (b) favorable
opinions of counsel satisfactory to the Administrative Agent in its sole discretion opining that
the forms of Mortgage are sufficient to create valid first deed of trust or mortgage liens in such
properties and interests and first priority assignments of and security interests in the
Hydrocarbons attributable to such properties and interests and proceeds thereof. In addition and
not by way of limitation of the foregoing, in the case of the Borrower or any Guarantor granting a
Lien in favor of the Administrative Agent upon any assets having a present value in excess of
$1,000,000 located in a new jurisdiction, the Borrower or Guarantor will at its own expense, obtain
and furnish to the Administrative Agent all such opinions of legal counsel as the Administrative
Agent may reasonably request in connection with any such security or instrument.



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     (c) Perfection and Protection of Security Interests and Liens. In addition and not by
way of limitation of the foregoing, the Borrower will from time to time deliver, or cause to be
delivered, to the Administrative Agent any financing statements, continuation statements, extension
agreements and other documents, properly completed (and executed and acknowledged when required) by
the Borrower or appropriate Guarantor in form and substance satisfactory to the Administrative
Agent, which the Administrative Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in the collateral securing any Secured Obligations. In
addition to the foregoing, the Borrower hereby authorizes, and shall cause each Guarantor to
authorize, the Administrative Agent, on behalf of the Issuing Bank and the Lenders, to file in the
appropriate filing office pursuant to applicable Law such financing statements, assignments and
continuation statements as the Administrative Agent shall deem necessary or desirable for the
purpose of perfecting, confirming, or protecting any Liens or other rights in the collateral
securing any Secured Obligations without the signature of the Borrower or any Guarantor.



     (d) Additional Restricted Subsidiaries. Within thirty (30) Business Days after the
Borrower or any Restricted Subsidiary creates, acquires or otherwise forms any other Subsidiary
(other than a Subsidiary designated as an Unrestricted Subsidiary in accordance with Section
1.6(b)), the Borrower shall:




     (i) execute and deliver, or cause each such Subsidiary owning any of the outstanding
equity interests in such other Restricted Subsidiary to execute and deliver, as applicable,
to the Administrative Agent on behalf of the Lenders, a Pledge Agreement, or an amendment or
supplement to an existing Pledge Agreement, if appropriate, pursuant to which all of the
outstanding equity interests in such other Restricted Subsidiary owned by the Borrower or
such Restricted Subsidiary shall be pledged to the Administrative Agent on behalf of the
Lenders, together with any certificates representing all equity interests so pledged, if
any, and for each such certificate representing shares of stock, a stock power executed in
blank;




     (ii) cause such Subsidiary to execute and deliver to the Administrative Agent on behalf
of the Lenders (i) a Guaranty, (ii) a ratification and acceptance of the Subordination
Agreement, (iii) an agreement substantially similar to the Security Documents executed and
delivered on the Closing Date and (iv) a Mortgage as to all Oil and Gas Properties
containing any proved Hydrocarbon reserves owned or leased by such Subsidiary;




     (iii) cause such Subsidiary to execute and deliver to the Administrative Agent on
behalf of the Lenders and the Issuing Bank, or to authorize the Administrative Agent to file
or record without such Subsidiary’s signature, appropriate financing statements covering the
collateral of such Subsidiary described in the Security Documents required to be delivered
pursuant to the foregoing clauses (i) or (ii);




     (iv) deliver or cause to be delivered to the Administrative Agent on behalf of the
Lenders and the Issuing Bank all agreements, documents, instruments and other writings of
the type described in Section 4.1(a)(iii), (iv) and (vi) with
respect to such Subsidiary and opinions of counsel acceptable to the Administrative Agent
and in form



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and substance satisfactory to the Administrative Agent covering the matters covered by
the opinions delivered on the Closing Date with respect to such Subsidiary; and




     (v) deliver or cause to be delivered to the Administrative Agent on behalf of the
Lenders all such information regarding the condition (financial or otherwise), business and
operations of such Subsidiary as the Administrative Agent, or the Issuing Bank or any Lender
through the Administrative Agent, may reasonably request.



     (e) Production Proceeds. Notwithstanding that, by the terms of the various Security
Documents, the Loan Parties are and will be assigning to the Administrative Agent, the Issuing Bank
and the Lenders all of the “Production” (as defined therein) and the proceeds therefrom accruing to
the properties covered thereby, so long as no Event of Default has occurred, the Loan Parties may
continue to receive from the purchasers of production all such Production Proceeds, subject,
however, to the Liens created under the Security Documents, which Liens are hereby affirmed and
ratified. Upon the occurrence of an Event of Default, the Administrative Agent, the Issuing Bank
and the Lenders may exercise all rights and remedies granted under the Security Documents,
including the right to obtain possession of all Production Proceeds then held by any Loan Party or
to receive directly from the purchasers of production all other Production Proceeds. In no case
shall any failure, whether purposeful or inadvertent, by the Administrative Agent, the Issuing Bank
or the Lenders to collect directly any such Production Proceeds constitute in any way a waiver,
remission or release of any of its or their rights under the Security Documents, nor shall any
release of any Production Proceeds by the Administrative Agent or Lenders to any Loan Party
constitute a waiver, remission, or release of any other Production Proceeds or of any rights of the
Administrative Agent, the Issuing Bank or the Lenders to collect other Production Proceeds
thereafter.



     SECTION 6.17 [Intentionally Omitted].



     SECTION 6.18 Unrestricted Subsidiaries. The Borrower:



     (a) will cause the management, business and affairs of each of Borrower and its Subsidiaries
to be conducted in such a manner (including, without limitation, by keeping separate books of
account, maintaining separate policies of insurance and by not permitting Properties of Borrower
and its respective Subsidiaries to be commingled) so that each Unrestricted Subsidiary will be
treated as an entity separate and distinct from Borrower and the Restricted Subsidiaries (except
(i) with respect to the treatment for tax purposes of the Borrower or any Restricted Subsidiary
holding any interest in an Unrestricted Subsidiary that is regarded as a partnership and (ii) for
the common management/directorship between the Borrower and any Unrestricted Subsidiary);



     (b) except as permitted by Section 7.3(e), will not, and will not permit any of the
Restricted Subsidiaries to, incur, assume or suffer to exist Guaranty Obligations or be or become
liable for any Indebtedness of any Unrestricted Subsidiary; and



     (c) will not permit any Unrestricted Subsidiary to hold any equity interest in, or any
Indebtedness of, the Borrower or any Restricted Subsidiary.



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ARTICLE VII.

NEGATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation shall
remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall
not, and the Borrower shall not permit any Restricted Subsidiary to, directly or indirectly:



     SECTION 7.1 Liens. Create, incur, assume or suffer to exist, any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other than the following:



     (a) Liens existing pursuant to any Loan Document;



     (b) Liens existing on the date hereof and listed on Schedule 7.1 and any renewals or
extensions thereof, provided that the property covered thereby is not increased and any
renewal or extension of the obligations secured or benefited thereby is permitted by Section
7.3(b);



     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate
proceedings, if adequate reserves with respect thereto are maintained on the books of the
applicable Person in accordance with GAAP;



     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, operator’s, statutory,
royalty owner’s or other like Liens arising in the ordinary course of business that are not overdue
for a period of more than 30 days or which are being contested in good faith and by appropriate
proceedings, if adequate reserves with respect thereto are maintained on the books of the
applicable Person;



     (e) pledges or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation, other than any Lien
imposed by ERISA;



     (f) 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;



     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real
property which, in the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the applicable Person;



     (h) Liens on fixed or capital assets acquired, constructed or improved by any Borrower or any
Restricted Subsidiary; provided that (i) such Liens, secure Indebtedness permitted by
clause (e) of Section 7.3, (ii) such Liens and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the completion of such construction
or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring,



63









 







constructing or improving such fixed or capital assets and (iv) such Liens shall not apply to
any other property or assets of any Borrower or any other Restricted Subsidiaries; and



     (i) Until such time as the Subordinate Mortgages are released and terminated as permitted by
Section 10.16, the Liens existing pursuant to the Subordinate Mortgages.



     SECTION 7.2 Investments. Make any Investments, except:



     (a) Investments other than those permitted by clauses (b) through (h) existing
on the date hereof and listed on Schedule 7.2;



     (b) Investments held by the Borrower or such Restricted Subsidiary in the form of cash or cash
equivalents;



     (c) advances to officers, directors and employees of the Borrower or any Restricted Subsidiary
in an aggregate amount not to exceed $50,000 at any time outstanding, for travel, entertainment,
relocation and analogous ordinary business purposes;



     (d) Investments constituting (1) contributions of capital (but not loans or advances) made by
the Borrower in any Guarantor or by any Guarantor in any other Guarantor, and (2) loans or advances
by the Borrower to any Guarantor, provided that such Investment constituting a loan or advance
shall be evidenced by a Pledged Note pledged to the Administrative Agent pursuant to a Pledge
Agreement;



     (e) Guaranty Obligations permitted by Section 7.3;



     (f) Investments permitted by Section 7.4;



     (g) Investments made by the Borrower to purchase or acquire additional shares of common stock
of Bois d’Arc Energy, provided that all such Investments made after the Closing Date do not exceed
$40,000,000 in the aggregate during any calendar year; provided, however, that both
before and after giving effect to such Investment (on a pro forma basis acceptable to the
Administrative Agent) (i) no Default or Event of Default shall have occurred and be continuing,
(ii) all representations and warranties contained in Article V hereof shall be true and
correct in all material respects as if made both immediately before and immediately after the time
of such Investment, and (iii) the Outstanding Amount does not exceed, or would not exceed after
giving effect to any Credit Extension the proceeds of which are used (or are intended to be used)
to fund any portion of such Investment, 80% of the Borrowing Base then in effect; and
further provided, however, that if all or any portion of such Investment is
made using the proceeds of any Borrowing, directly or indirectly, then (x) the Borrower shall have
delivered to the Administrative Agent and the Lenders prior written notice of such Investment at
least five (5) Business Days prior to the requested date of the Borrowing describing such
Investment in reasonable detail (as determined by the Administrative Agent and the Lenders), and
(y) prior to making any such Investment, the Borrower shall have completed, executed and delivered
to each Lender, and each Lender shall have accepted (in each such Lender’s sole and absolute
discretion) and executed, a Form U-1 (or any successor form promulgated by or on behalf of the
Board) demonstrating compliance with Regulation U issued by the Board; and



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     (h) Investments by the Borrower or any Guarantor in any other Person, provided that all such
Investments made after the Closing Date do not exceed $10,000,000 in the aggregate at any time;
provided that such Investment shall not violate Section 7.8 or Section 7.11, and
provided, further, that the Borrower shall, or shall cause such other Person to,
comply with the provisions of Section 6.16(d) in accordance therewith; and
provided, further, that both before and after giving effect to such Investment (on
a pro forma basis acceptable to the Administrative Agent) no Default or Event of Default shall have
occurred and be continuing and all representations and warranties contained in Article V hereof
shall be true and correct in all material respects as if made both immediately before and
immediately after the time of such Investment.



     SECTION 7.3 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:



     (a) Indebtedness under the Loan Documents;



     (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.3 and any
refinancings, refundings, renewals or extensions thereof; provided that the amount of such
Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension
except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred, in connection with such refinancing;



     (c) Guaranty Obligations of the Borrower or any Restricted Subsidiary in respect of
Indebtedness otherwise permitted hereunder of the Borrower or any wholly-owned Restricted
Subsidiary provided all such Indebtedness shall be evidenced by Pledged Notes (as described in the
Pledged Agreements) which shall have been pledged the Administrative Agent in accordance with the
Pledge Agreements;



     (d) obligations (contingent or otherwise) of the Borrower or any Restricted Subsidiary
existing or arising under any Hedging Agreement with any Lender or any Person with an investment
grade debt rating acceptable to the Administrative Agent at the time such Hedging Agreement is
entered into or any other Person acceptable to the Administrative Agent, provided that (i)
such obligations are (or were) entered into by such Person in the ordinary course of business for
the purpose of directly mitigating risks associated with liabilities, commitments, investments,
assets, or property held or reasonably anticipated by such Person, or changes in the value of
securities issued by such Person and not for purposes of speculation or taking a “market view;” and
(ii) such Hedging Agreement does not contain any provision exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the defaulting party;



     (e) Indebtedness in an aggregate principal amount not to exceed $20,000,000 at any time
outstanding, provided that such Indebtedness shall either be unsecured or secured only by Liens
satisfying all of the conditions set forth in Section 7.1(h);



     (f) Indebtedness of Borrower outstanding under the Indenture Debt Documents, provided that the
principal amount of any Indebtedness outstanding under the Indenture Debt Documents shall not
exceed $175,000,000 at any time (except by an amount equal to a



65









 







reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred,
in connection with any refinancing, refunding, renewal or extension of the facilities described in
the Indenture Debt Documents);



     (g) Indebtedness constituting intercompany loans or advances owing by a Guarantor to the
Borrower evidenced by a Pledged Note; and



     (h) Unsecured insurance premium financing in the ordinary course of business.



     SECTION 7.4 Fundamental Changes. Merge, consolidate with or into, or convey, transfer, lease
or otherwise dispose of (whether in one transaction or in a series of related transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any
Person, except that, so long as no Default or Event of Default exists or would result therefrom:



     (a) any Restricted Subsidiary may merge with (i) the Borrower, provided that the
Borrower shall be the continuing or surviving Person, or (ii) any one or more Restricted
Subsidiaries, provided that when any wholly-owned Subsidiary is merging with another
Restricted Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person; and



     (b) any Restricted Subsidiary may sell all or substantially all of its assets (upon voluntary
liquidation or otherwise), to the Borrower or to another Restricted Subsidiary; provided
that if the seller in such a transaction is a wholly-owned Restricted Subsidiary, then the
purchaser must also be a wholly-owned Restricted Subsidiary.



     SECTION 7.5 Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:



     (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in
the ordinary course of business;



     (b) Dispositions of inventory in the ordinary course of business;



     (c) Dispositions of property by any Restricted Subsidiary to the Borrower or to a wholly-owned
Restricted Subsidiary;



     (d) Dispositions permitted by Section 7.4;



     (e) if no Default or Event of Default exists either before or after such Disposition or would
result therefrom, Dispositions of Oil and Gas Properties constituting Proved Reserves included in
the most recently delivered Engineering Report that, when aggregated with any other Disposition
made pursuant to this Section 7.5(e) between the most recent and the next succeeding
regularly schedule redeterminations of the Borrowing Base, have a fair market value not exceeding
ten percent (10%) of the Borrowing Base in effect at the time of such Disposition, provided
that, in connection with any such sales of assets included in the most recently delivered
Engineering Report having a fair market value, when aggregated with any other Disposition



66









 







made pursuant to this Section 7.5(e) between the most recent and the next succeeding
regularly schedule redeterminations of the Borrowing Base, in excess of five percent (5%) of the
Borrowing Base in effect at the time of such Disposition, the Borrowing Base shall automatically be
reduced concurrently with such Disposition in an amount equal to such excess;



     (f) if no Default or Event of Default exists either before or after such Disposition or would
result therefrom, Dispositions of Oil and Gas Properties that do not constitute Proved Reserves in
the most recently delivered Engineering Report;



     (g) if no Default or Event of Default exists either before or after such Disposition or would
result therefrom, Dispositions of some or all of the common stock of Bois d’Arc Energy by the
Borrower, provided that the Borrower shall have delivered to the Administrative Agent and the
Lenders prior written notice of such Disposition at least five (5) Business Days prior to the
consummation thereof and, if requested by the Administrative Agent or any Lender in connection with
such Disposition, the Borrower shall have executed and delivered prior to the consummation thereof
a Form U-1 or an amendment to any previously delivered Form U-1, together with all annexes or
schedules thereto and any other documents or information related thereto as may be requested by the
Administrative Agent or any Lender, for each Lender duly completed by the Borrower in form and
substance acceptable to each Lender (as evidenced by each Lender having executed and returned a
copy of its respective Form U-1) demonstrating compliance with Regulation U issued by the Board
after giving effect to any such Disposition; and



     (h) if no Default or Event of Default exists either before or after such Disposition or would
result therefrom, Dispositions of any other assets that are not Oil and Gas Properties, provided
that the aggregate fair market value of all such assets shall not exceed $20,000,000 in any
calendar year;



provided, however, that any Disposition pursuant to this Section 7.5 shall
be for fair market value.



     SECTION 7.6 Restricted Payments. Declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, except that:



     (a) each Restricted Subsidiary may make Restricted Payments, directly or indirectly, to the
Borrower or a Guarantor;



     (b) Borrower may declare and make dividend payments or other distributions payable solely in
the common stock of Borrower;



     (c) the Borrower and each Restricted Subsidiary may purchase, redeem or otherwise acquire
shares of its common stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its common stock; and



     (d) other Restricted Payments that, when aggregated with all Optional Indebtedness Payments
made pursuant to Section 7.12(b), if any, do not exceed $40,000,000 in aggregate



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amount during any calendar year; provided that both before and after giving effect to
such Restricted Payment, as applicable, (on a pro forma basis acceptable to the Administrative
Agent) no Default or Event of Default shall have occurred and be continuing and all representations
and warranties contained in Article V hereof shall be true and correct in all material
respects as if made at the time of such Restricted Payment;



provided, however, that notwithstanding the foregoing, no Restricted Payment (other
than Restricted Payments pursuant to clause (a)) shall be made at any time when the
Outstanding Amount exceeds, or would exceed after giving effect to any Credit Extension the
proceeds of which are used (or are intended to be used) to fund any portion of such Restricted
Payment, 80% of the Borrowing Base then in effect; and further provided,
however, that the Borrower will not issue any Disqualified Stock.



     SECTION 7.7 ERISA. At any time engage in a transaction which could be subject to Section 4069
or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt “prohibited transaction”
(as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable
Laws; or (c) incur any material “accumulated funding deficiency” (as defined in Section 302 of
ERISA), which, with respect to each event listed above, could be reasonably expected to have a
Material Adverse Effect.



     SECTION 7.8 Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by the Borrower and its Restricted
Subsidiaries on the date hereof.



     SECTION 7.9 Transactions with Affiliates. Enter into any transaction of any kind with any
Affiliate of the Borrower (including without limitation, the purchase from, sale to, or exchange of
property with, or the rendering of any service by or from, any Affiliate), except in the ordinary
course of, and pursuant to the reasonable requirements of, the Borrower’s or any Guarantor’s
business and upon fair and reasonable terms no less favorable to the Borrower or such Guarantor
than would be obtained in a comparable arms-length transaction with a Person other than an
Affiliate provided such transactions are otherwise permitted hereunder.



     SECTION 7.10 Burdensome Agreements. Enter into any Contractual Obligation (other than this
Agreement and the other Loan Documents) that limits the ability of (a) any Restricted Subsidiary to
make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the
Borrower or any Guarantor, (b) any Restricted Subsidiary to Guarantee the Secured Obligations, or
(c) the Borrower or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens on
property of such Person, in each case, other than Contractual Obligations pursuant to the Indenture
Debt Documents to the extent listed in Schedule 7.10 provided, however,
that this clause (c) shall not prohibit any negative pledge incurred or provided in favor
of any holder of any Lien permitted under Section 7.1(h) solely to the extent any such
negative pledge relates to the property encumbered by such Lien.



     SECTION 7.11 Use of Proceeds. Except as expressly provided in, and subject to the
satisfaction of the conditions set forth in, Section 7.2(g), use the proceeds of any Credit
Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry margin stock (within the meaning of Regulation U of the Board) or to extend



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credit to others for the purpose of purchasing or carrying margin stock or to refund
indebtedness originally incurred for such purpose.



     SECTION 7.12 Payments and Modification of Indenture Debt Documents. Make, or permit any
Restricted Subsidiary to make, any optional payment or prepayment of principal of, or make any
payment of interest on, any Indebtedness on any day other than the stated, scheduled date for such
payment or prepayment set forth in the documents and instruments memorializing such Indebtedness,
or defease (whether a covenant defeasance, legal defeasance or other defeasance), prepay or redeem
any of Indebtedness or enter into any agreement or arrangement providing for any defeasance of any
kind of any Indebtedness, or make any deposit for any of the foregoing purposes (all of the
foregoing defined herein as “Optional Indebtedness Payments”), except such Optional
Indebtedness Payments that, when aggregated with all Restricted Payments made pursuant to
Section 7.6(d), if any, do not exceed $40,000,000 in aggregate amount during any calendar
year, provided that both before and after giving effect to any Optional Indebtedness
Payment (on a pro forma basis acceptable to the Administrative Agent) no Default or Event of
Default shall have occurred and be continuing and all representations and warranties contained in
Article V hereof shall be true and correct in all material respects as if made at the time
of the applicable Optional Indebtedness Payment, and further provided, that the Borrower
shall not make any Optional Indebtedness Payments permitted above at any time when the Outstanding
Amount exceeds, or would exceed after giving effect to any Credit Extension the proceeds of which
are used (or are intended to be used) to fund any portion of any Optional Indebtedness Payments,
80% of the Borrowing Base then in effect, or amend or modify, or consent or agree to any amendment
or modification of, any Indenture Debt Document.



     SECTION 7.13 Financial Covenants.



     (a) Minimum Tangible Net Worth. Permit or suffer the Consolidated Tangible Net Worth
of Borrower and its Subsidiaries, at any time, to be less than the sum of (i) $450,000,000,
plus (ii) 50% of Consolidated Net Income for each fiscal quarter, commencing with the
fiscal quarter beginning January 1, 2007, and to be added as of the last day of such fiscal quarter
(provided that if such Consolidated Net Income is negative in such fiscal quarter, the
amount added pursuant to this clause (ii) shall be zero and shall not reduce the amount
previously added pursuant to this clause (ii) for any other fiscal quarter), plus
(iii) 75% of the net cash proceeds of any equity offering or other sale of capital stock of
Borrower or any of its Restricted Subsidiaries, other than net cash proceeds in an aggregate amount
per fiscal year not to exceed $5,000,000 received by Borrower in connection with the exercising of
stock options; provided that for purposes of calculating Consolidated Tangible Net Worth
and Consolidated Net Income, the Borrower shall exclude (x) any ceiling test write-down and
impairment write-downs required by GAAP or by the Securities and Exchange Commission, (y) any
non-cash charges or losses and any non-cash income or gains, in each case described in, and
calculated pursuant to, Financial Accounting Standards Board Statements of Financial Accounting
Standards Nos. 133 or 143, but shall expressly include any cash charges or payments in respect of
the termination of any Hedging Agreement.



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     (b) Current Ratio. Permit or suffer the ratio of (i) sum of Current Assets
plus the unused availability under this Agreement, to (ii) Current Liabilities, to be less
than 1.0 to 1.0 at any time; provided that the calculation of Current Assets and Current
Liabilities for purposes of this Section 7.13(b) shall exclude any non-cash Current Assets
and Current Liabilities, in each cased described in, and calculated pursuant to, Financial
Accounting Standards Board Statements of Financial Accounting Standards Nos. 133 or 143, but shall
expressly include any Current Assets or Current Liabilities in respect of, or arising from, the
termination of any Hedging Agreement.



     SECTION 7.14 Limitation on Hedges. Enter into any commodity hedging or derivative
transactions except Hedge Agreements related to bona fide hedging activities of the Borrower or any
of its Restricted Subsidiaries in an aggregate notional amount not to exceed, with respect to any
future calendar quarter, 100% of the Borrower’s and its Restricted Subsidiaries’ projected
production of oil (for oil related transactions) and 100% of the Borrower’s and its Restricted
Subsidiaries’ projected production of natural gas (for natural gas related transactions), in each
case, from proved producing Oil and Gas Properties of the Borrower and its Restricted Subsidiaries.



ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES




     SECTION 8.1 Events of Default. Any of the following shall constitute an Event of Default:



     (a) Non-Payment. The Borrower fails to pay within two (2) Business Days after the
same becomes due any amount of principal of any Loan or any L/C Obligation, or any interest on any
Loan or on any L/C Obligation, or any commitment fee or other fee due hereunder, or any other
amount payable hereunder or under any other Loan Document; or



     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant
or agreement contained in any of Sections 6.3, 6.5, 6.7, 6.10,
6.12, 6.13 or 6.16 or Article VII; or



     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or
agreement (not specified in clauses (a) or (b) above) contained in any Loan
Document on its part to be performed or observed and such failure continues for 30 days after
written notice to the Borrower; or



     (d) Representations and Warranties. Any representation or warranty made or deemed
made by the Borrower or any other Loan Party herein, in any other Loan Document, or in any
certificate or document delivered in connection herewith or therewith proves to have been incorrect
in any material respect when made or deemed made; or



     (e) Cross-Default. (i) Any Loan Party (A) fails to make any payment when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any
Indebtedness or Guaranty Obligation having an aggregate principal amount (including undrawn or
available amounts and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $20,000,000, or (B) fails to observe or



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perform any other agreement or condition relating to any such Indebtedness or Guaranty
Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or
any other event occurs, the effect of which default or other event is to cause, or to permit the
holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guaranty
Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the actual giving of notice if required, such Indebtedness to be
demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to
its stated maturity, or such Guaranty Obligation to become payable or cash collateral in respect
thereof to be demanded; or



     (f) Insolvency Proceedings, Etc. Any Loan Party institutes or consents to the
institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of
its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of such Loan Party and the
appointment continues undischarged or unstayed for 30 calendar days; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any part of its property is instituted
without the consent of such Person and continues undismissed or unstayed for 30 calendar days, or
an order for relief is entered in any such proceeding; or



     (g) Inability to Pay Debts; Attachment. (i) Any Loan Party becomes unable or admits
in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ
or warrant of attachment or execution or similar process is issued or levied against all or any
material part of the property of any such Loan Party and is not released, vacated or fully bonded
within 30 days after its issue or levy; or



     (h) Judgments. There is entered against the Borrower or any Guarantor (i) one or more
final judgments or orders for the payment of money which together with other such judgments or
orders exceeds the aggregate amount of $20,000,000 (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute coverage), or (ii) any non-monetary
final judgment that has, or would reasonably be expected to have, a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order,
or (B) there is a period of 30 consecutive days during which a stay of enforcement of such
judgment, by reason of a pending appeal or otherwise, is not in effect; or



     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer
Plan which has resulted or could reasonably be expected to result in liability of any Loan Party
under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC, or (ii) any Loan Party
or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under
a Multiemployer Plan; or



     (j) Event of Default Under Other Loan Document. Any event of default described in any
Security Document or any other Loan Document shall have occurred and be continuing, or any material
provision of any Security Agreement or any other Loan Document shall at any time



71









 







for any reason cease to be valid, binding and enforceable against any Loan Party that is an
obligor thereunder; or



     (k) Invalidity of Loan Documents. Any Loan Document, at any time after its execution
and delivery and for any reason other than the agreement of all the Lenders or satisfaction in full
of all the Obligations, ceases to be in full force and effect, or is declared by a court of
competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Loan
Party denies that it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind any Loan Document; or



     (l) Change of Control. There occurs any Change of Control with respect to any of the
Borrower or any Restricted Subsidiary; or there occurs any “Change of Control Triggering Event” as
defined in the 2004 Senior Notes Indenture; or



     (m) Material Adverse Effect. There occurs any event or circumstance that has a
Material Adverse Effect which Material Adverse Effect shall not have been cured within 30 days
following notice from the Administrative Agent.



     SECTION 8.2 Remedies Upon Event of Default. If any Event of Default occurs, the
Administrative Agent shall, at the request of, or may, with the consent of, the Majority Lenders,



     (a) declare the commitment of each Lender to make Loans and any obligation of the Issuing Bank
to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be
terminated;



     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower;



     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to
the then Outstanding Amount thereof); and



     (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents or applicable law, including, without limitation, the
enforcement of the Administrative Agent’s and the Lenders’ rights either by suit in equity, or by
action at law, or by other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in this Agreement or in any then
outstanding Note or any Security Document or in aid of the exercise of any power granted in this
Agreement or in any then outstanding Note or any Security Document;



provided, however, that upon the occurrence of any event specified in clause
(f) of Section 8.1, the obligation of each Lender to make Loans and any obligation of
the Issuing Bank to make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically
become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C
Obligations as



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aforesaid shall automatically become effective, in each case without further act of the
Administrative Agent or any Lender.



     SECTION 8.3 Distribution of Proceeds. All proceeds of any realization on the Collateral
received by the Administrative Agent pursuant to the Security Documents or any payments on any of
the liabilities secured by the Security Documents received by the Administrative Agent or any
Lender upon and during the continuance of any Event of Default shall be allocated and distributed
as follows (and with respect to any contingent obligation shall be held as cash collateral for
application as follows):



     (a) First, to the payment of all costs and expenses, including without limitation all
attorneys’ fees, of the Administrative Agent in connection with the enforcement of the Security
Documents and otherwise administering this Agreement;



     (b) Second, to the payment of all costs, expenses and fees, including without limitation,
commitment fees, letter of credit fees and attorneys’ fees, owing to the Issuing Bank and the
Lenders pursuant to the Obligations on a pro rata basis in accordance with the Obligations
consisting of fees, costs and expenses owing to the Issuing Bank and the Lenders under the
Obligations for application to payment of such liabilities;



     (c) Third, to the Issuing Bank, the Lenders or any Affiliate of a Lender on a pro rata basis
in accordance with (i) the Obligations consisting of interest and principal owing to the Lenders
under the Obligations, (ii) any obligations owing to any Lender or any Affiliate of a Lender
pursuant to any Hedging Agreement to which it is a party (whether pursuant to a termination thereof
or otherwise) and (iii) any reimbursement obligations or other liabilities owing to the Issuing
Bank or any Lender with respect to any Letter of Credit or any application for a Letter of Credit,
for application to payment of such liabilities;



     (d) Fourth, to the payment of any and all other amounts owing to the Administrative Agent, the
Issuing Bank and the Lenders on a pro rata basis in accordance with the total amount of such
Indebtedness owing to each of the Lenders, for application to payment of such liabilities; and



     (e) Fifth, to the Borrower or such other Person as may be legally entitled thereto.



ARTICLE IX.

ADMINISTRATIVE AGENT




     SECTION 9.1 Appointment and Authorization of Administrative Agent.



     (a) Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates and
authorizes the Administrative Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor



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shall the Administrative Agent have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent. Without limiting the generality of the foregoing sentence, the
use of the term “agent” herein and in the other Loan Documents with reference to the Administrative
Agent is not intended to connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative relationship between
independent contracting parties. Each Lender hereby agrees to assert no claim against the
Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary
duty, all of which claims are hereby expressly waived by each Lender.



     (b) 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 until such time (and except for so long) as the
Administrative Agent may agree at the request of the Majority Lenders to act for the Issuing Bank
with respect thereto; provided, however, that the Issuing Bank shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this Article IX
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 application and agreements for
letters of credit pertaining to the Letters of Credit as fully as if the term “Administrative
Agent” as used in this Article IX included the Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided herein with respect to the Issuing Bank.



     SECTION 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts
concerning all matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in
the absence of gross negligence or willful misconduct.



     SECTION 9.3 Liability of Administrative Agent. No Agent-Related Person shall (a) be liable
for any action taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct in connection with its duties expressly set forth herein),
or (b) be responsible in any manner to any Lender or participant for any recital, preliminary
statement, statement, representation or warranty made by any Loan Party or any officer thereof,
contained herein or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any
failure of any Loan Party or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or
participant to ascertain or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party or any Affiliate thereof.



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     SECTION 9.4 Reliance by Administrative Agent.



     (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons, and upon advice and statements of legal counsel (including
counsel to any Loan Party), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to
take any action under any Loan Document unless it shall first receive such advice or concurrence of
the Majority Lenders as it deems appropriate and, if it so requests, it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority Lenders or all the
Lenders, if required hereunder, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly
permits or prohibits an action unless the Majority Lenders otherwise determine, the Administrative
Agent shall, and in all other instances, the Administrative Agent may, but shall not be required
to, initiate any solicitation for the consent or a vote of the Lenders.



     (b) For purposes of determining compliance with the conditions specified in Section
4.1, 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 either sent by the
Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to a Lender.



     SECTION 9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with respect to defaults in
the payment of principal, interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received written notice from a
Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default.” The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take such action with
respect to such Default or Event of Default as may be directed by the Majority Lenders in
accordance with Article VIII; provided, however, that unless and until the
Administrative Agent has received any such direction, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable or in the best interest of the Lenders.



     SECTION 9.6 Credit Decision; Disclosure of Information by Administrative Agent. Each Lender
acknowledges that no Agent-Related Person has made any representation or warranty to it, and that
no act by the Administrative Agent hereinafter taken, including any consent to and acceptance of
any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed
to constitute any representation or warranty by any Agent-



75









 







Related Person to any Lender as to any matter, including whether Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their respective Restricted Subsidiaries, and all
applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each
Lender also represents that it will, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by the Administrative
Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any of the Loan Parties or any of
their respective Affiliates which may come into the possession of any Agent-Related Person.



     SECTION 9.7 Indemnification of Administrative Agent. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related
Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the
obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from
and against any and all Indemnified Liabilities incurred by it (INCLUDING ANY AND ALL INDEMNIFIED
LIABILITIES ARISING OUT OF, IN ANY WAY RELATING TO, OR RESULTING FROM SUCH AGENT-RELATED PARTY’S
OWN NEGLIGENCE); provided, however, that no Lender shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such
Agent-Related Person’s gross negligence or willful misconduct; provided, however,
that no action taken in accordance with the directions of the Majority Lenders shall be deemed to
constitute gross negligence or willful misconduct for purposes of this Section. Without limitation
of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the
Administrative Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any
other Loan Document, or any document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The
undertaking in this Section shall survive termination of the Commitments, the payment of all
Obligations hereunder and the resignation or replacement of the Administrative Agent.



     SECTION 9.8 Administrative Agent in its Individual Capacity. BMO and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,



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acquire equity interests in and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with each of the Loan Parties and their respective
Affiliates as though BMO were not the Administrative Agent or the Issuing Bank hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BMO or its Affiliates may receive information regarding any Loan Party or its
Affiliates (including information that may be subject to confidentiality obligations in favor of
such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BMO shall have the same
rights and powers under this Agreement as any other Lender and may exercise such rights and powers
as though it were not the Administrative Agent or the Issuing Bank, and the terms “Lender” and
“Lenders” include BMO in its individual capacity.



     SECTION 9.9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to the Lenders. If the Administrative Agent resigns
under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor
administrative agent for the Lenders. If no successor administrative agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the Administrative Agent may
appoint, after consulting with the Lenders, a successor administrative agent from among the
Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such
successor administrative agent shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term “Administrative Agent” shall mean such successor administrative
agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative
Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Article IX and Sections 10.4 and
10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement. If no successor administrative agent has
accepted appointment as Administrative Agent by the date which is 30 days following a retiring
Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Majority Lenders appoint a successor
agent as provided for above.



     SECTION 9.10 Other Agents; Lead Managers. None of the Lenders identified on the facing page
or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent” or
“lead manager” shall have any right, power, obligation, liability, responsibility or duty under
this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing,
none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with
any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the
Lenders so identified in deciding to enter into this Agreement or in taking or not taking action
hereunder.



     SECTION 9.11 Hedging Arrangements. To the extent any Affiliate of a Lender is a party to a
Hedging Agreement with any Loan Party, such Affiliate of a Lender shall be deemed to appoint the
Administrative Agent its nominee and agent, and to act for and on behalf of such Affiliate in
connection with the Security Documents and to be bound by this Article IX.



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ARTICLE X.

MISCELLANEOUS




     SECTION 10.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party
therefrom, shall be effective unless in writing signed by the Majority Lenders and the Borrower and
acknowledged and agreed by each other Loan Party, and acknowledged by the Administrative Agent, and
each such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment, waiver or
consent shall, unless in writing and signed by each of the Lenders directly affected thereby and by
the Borrower, and acknowledged and agreed by each other Loan Party and acknowledged by the
Administrative Agent, do any of the following:



     (a) extend or increase the Commitment Amount of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.2); or



     (b) postpone any date fixed by this Agreement or any other Loan Document for any payment or
mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Loan Document; or



     (c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or any fees or other amounts payable hereunder or under any other Loan Document, or
change the manner of computation of any financial covenant used in determining the Base Rate
Spread, LIBOR Spread or Commitment Fee Rate that would result in a reduction of any interest rate
on any Loan; provided, however, that only the consent of the Majority Lenders shall
be necessary to waive any obligation of the Borrower to pay interest at the rate specified in
Section 2.9(b); or



     (d) change the percentage of the Aggregate Commitments or of the aggregate unpaid principal
amount of the Loans and L/C Obligations which is required for the Lenders or any of them to take
any action hereunder or change the definition of “Majority Lenders” or “Required Borrowing Base
Lenders”; or



     (e) increase the Borrowing Base, or take any other action which requires the signing of all
the Lenders pursuant to the terms of this Agreement or of any other Loan Document, or change the
Percentage Share or Voting Percentage of any Lender; or



     (f) amend this Section, or Section 2.14, or any provision herein providing for consent
or other action by all the Lenders; or



     (g) permit any termination, amendment, modification, waiver, or release of any Guaranty or any
provision thereof; or



     (h) release any collateral under any of the Security Documents, or permit any termination,
amendment, modification, waiver or release of any Security Document or an provision thereof,
provided that, notwithstanding the foregoing, the consent of the Lenders shall not be required for
any release of any collateral under any of the Security Documents in



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connection with a Disposition by the Borrower or any Guarantor if such Disposition is
permitted by Section 7.5 hereof as Section 7.5 is in effect on the Closing Date; or



     (i) waive, amend or otherwise modify the provisions of Section 4.2(e), Section
5.14(a), Section 7.2(g) or Section 7.11, or any condition set forth therein;



and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Majority Lenders or all the Lenders, as
the case may be, affect the rights or duties of the Issuing Bank under this Agreement or any Letter
of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in
addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or
duties of the Administrative Agent under this Agreement or any other Loan Document; and (iii) the
Agent and Arranger Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed only by the parties thereto.



     SECTION 10.2 Notices and Other Communications; Facsimile Copies.



     (a) General. Unless otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing (including by facsimile transmission) and
mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c)
below) electronic mail address specified for notices on Schedule 10.2; or, in the case of
the Borrower, the Administrative Agent, or the Issuing Bank, to such other address as shall be
designated by such party in a notice to the other parties, and in the case of any other party, to
such other address as shall be designated by such party in a notice to the Borrower, the
Administrative Agent and the Issuing Bank. All such notices and other communications shall be
deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended
recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended
recipient; (B) if delivered by mail, four Business Days after deposit in the mails, postage
prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and
(D) if delivered by electronic mail (which form of delivery is subject to the provisions of
subsection (c) below), when delivered; provided, however, that notices and
other communications to the Administrative Agent and the Issuing Bank pursuant to Article II shall
not be effective until actually received by such Person. Any notice or other communication
permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed
by means of a telephone call to the intended recipient at the number specified on Schedule
10.2, it being understood and agreed that a voicemail message shall in no event be effective as
a notice, communication or confirmation hereunder.



     (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be
transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures
shall, subject to applicable Law, have the same force and effect as manually-signed originals and
shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative
Agent may also require that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.



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     (c) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including email and Internet
or intranet websites) pursuant to procedures approved by the Administrative Agent, provided
that the foregoing shall not apply to notices to any Lender pursuant to Article II if such
Lender has notified the Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, 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.



     (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the
Lenders shall be entitled to rely and act upon any notices (including telephonic Notice of
Advances) purportedly given by or on behalf of the Borrower even if (i) such notices were not made
in a manner specified herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from
all losses, costs, expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other
communications with the Administrative Agent may be recorded by the Administrative Agent, and each
of the parties hereto hereby consents to such recording.



     SECTION 10.3 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative
Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein or therein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.



     SECTION 10.4 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to pay or reimburse
the Administrative Agent for all costs and expenses incurred in connection with the development,
preparation, negotiation and execution of this Agreement and the other Loan Documents and any
amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or
not the transactions contemplated hereby or thereby are consummated), and the consummation and
administration of the transactions contemplated hereby and thereby, including all Attorney Costs,
and (b) to pay or reimburse the Administrative Agent, the Issuing



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Bank and each Lender for all costs and expenses incurred in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this Agreement or the other
Loan Documents (including all such costs and expenses incurred during any “workout” or
restructuring in respect of the Obligations and during any legal proceeding, including any
proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and
expenses shall include all search, filing, recording, title insurance and appraisal charges and
fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative
Agent and the cost of independent public accountants and other outside experts retained by the
Administrative Agent or any Lender. The agreements in this Section shall survive the termination
of the Commitments and repayment of all the other Obligations.



     SECTION 10.5 Indemnification by the Borrower. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to indemnify, defend, save and hold harmless each
Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees,
counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against:
(a) any and all claims, demands, actions or causes of action that are asserted against any
Indemnitee by any Person (other than the Administrative Agent or any Lender) relating directly or
indirectly to a claim, demand, action or cause of action that such Person asserts or may assert
against any Loan Party, any Affiliate of any Loan Party or any of their respective officers or
directors; (b) any and all claims, demands, actions or causes of action that may at any time
(including at any time following repayment of the Obligations and the resignation or removal of the
Administrative Agent or the replacement of any Lender) be asserted or imposed against any
Indemnitee, arising out of or relating to, the Loan Documents, any predecessor loan documents, the
Commitments, the use or contemplated use of the proceeds of any Credit Extension, or the
relationship of any Loan Party, the Administrative Agent and the Lenders under this Agreement or
any other Loan Document; (c) any administrative or investigative proceeding by any Governmental
Authority arising out of or related to a claim, demand, action or cause of action described in
clause (a) or (b) above; and (d) any and all liabilities (including liabilities
under indemnities), losses, costs or expenses (including Attorney Costs) that any Indemnitee
suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of
action, litigation or proceeding, or as a result of the preparation of any defense in connection
with any foregoing claim, demand, action, cause of action, litigation or proceeding, in all cases,
WHETHER OR NOT ARISING OUT OF THE NEGLIGENCE OF AN INDEMNITEE, and whether or not an Indemnitee is
a party to such claim, demand, action, cause of action, litigation or proceeding (all the
foregoing, collectively, the “Indemnified Liabilities”); provided that no
Indemnitee shall be entitled to indemnification for any claim caused by its own gross negligence or
willful misconduct or for any loss asserted against it by another Indemnitee. The agreements in
this Section shall survive the termination of the Commitments and repayment of all the other
Obligations.



     SECTION 10.6 Payments Set Aside. To the extent that the Borrower makes a payment to the
Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right
of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant
to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any



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proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such set-off had not occurred, and
(b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable
share of any amount so recovered from or repaid by the Administrative Agent, plus interest
thereon from the date of such demand to the date such payment is made at a rate per annum equal to
(i) with respect to the first two Business Days following such demand, the Federal Funds Rate from
time to time in effect, and (ii) with respect to each day thereafter, the Base Rate from time to
time in effect.



     SECTION 10.7 Successors and Assigns; Assignments; Participations.



     10.7.1 Successors and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns permitted
hereby, except that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent 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 and, to the extent
expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under
or by reason of this Agreement.



     10.7.2 Assignments.



     (a) Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans
(including in all instances for purposes of this subsection (a), participations in L/C
Obligations) at the time owing to it); provided that (i) except 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 or an Affiliate of a Lender, the
aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder,
including as noted above, participations in L/C Obligations) subject to each such assignment,
determined as of the date the Lender Assignment with respect to such assignment is delivered to the
Administrative Agent, 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 and so long as in the case of Bank of
Montreal, such Lender shall have been reduced to its “final hold amount” as described in the
commitment letter referred to in the Agent and Arranger Fee Letter, the Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall
be made as an assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Commitment assigned, except that
this clause (ii) shall not prohibit any Lender from assigning all or a portion of its
rights and obligations among separate Borrowings on a non-pro rata basis, (iii) the parties to each
assignment shall execute and deliver to the Administrative Agent a Lender Assignment, together with
a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the
Administrative Agent pursuant to subsection (c) of this Section, from and after the
effective date specified in each Lender Assignment, the Eligible



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Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by
such Lender Assignment, 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 Lender
Assignment, be released from its obligations under this Agreement (and, in the case of an Lender
Assignment covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of
Sections 3.7, 10.4 and 10.5). Upon request, the Borrower (at its expense)
shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender.
Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not
comply with this subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with Section 10.7.3
of this Section.



     (b) The Administrative Agent, acting solely for this purpose as an agent of the Borrower,
shall maintain at the Administrative Agent’s Office a copy of each Lender Assignment delivered to
it and a register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register
shall be available for inspection by the Borrower and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.



     10.7.3 Participations.



     (a) Any Lender may, without the consent of, or notice to, the Borrower or the Administrative
Agent, sell participations to one or more banks or other entities (a “Participant”) in all
or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans (including such Lender’s participations in L/C
Obligations) 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 other 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; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any amendment, waiver or
other modification that would (i) postpone any date upon which any payment of money is scheduled to
be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to
such Participant, or (iii) release any Guarantor from the Guaranty. Subject to subsection
(b) of this Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 3.1, 3.4 and 3.5 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to Section 10.7.2 of this
Section. To the extent permitted by law,



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each Participant also shall be entitled to the benefits of Section 10.9 as though it
were a Lender, provided such Participant agrees to be subject to Section 2.14 as
though it were a Lender.



     (b) A Participant shall not be entitled to receive any greater payment under Section
3.1 or 3.4 than the applicable Lender would have been entitled to receive with respect
to the participation sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.1
unless the Borrower is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 3.8 as though it were a
Lender.



     10.7.4 Pledge of Lender’s Interest. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including under its Notes, if
any) to secure obligations of such Lender, including any pledge or assignment to secure obligations
to a Federal Reserve Bank; provided that no such pledge or assignment shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.



     10.7.5 Consent to Assignment. If the consent of the Borrower to an assignment or to an
Eligible Assignee is required hereunder (including a consent to an assignment which does not meet
the minimum assignment threshold specified in clause (i) of the proviso to the first
sentence of Section 10.7.2, the Borrower shall be deemed to have given its consent five
Business Days after the date notice thereof has been delivered by the assigning Lender (through the
Administrative Agent) unless such consent is expressly refused by the Borrower prior to such fifth
Business Day.



     10.7.6 Definitions for Section 10.7. As used herein, the following terms have the following
meanings:



“Eligible Assignee” means (a) a Lender; (b) an Affiliate of
a Lender; and (c) any other Person (other than a natural Person)
approved by the Administrative Agent, the Issuing Bank, and provided
that no Default has occurred and is continuing, the Borrower (each
such approval not to be unreasonably withheld or delayed).



“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.



     10.7.7 Assignment by BMO. Notwithstanding anything to the contrary contained herein, if at
any time BMO assigns all of its Commitment and Loans pursuant to Section 10.7.2 above, BMO
may, upon 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 successor Issuing Bank hereunder; provided, however, that no failure by
the Borrower to appoint any such successor shall affect the resignation of BMO as Issuing Bank.



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BMO shall retain all the rights and obligations 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 L/C Obligations with respect thereto (including the right to require the Lenders to make Base
Rate Loans or fund participations in Unreimbursed Amounts pursuant to Section 2.3.3).




     SECTION 10.8 Confidentiality. (a) Each of the Administrative Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that Information may be
disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (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;
(c) to the extent required by applicable laws or regulations or by any subpoena or similar legal
process; (d) to any other party to this Agreement; (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder; (f) subject to an agreement containing provisions substantially the same as
those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective
Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or
(ii) any direct or indirect contractual counterparty or prospective counterparty (or such
contractual counterparty’s or prospective counterparty’s professional advisor) to any credit
derivative transaction relating to obligations of the Borrower; (g) with the consent of the
Borrower; (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 or any Lender on
a nonconfidential basis from a source other than the Borrower; or (i) to the National Association
of Insurance Commissioners or any other similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s or its Affiliates’ investment portfolio
in connection with ratings issued with respect to such Lender or its Affiliates. For the purposes
of this Section, “Information” means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to the Administrative
Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that,
in the case of information received from the Borrower after the date hereof, such information is
clearly identified in writing 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 10.9 Set-off. In addition to any rights and remedies of the Lenders provided by law,
upon the occurrence and during the continuance of any Event of Default, each Lender is authorized
at any time and from time to time, without prior notice to the Borrower or any other Loan Party,
any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party)
to the fullest extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other indebtedness at any
time owing by, such Lender to or for the credit or the account of the respective Loan Parties
against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of
whether or not the Administrative Agent or such Lender shall have made



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demand under this Agreement or any other Loan Document and although such Obligations may be
contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative
Agent after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of such set-off and
application.



     SECTION 10.10 Interest Rate Limitation. It is the intention of the parties hereto to conform
strictly to applicable usury laws and, anything herein to the contrary notwithstanding, the
obligations of the Borrower to each Lender and the Issuing Bank under this Agreement shall be
subject to the limitation that payments of interest shall not be required to the extent that
receipt thereof would be contrary to provisions of law applicable to such Lender or the Issuing
Bank limiting rates of interest which may be charged or collected by such Lender or the Issuing
Bank. Accordingly, if the transactions contemplated hereby would be usurious under applicable law
(including the Federal and state laws of the United States of America, or of any other jurisdiction
whose laws may be mandatorily applicable) with respect to a Lender or the Issuing Bank then, in
that event, notwithstanding anything to the contrary in this Agreement, it is agreed as follows:
(i) the provisions of this Section 10.10 shall govern and control; (ii) the aggregate of
all consideration which constitutes interest under applicable law that is contracted for, charged
or received under this Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement by such Lender or the Issuing Bank shall under no circumstances
exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate,
if any, with respect to such Lender or the Issuing Bank herein called the “Highest Lawful
Rate”), and any excess shall be credited to the Borrower by such Lender or the Issuing Bank
(or, if such consideration shall have been paid in full, such excess promptly refunded to the
Borrower); (iii) all sums paid, or agreed to be paid, to the Lender or the Issuing Bank for the
use, forbearance and detention of the indebtedness of the Borrower to such Lender or the Issuing
Bank hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full so that the actual
rate of interest is uniform throughout the full term thereof; and (iv) if at any time the interest
provided pursuant to Article II together with any other fees payable pursuant to this Agreement and
deemed interest under applicable law, exceeds that amount which would have accrued at the Highest
Lawful Rate, the amount of interest and any such fees to accrue to such Lender or the Issuing Bank
pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this
Agreement to that amount which would have accrued at the Highest Lawful Rate, but any subsequent
reductions, as applicable, shall not reduce the interest to accrue to such Lender or the Issuing
Bank pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest
accrued pursuant to this Agreement and such fees deemed to be interest equals the amount of
interest which would have accrued to such Lender or the Issuing Bank if a varying rate per annum
equal to the interest provided pursuant to Article II had at all times been in effect, plus
the amount of fees which would have been received but for the effect of this Section 10.10.
For purposes of Tex. Fin. Code Ann. Ch. 303, as amended, to the extent, if any, applicable to a
Lender or the Issuing Bank, the Borrower agrees that the Highest Lawful Rate shall be the “weekly
ceiling” as defined in said Article, provided that such Lender and the Issuing Bank may
also rely, to the extent permitted by applicable laws, on alternative maximum rates of interest
under other laws applicable to such Lender or such Issuer, as the case may be, if greater. Tex.
Fin. Code Ann. Ch. 346 (which



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regulates certain revolving credit loan accounts and revolving tri-party accounts) shall not
apply to this Agreement or the Notes.



     SECTION 10.11 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.



     SECTION 10.12 Survival of Representations and Warranties. All representations and warranties
made hereunder and in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by the Administrative
Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default or Event of Default at the time of any
Credit Extension, and shall continue in full force and effect as long as any Loan or any other
Obligation shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.



     SECTION 10.13 Collateral Matters; Hedges. The benefit of the Security Documents and the
provisions of this Agreement and the other Loan Documents relating to the collateral shall also
extend to and be available on a pro rata basis to each Lender and such Lender’s Affiliates in
respect of any obligations under a Hedging Agreement only so long as such Lender remains a party to
this Agreement and this Agreement remains in effect. No Lender or Affiliate of a Lender shall have
any voting or consent right under any Loan Document as a result of the existence of obligations
owed to it under a Hedging Agreement.



     SECTION 10.14 Renewal and Continuation of Prior Indebtedness. Upon the effectiveness of this
Agreement, all of the Prior Indebtedness outstanding on such date shall hereby be restructured,
rearranged, renewed, extended and continued as provided in this Agreement and all Loans outstanding
under the Prior Credit Facility shall become Loans outstanding hereunder.



     In connection herewith, the Prior Lenders have sold, assigned, transferred and conveyed, and
Lenders party to this Agreement have purchased and accepted, and hereby purchase and accept, so
much of the Prior Indebtedness such that each Lender’s percentage of the loans and obligations
outstanding pursuant to the Prior Credit Facility, as restructured, rearranged, renewed, extended
and continued pursuant to this Agreement, shall be equal to such Lender’s Percentage Share upon the
effectiveness of this Agreement. The Lenders acknowledge and agree that the assignment, transfer
and conveyance of the Prior Indebtedness is without recourse to the Prior Lenders and without any
warranties whatsoever by any Prior Lender.



     SECTION 10.15 Severability. Any provision of this Agreement and the other Loan Documents to
which the Borrower is a party 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 thereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.



87









 





     SECTION 10.16 Authorization to Release Subordinate Mortgages. By executing this Agreement,
each Lender hereby consents to the execution by the Administrative Agent and delivery to the
Borrower or its designee one or more releases of any subordinate mortgages, deeds of trust,
assignments, security agreements, financing statements and fixture filings heretofore delivered by
a Guarantor in favor of the Borrower to secure any Indebtedness of such Guarantor owing to the
Borrower that have been collaterally assigned to the Administrative Agent for the benefit of the
Lenders and the other parties secured thereby (including, without limitation, the Subordinate
Mortgages), together with any and all other documents or instruments of release with respect to the
Liens evidenced thereby as the Administrative Agent shall determine are necessary or appropriate
(in its sole discretion).



     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 and each other Loan Party that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is
required to obtain, verify and record information that identifies the Borrower and each other Loan
Party, which information includes the name and address of the Borrower and each other Loan Party
and other information that will allow such Lender or the Administrative Agent, as applicable, to
identify the Borrower and each other Loan Party in accordance with the Act.



     SECTION 10.18 Governing Law.



     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
(WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT OF LAW EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW); PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH
LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.



     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN MANHATTAN OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE
AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER
DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED
BY THE LAW OF SUCH STATE.



88









 





     SECTION 10.19 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY
LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.



     SECTION 10.20 Consents to Renewals, Modifications and Other Actions and Events. This
Agreement and all of the obligations of the Borrower hereunder shall remain in full force and
effect without regard to and shall not be released, affected or impaired by: (a) any amendment,
assignment, transfer, modification of or addition or supplement to the Lenders’ Obligations, this
Agreement, any Note or any other Loan Document; (b) any extension, indulgence, increase in the
Lenders’ Obligations or other action or inaction in respect of any of the Loan Documents or
otherwise with respect to the Lenders’ Obligations, or any acceptance of security for, or
guaranties of, any of the Lenders’ Obligations or Loan Documents, or any surrender, release,
exchange, impairment or alteration of any such security or guaranties including without limitation
the failing to perfect a security interest in any such security or abstaining from taking advantage
or of realizing upon any guaranties or upon any security interest in any such security; (c) any
default by the Borrower under, or any lack of due execution, invalidity or unenforceability of, or
any irregularity or other defect in, any of the Loan Documents; (d) any waiver by the Lenders or
any other Person of any required performance or otherwise of any condition precedent or waiver of
any requirement imposed by any of the Loan Documents, any guaranties or otherwise with respect to
the Lenders’ Obligations; (e) any exercise or non-exercise of any right, remedy, power or privilege
in respect of this Agreement or any of the other Loan Documents; (f) any sale, lease, transfer or
other disposition of the assets of the Borrower or any consolidation or merger of the Borrower with
or into any other Person, corporation, or entity, or any transfer or other disposition by the
Borrower or any other holder of any shares of capital stock or other ownership interest of the
Borrower; (g) any bankruptcy, insolvency, reorganization or similar proceedings involving or
affecting the Borrower; (h) the release or discharge of the Borrower from the performance or
observance of any agreement, covenant, term or condition under any of the Obligations or contained
in any of the Loan Documents by operation of law; or (i) any other cause whether similar or
dissimilar to the foregoing which, in the absence of this provision, would release, affect or
impair the Obligations, covenants, agreements and duties of the Borrower hereunder, including
without limitation any act or omission by the Administrative Agent, or the Lenders or any other
Person which increases the scope of the Borrower’s risk; and in each case described in this
paragraph whether or not the Borrower shall have notice or knowledge of any of the foregoing, each
of which is specifically waived by the Borrower. The Borrower warrants to the Administrative Agent
and the Lenders



89









 







that it has adequate means to obtain from the Guarantors on a continuing basis information
concerning the financial condition and other matters with respect to the Guarantors and it is not
relying on the Administrative Agent or the Lenders to provide such information either now or in the
future.



     SECTION 10.21 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject matter hereof and
thereof and supersedes all prior agreements, written or oral, on such subject matter. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN 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 BETWEEN THE PARTIES.



90









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.



	 	 	 	 	 	 	 
	 	 	COMSTOCK RESOURCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	ROLAND O. BURNS	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Roland O. Burns	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF MONTREAL,	 	 
	 	 	as Administrative Agent and Issuing Bank and Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	JOSEPH A. BLISS	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Joseph A. Bliss	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	BMO CAPITAL MARKETS	 	 
	 	 	FINANCING, INC., as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	MARY LOU ALLEN	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mary Lou Allen	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,	 	 
	 	 	as Syndications Agent and Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	JEFFREY H. RATHKAMP	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Jeffrey H. Rathkamp	 	 
	 

	 	Title:
	 	Director	 	 






S - 1









 






	 	 	 	 	 	 	 
	 	 	COMERICA BANK,	 	 
	 	 	as Co-Documentation Agent and Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	PETER L. SEFZIK	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Peter L. Sefzik	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	FORTIS CAPITAL CORP.,	 	 
	 	 	as Co-Documentation Agent and Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	SCOTT MYATT	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Myatt	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	DARRELL HOLLEY	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Darrell Holley	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	UNION BANK OF CALIFORNIA, N.A.,	 	 
	 	 	as Co-Documentation Agent and Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	SEAN MURPHY	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Sean Murphy	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF SCOTLAND, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	JOSEPH FRATUS	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Joseph Fratus	 	 
	 

	 	Title:
	 	First Vice President	 	 






S - 2









 






	 	 	 	 	 	 	 
	 	 	CALYON NEW YORK BRANCH, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	DENNIS PETITO	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Dennis Petitio	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	MICHAEL WILLIS	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Michael Willis	 	 
	 

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 	 	THE ROYAL BANK OF SCOTLAND plc,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	ROBERT E. POIRRIER, JR.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Robert E. Poirrier, Jr.	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	THE BANK OF NOVA SCOTIA,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	GREGORY GEORGE	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Gregory George	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	REGIONS BANK, successor by merger to	 	 
	 	 	AmSouth Bank, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	WILLIAM A. PHILIPP	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	William A. Philipp	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	COMPASS BANK,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	DOROTHY MARCHAND	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Dorothy Marchand	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






S - 3









 






	 	 	 	 	 	 	 
	 	 	CAPITAL ONE, NATIONAL ASSOCIATION,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	NANCY G. MORAGAS	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Nancy G. Moragas	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	NATIXIS, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	DONOVAN C. BROUSSARD	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Donovan C. Broussard	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	LOUIS P. LAVILLE, III	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Louis P. Laville, III	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	DARIA M. MAHONEY	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Daria M. Mahoney	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	KEYBANK NATIONAL ASSOCIATION,	 	 
	 	 	as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	BRENDAN A. LAWLOR	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Brendan A. Lawlor	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






S - 4









 





SCHEDULE 2.1




COMMITMENT AMOUNTS

AND PERCENTAGE SHARES




	 	 	 	 	 	 	 	 	 
	Lender	 	Commitment Amount	 	 	 	Percentage Share
	BMO Capital Markets Financing, Inc.
	 	$	54,000,000.00	 	 	 	9.00000000	%
	Bank of America, N.A.
	 	$	48,000,000.00	 	 	 	8.00000000	%
	Comerica Bank
	 	$	48,000,000.00	 	 	 	8.00000000	%
	Fortis Capital Corp.
	 	$	48,000,000.00	 	 	 	8.00000000	%
	Union Bank of California, N.A.
	 	$	48,000,000.00	 	 	 	8.00000000	%
	Bank of Scotland
	 	$	42,000,000.00	 	 	 	7.00000000	%
	Calyon New York Branch
	 	$	42,000,000.00	 	 	 	7.00000000	%
	The Royal Bank of Scotland plc
	 	$	36,000,000.00	 	 	 	6.00000000	%
	The Bank of Nova Scotia
	 	$	36,000,000.00	 	 	 	6.00000000	%
	Regions Bank
	 	$	36,000,000.00	 	 	 	6.00000000	%
	Compass Bank
	 	$	36,000,000.00	 	 	 	6.00000000	%
	Capital One National Association
	 	$	36,000,000.00	 	 	 	6.00000000	%
	Natixis
	 	$	36,000,000.00	 	 	 	6.00000000	%
	U.S. Bank National Association
	 	$	27,000,000.00	 	 	 	4.500000000	%
	KeyBank National Association
	 	$	27,000,000.00	 	 	 	4.500000000	%
	 
	 	 	 	 	 	 
	Total
	 	$	600,000,000.00	 	 	 	100.00000000	%






Sch 2.1 — 1




 









 





SCHEDULE 4.1




SECURITY SCHEDULE




Sch 4.1 — 1




 









 





SCHEDULE 5.6




LITIGATION




Sch 5.6 — 1




 









 





SCHEDULE 5.13




SUBSIDIARIES

AND OTHER EQUITY INVESTMENTS




[MODIFIED BY SECOND AMENDMENT; SEE ATTACHMENT THERETO]





			
	Part (a).	 	Subsidiaries.






			
	Part (b).	 	Guarantors on the Closing Date.






			
	Part (b).	 	Other Equity Investments.





Sch 5.13 — 1




 









 





SCHEDULE 7.1




EXISTING LIENS




Sch 7.1 — 1





 









 





SCHEDULE 7.2




EXISTING INVESTMENTS





Sch 7.2 — 1









 








SCHEDULE 7.3




EXISTING INDEBTEDNESS





Sch 7.3 — 1









 








SCHEDULE 7.10




PERMITTED RESTRICTIONS ON LIEN INCURRENCE




     Section 6.12 of the 2004 Senior Notes Indenture provides that the Borrower shall not, and
shall not permit any of the Loan Parties to, directly or indirectly, create, incur, assume, affirm
or suffer to exist or become effective any “Lien” (as defined therein) of any kind, except for
Permitted Liens (as defined therein), upon any of their respective properties, whether now owned or
acquired after the date of the 2004 Senior Notes Indenture or any income or profits therefrom, or
assign or convey any right to receive income thereon, unless (a) in the case of any Lien securing
Subordinated Indebtedness (as defined therein), the 2004 Senior Notes are secured by a lien on such
property or proceeds that is senior in priority to such Lien and (b) in the case of any other Lien,
the 2004 Senior Notes are directly secured equally and ratably with the obligation or liability
secured by such Lien.



Sch 7.10 — 1









 





SCHEDULE 10.2




EURODOLLAR AND DOMESTIC LENDING OFFICES,

ADDRESSES FOR NOTICES




	 	 	 
	COMSTOCK RESOURCES, INC.
	5300 Town and Country Blvd., Suite 500
	Frisco, TX 75034
	Attention:

	 	Roland Burns
	 

	 	Chief Financial Officer
	Telephone:

	 	(972) 668-8800
	Facsimile:

	 	(972) 668-8822
	Electronic Mail: rburns@comstockresources.com






Sch 10.2 — 1









 





	 	 	 
	BANK OF MONTREAL
	Administrative Agent’s Office for Notices:
	Bank of Montreal
	700 Louisiana, Suite 4400
	Houston, TX 77002
	Attention:

	 	Joseph A. Bliss
	Telephone:

	 	(713) 546-9735
	Facsimile:

	 	(713) 223-4007
	Electronic Mail: joe.bliss@bmo.com






	 	 	 
	Lender’s Lending Office For Requests of
Credit Extensions and Payments:
	BMO Capital Markets Financing, Inc.
	115 South LaSalle
	Chicago, IL 60304
	Attention:

	 	Carl Faming
	Telephone:

	 	(312) 461-5322
	Facsimile:

	 	(312) 750-3456
	Harris Trust & Savings Bank
	Chicago Branch
	ABA#: 071 000288
	For Further Credit to BMO Capital Markets Financing, Inc.
	Chicago Branch
	A/C# 1833201






	 	 	 
	Issuing Bank:
	Bank of Montreal
	700 Louisiana, Suite 4400
	Houston, Texas 77002
	Attention:

	 	Joseph A. Bliss
	Telephone:

	 	(713) 546-9735
	Facsimile:

	 	(713) 223-4007
	Electronic Mail: joe.bliss@bmo.com






Sch 10.2 — 2









 





	 	 	 
	BANK OF AMERICA, N.A.
	Address for Notices:
	Bank of America, N.A.
	910 Main Street, 67th Floor
	Dallas, Texas 75202
	Attention:

	 	Jeff H. Rathkamp
	Telephone:

	 	(617) 434-7010
	Facsimile:

	 	(617) 434-3652
	Electronic Mail: jeffrey.h.rathkamp@bankofamerica.com
	Back-up Name: Maria J. Soares
	Telephone:

	 	(617) 434-7198
	Facsimile:

	 	(617) 434-0201
	Electronic Mail: maria.j.soares@bankofamerica.com






	 	 	 
	Lending Office:
	Bank of America, N.A.
	1201 Main Street, 6th Floor
	Dallas, Texas 75202
	Attention:

	 	Glenda Bromley
	Telephone:

	 	(214) 508-8807
	Facsimile:

	 	(214) 508-8419
	Electronic Mail: glenda.bromley@bankofamerica.com






Sch 10.2 — 3









 





	 	 	 
	COMERICA BANK
	Address for Notices:
	Comerica Bank
	1601 Elm Street, 2nd Floor
	Dallas, Texas 75201
	Attention:

	 	Peter L. Sefzik
	Telephone:

	 	(214) 969-6538
	Facsimile:

	 	(214) 969-6561
	Electronic Mail: plsefzik@comerica.com
	 
	 	 
	Lending Office:
	Comerica Bank
	Detroit, MI
	Attention:

	 	Jeffrey L. Zelenka
	Telephone:

	 	(734) 632-3052
	Facsimile:

	 	(734) 632-2993
	Electronic Mail: jeffrey_l_zelenka@comerica.com






Sch 10.2 — 4









 





	 	 	 
	FORTIS CAPITAL CORP.
	 
	 	 
	Address for Notices and Lending Offices:
	Fortis Capital Corp.
	15455 North Dallas Parkway, Suite 1400
	Addison, Texas 75001
	Attention:

	 	Michele Jones
	Telephone:

	 	(214) 953-9303
	Facsimile:

	 	(214) 754-5982
	Electronic Mail: michele.jones@us.fortis.com






Sch 10.2 — 5









 





	 	 	 
	UNION BANK OF CALIFORNIA, N.A.
	 
	 	 
	Address for Notices:
	Union Bank of California, N.A.
	500 N. Akard, Suite 4200
	Dallas, Texas 75201
	Attention:

	 	Sean Murphy
	 

	 	Vice President
	Telephone:

	 	(214) 922-4200
	Direct:

	 	(214) 922-4208
	Facsimile:

	 	(214) 922-4209
	Electronic Mail: sean.murphy@uboc.com
	 
	 	 
	Lending Office:
	Union Bank of California, N.A.
	1980 Saturn Street, Mail Code V01-120
	Monterey Park, California 91755
	Attention:

	 	Maria Suncin
	Telephone:

	 	(323) 720-2870
	Facsimile:

	 	(323) 720-2252 / 2251
	Electronic Mail: maria.suncin@uboc.com






Sch 10.2 — 6









 





	 	 	 
	THE BANK OF NOVA SCOTIA
	 
	 	 
	Address for Notices:
	The Bank of Nova Scotia
	Houston Representative Office
	1100 Louisiana, Suite 3000
	Houston, TX 77002
	Attention:

	 	Rick Hawthorne
	Telephone:

	 	(713) 759-3432
	Facsimile:

	 	(713) 752-2425
	Electronic Mail: Richard_Hawthorne@scotiacapital.com
	 
	 	 
	Lending Office:
	The Bank of Nova Scotia
	Atlanta Agency
	Suite 2700, 600 Peachtree St. N.E.
	Atlanta, GA 30308






Sch 10.2 — 7









 





	 	 	 
	BANK OF SCOTLAND
	 
	 	 
	Address for Notices:
	Bank of Scotland
	565 Fifth Avenue
	New York, NY 10017
	Attention:

	 	 Shirley Vargas
	 

	 	Vice President
	Telephone:

	 	 (212) 450-0875
	Facsimile:

	 	 (212) 479-2807
	Electronic Mail: shirley_vargas@bankofscotland.com
	 
	 	 
	Lending Office:
	Bank of Scotland
	565 Fifth Avenue
	New York, NY 10017






Sch 10.2 — 8









 





	 	 	 
	COMPASS BANK
	 
	 	 
	Address for Notices:
	Compass Bank
	24 Greenway Plaza, Suite 1400A
	Houston, TX 77046
	Attention:

	 	Dorothy Marchand
	Telephone:

	 	(713) 968-8272
	Facsimile:

	 	(713) 968-8292
	Electronic Mail: dorothy.marchand@compassbank.com
	 
	 	 
	Lending Office:
	Compass Bank
	24 Greenway Plaza, Suite 1400A
	Houston, TX 77046






Sch 10.2 — 9









 





	 	 	 
	CALYON NEW YORK BRANCH
	 
	 	 
	Address for Notices:
	Calyon New York Branch
	1301 Travis, Suite 2100
	Houston, TX 77002
	Attention:

	 	Tom Byargeon
	Telephone:

	 	(713) 890-8616
	Facsimile:

	 	(713) 890-8668
	Electronic Mail: tom.byargeon@us.calyon.com
	 
	 	 
	Calyon New York Branch
	1301 Travis, Suite 2100
	Houston, TX 77002
	Attention:

	 	Salman Patoli
	Telephone:

	 	(713) 890-8631
	Facsimile:

	 	(713) 890-8668
	Electronic Mail: salman.patoli@us.calyon.com
	 
	 	 
	Lending Office:
	Calyon New York Branch
	1301 Avenue of the Americas
	New York, New York 10019






Sch 10.2 — 10









 





	 	 	 
	CAPITAL ONE, NATIONAL ASSOCIATION
	 
	 	 
	Address for Notices:
	Capital One N.A.
	313 Carondelet St., 10th Floor
	New Orleans, LA 70130
	Attention:

	 	Nancy Moragas
	Telephone:

	 	(504) 533-2863
	Facsimile:

	 	(504) 533-5594
	Electronic Mail: nancy.moragas@capitalonebank.com
	 
	 	 
	Lending Office:
	Capital One, National Association
	5718 Westheimer, 6th Floor – Energy Dept.
	Houston, Texas 77057
	Attention: Norma Platt
	Telephone:

	 	713-435-5233
	Facsimile:

	 	713-435-5106
	Electronic Mail: norma.platt@capitalonebank.com






Sch 10.2 — 11









 





	 	 	 
	THE ROYAL BANK OF SCOTLAND plc
	 
	 	 
	Address for Notices:
	The Royal Bank of Scotland plc
	600 Travis Street, Suite 6500
	Houston, Texas 77002
	Attention:

	 	Robert Poirrier
	Telephone:

	 	713-221-2434
	Facsimile:

	 	713-221-2428
	Electronic Mail: robert.poirrier@rbos.com
	 
	 	 
	Lending Office:
	101 Park Avenue
	New York, New York 10178
	Attention:

	 	Punam Gambhir
	Telephone:

	 	(212) 401-3451
	Fax:

	 	(212) 401-1494






Sch 10.2 — 12









 






	 	 	 
	NATIXIS
	 	 
	 
	 	 
	Address for Notices:
	Natixis
	Southwest Representative Office
	333 Clay Street, Suite 4340
	Houston, TX 77002
	Attention:

	 	Tanya McAllister
	Telephone:

	 	(713) 759-9401
	Facsimile:

	 	(713) 571-6165
	Electronic Mail: Tanya.mcallister@nyc.nxbp.com
	 
	 	 
	With a copy to:
	Natixis
	New York Branch
	645 5th Avenue, 20th Floor
	New York, NY 10022
	Attention:

	 	Stacey Caruth
	Facsimile:

	 	(212) 872-5160
	 
	 	 
	Lending Office:
	Natixis
	Southwest Representative Office
	333 Clay Street, Suite 4340
	Houston, TX 77002






Sch 10.2 — 13









 





	 	 	 
	REGIONS BANK
	(successor by merger to AmSouth Bank)
	 
	 	 
	Address for Notices:
	Regions Bank
	210 E Capitol St.
	4th Floor Plaza
	Jackson, MS 39201
	Attention:

	 	Bill Philipp
	Telephone:

	 	(601) 354-8229
	Facsimile:

	 	(601) 354-8563
	Electronic Mail: bill.philipp@regions.com
	 
	 	 
	Lending Office:
	Regions Bank
	210 E Capitol St.
	4th Floor Plaza
	Jackson, MS 39201






Sch 10.2 — 14









 





	 	 	 
	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 
	Address for Notices:
	U.S. Bank National Association
	950 17th Street, 8th Floor
	Attention:

	 	Daria Mahoney
	Telephone:

	 	303-585-4216
	Facsimile:

	 	303-585-4362
	Electronic Mail: daria.mahoney@usbank.com
	 
	 	 
	Lending Office:
	555 SW Oak – PD-OR-P7LS
	Portland, Oregon 97208
	Attention: Hanny Nawawi
	Telephone: 503-275-7894
	Facsimile: 503-275-8181






Sch 10.2 — 15









 





	 	 	 
	KEYBANK NATIONAL ASSOCIATION
	 
	 	 
	Address for Notices:
	KeyBank National Association
	8117 Preston Road, Suite #440
	Dallas, Texas 75225
	Attention:

	 	Thomas Rajan
	Telephone:

	 	214-414-2580
	Facsimile:

	 	214-414-2610
	Electronic Mail: Thomas_Rajan@keybank.com
	 
	 	 
	Lending Office:
	127 Public Square
	Cleveland, Ohio 44114
	Attention:

	 	Vyette M. Dyson-Owens
	Telephone:

	 	216-689-4358
	Facsimile:

	 	216-689-5962
	Electronic Mail: yvette_m_dyson-owens@keybank.com






Sch 10.2 — 16









 





EXHIBIT A




FORM OF NOTICE OF ADVANCE




Date:                     ,           




To:      BANK OF MONTREAL, as Administrative Agent




Ladies and Gentlemen:




          Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of
December 15, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing
from time to time, the “Credit Agreement”; the terms defined therein being used herein as
therein defined), among COMSTOCK RESOURCES, INC., a Nevada corporation (“Borrower”), the
Lenders from time to time party thereto, BANK OF MONTREAL, as Administrative Agent and Issuing
Bank.




          The undersigned hereby requests (select one):




	 	 	 	 	 	 	 
	 

	 	o
	 	 A Borrowing of Loans
	 	o A conversion or continuation of Loans






	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.	 	 	On
	 	 	 	(a Business Day).
	 

	 	 	 	 	 	 	 	 	 	 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	2.	 	 	In the amount of $
	 	 	.	 	 	 
	 

 	 	 	 	 	 	 	 	 	 	 	 	 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.	 	 	Comprised of
	 	 	.	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	[Type of Loan requested]	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	4.	 	 	For LIBO Rate Loans: with an Interest Period of                      months.






          There does not exist, as of the above date, and after giving effect to the advance requested
in this notice for advance, any default under the Credit Agreement.




          All conditions precedent to the advance requested hereby set forth in Section 4.2 of
the Credit Agreement have been satisfied.




          The Borrowing requested herein complies with the proviso to the first sentence of Section
2.1 of the Credit Agreement.




          [The Borrower [will (or intends to)][will not] use [some or all][any] of the proceeds of the
requested Loans to make an Investment of the type described in Section 7.2(g) of the Credit
Agreement.][IF APPLICABLE – Borrower must comply with requirements of Regulation U.]




Exh A-1 — 1









 





	 	 	 	 	 	 	 
	 	 	COMSTOCK RESOURCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Roland O. Burns
	 	 
	 

	 	Title:
	 	 Chief Financial Officer	 	 






Exh A-1 — 2









 





EXHIBIT B




FORM OF NOTE




	 	 	 	 	 	 	 	 	 
	$
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 
	 	 

	 	 






     FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to the
order of                                                              (the “Lender”), on the Maturity Date (as defined in
the Credit Agreement referred to below) the principal amount of                                          Dollars
($                    ), or such lesser principal amount of Loans (as defined in such Credit Agreement) due
and payable by the Borrower to the Lender on the Maturity Date under that certain Second Amended
and Restated Credit Agreement, dated as of December 15, 2006 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit Agreement”;
the terms defined therein being used herein as therein defined), among COMSTOCK RESOURCES, INC., a
Nevada corporation (“Borrower”), the Lenders from time to time party thereto, BANK OF
MONTREAL, as Administrative Agent and Issuing Bank.



     The Borrower promises to pay interest on the unpaid principal amount of each Loan from the
date of such Loan until such principal amount is paid in full, at such interest rates, and at such
times as are specified in the Credit Agreement. All payments of principal and interest shall be
made to the Administrative Agent for the account of the Lender in Dollars in immediately available
funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder,
such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment (and before as well as after judgment) computed at the per annum rate set
forth in the Credit Agreement.



     This Note is one of the Notes referred to in the Credit Agreement, is entitled to the benefits
thereof and is subject to optional and mandatory prepayment in whole or in part as provided
therein. This Note is also entitled to the benefits of the Guarantees and is secured by certain
collateral more particularly described in the Security Documents. Upon the occurrence of one or
more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid
on this Note shall become, or may be declared to be, immediately due and payable all as provided in
the Credit Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or
records maintained by the Lender in the ordinary course of business. The Lender may also attach
schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments
with respect thereto.



     This Note is an extension, renewal, and replacement of, and is given in substitution and
exchange for, certain promissory notes evidencing Prior Indebtedness of the Borrower in the
original aggregate principal amount of up to $400,000,000 executed by the Borrower under that
certain Amended and Restated Credit Agreement dated as of February 25, 2004 (the “Prior Credit
Agreement”), among the Borrower, Bank of Montreal, as administrative agent, and certain lenders and
other financial institutions that were, or thereafter became, parties thereto, as such Prior Credit
Agreement was or may have been from time to time thereafter amended or modified, which was itself
an extension, renewal, and replacement of, and was given in substitution and exchange for, certain
promissory notes evidencing prior Indebtedness of the Borrower in the



Exh B — 1









 




original aggregate principal amount of up to $350,000,000 executed by the Borrower under that
certain Credit Agreement dated as of December 17, 2001, among the Borrower, Toronto Dominion
(Texas), Inc., as administrative agent, and certain lenders and other financial institutions that
were, or thereafter became, parties thereto, as such Credit Agreement was or may have been from
time to time thereafter amended or modified, and the indebtedness evidenced hereby and thereby is a
continuing indebtedness and nothing herein contained or implied shall be construed to deem such
indebtedness or any accrued and unpaid interest thereon paid, satisfied, novated or terminated, or
any collateral or security therefore released or terminated.




     The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment,
protest and demand and notice of protest, demand, dishonor and non-payment of this Note.



     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).



	 	 	 	 	 	 	 
	 	 	COMSTOCK RESOURCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Roland O. Burns
	 	 
	 

	 	Title:
	 	 Chief Financial Officer	 	 






Exh B — 2









 





LOANS AND PAYMENTS WITH RESPECT THERETO




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Amount of	 	 	 	 
	 	 	 	 	 	 	 	 	Principal or	 	Outstanding	 	 
	 	 	 	 	 	 	End of	 	Interest	 	Principal	 	 
	 	 	Type of	 	Amount of	 	Interest	 	Paid This	 	Balance	 	Notation
	Date	 	Loan Made	 	Loan Made	 	Period	 	Date	 	This Date	 	Made By
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 





Exh B — 3









 





EXHIBIT C




FORM OF COMPLIANCE CERTIFICATE




Financial Statement Date:                     ,           




To:      BANK OF MONTREAL, as Administrative Agent




Ladies and Gentlemen:




     Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of
December 15, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing
from time to time, the “Credit Agreement”; the terms defined therein being used herein as
therein defined), among COMSTOCK RESOURCES, INC., a Nevada corporation (“Borrower”), the
Lenders from time to time party thereto, BANK OF MONTREAL, as Administrative Agent and Issuing
Bank.



     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is
the                                         of the Borrower, and that, as such, he/she is authorized to
execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and
that:



[Use following for fiscal year-end financial statements]




     1. Attached hereto as Schedule 1 are the year-end initial audited financial statements
required by Section 6.1(a) of the Credit Agreement for the fiscal year of the Borrower
ended as of the above date, together with the report and opinion of an independent certified public
accountant required by such section.



[Use following for fiscal quarter-end financial statements]




     5. Attached hereto as Schedule 1 are the unaudited financial statements required by
Section 6.1(b) of the Credit Agreement for the fiscal quarter of the Borrower ended as of
the above date. Such financial statements fairly present the financial condition, results of
operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such
date and for such period, subject only to normal year-end audit adjustments and the absence of
footnotes.



     6. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has
made, or has caused to be made under his/her supervision, a detailed review of the transactions and
condition (financial or otherwise) of the Borrower during the accounting period covered by the
attached financial statements.



     7. A review of the activities of the Borrower during such fiscal period has been made under
the supervision of the undersigned with a view to determining whether during such fiscal period the
Borrower performed and observed all its Obligations under the Loan Documents, and



Exh C — 1









 





[select one:]




     [to the best knowledge of the undersigned during such fiscal period, the Borrower performed
and observed each covenant and condition of the Loan Documents applicable to it.]



—or—




     [the following covenants or conditions have not been performed or observed and the following
is a list of each such Default or Event of Default and its nature and status:]



     8. The financial covenant analyses and information set forth on Schedule 2 attached
hereto are true and accurate on and as of the date of this Certificate.



     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                                         ,            
         .



	 	 	 	 	 	 	 
	 	 	COMSTOCK RESOURCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Roland O. Burns
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 






Exh C — 2









 





EXHIBIT D




FORM OF LENDER ASSIGNMENT




     Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of
December 15, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing
from time to time, the “Credit Agreement”; the terms defined therein being used herein as
therein defined), among COMSTOCK RESOURCES, INC., a Nevada corporation (“Borrower”), the
Lenders from time to time party thereto, BANK OF MONTREAL, as Administrative Agent and Issuing
Bank.



     The assignor identified on the signature page hereto (the “Assignor”) and the assignee
identified on the signature page hereto (the “Assignee”) agree as follows:



     1. (a) Subject to paragraph 11, effective as of the date specified on Schedule 1
hereto (the “Effective Date”), the Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, the interest described on Schedule
1 hereto (the “Assigned Interest”) in and to the Assignor’s rights and obligations
under the Credit Agreement.



          (b) From and after the Effective Date, (i) the Assignee shall be a party under the Credit
Agreement and will have all the rights and obligations of a Lender for all purposes under the Loan
Documents to the extent of the Assigned Interest and be bound by the provisions thereof, and (ii)
the Assignor shall relinquish its rights and be released from its obligations under the Credit
Agreement to the extent of the Assigned Interest. The Assignor and/or the Assignee, as agreed by
the Assignor and the Assignee, shall deliver, in immediately available funds, any applicable
assignment fee required under Section 10.7.2(a) of the Credit Agreement.




     2. On the Effective Date, the Assignee shall pay to the Assignor, in immediately available
funds, an amount equal to the purchase price of the Assigned Interest as agreed upon by the
Assignor and the Assignee.



     3. From and after the Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement and the Notes, if any, in respect of the Assigned Interest (including all
payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and
the Assignee shall make all appropriate adjustments in payments under the Credit Agreement and such
Notes, if any, for periods prior to the Effective Date directly between themselves.



     4. The Assignor represents and warrants to the Assignee that:




     (a) The Assignor is the legal and beneficial owner of the Assigned Interest, and the
Assigned Interest is free and clear of any adverse claim;



Exh D — 1









 






     (b) the Assigned Interest listed on Schedule 1 accurately and completely sets
forth the Outstanding Amount of all Loans and L/C Obligations relating to the Assigned
Interest as of the Effective Date;




     (c) it has the power and authority and the legal right to make, deliver and perform,
and has taken all necessary action, to authorize the execution, delivery and performance of
this Lender Assignment, and any and all other documents delivered by it in connection
herewith and to fulfill its obligations under, and to consummate the transactions
contemplated by, this Lender Assignment and the Loan Documents, and no consent or
authorization of, filing with, or other act by or in respect of any Governmental Authority,
is required in connection in connection herewith or therewith; and




     (d) this Lender Assignment constitutes the legal, valid and binding obligation of the
Assignor.



     The Assignor makes no representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower or any of its Affiliates or the performance by the Borrower
or any of its Affiliates of their respective obligations under the Loan Documents, and assumes no
responsibility with respect to any statements, warranties or representations made under or in
connection with any Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document other than as expressly set forth above.



     5. The Assignee represents and warrants to the Assignor and the Administrative Agent that:




     (a) it is an Eligible Assignee;




     (b) it has the full power and authority and the legal right to make, deliver and
perform, and has taken all necessary action, to authorize the execution, delivery and
performance of this Lender Assignment, and any and all other documents delivered by it in
connection herewith and to fulfill its obligations under, and to consummate the transactions
contemplated by, this Lender Assignment and the Loan Documents, and no consent or
authorization of, filing with, or other act by or in respect of any Governmental Authority,
is required in connection in connection herewith or therewith;




     (c) this Lender Assignment constitutes the legal, valid and binding obligation of the
Assignee;




     (d) under applicable Laws no tax will be required to be withheld by the Administrative
Agent or the Borrower with respect to any payments to be made to the Assignee hereunder or
under any Loan Document, and unless otherwise indicated in the space opposite the Assignee’s
signature below, no tax forms described in Section 3.8 of the Credit Agreement are
required to be delivered by the Assignee; and




     (e) the Assignee has received a copy of the Credit Agreement, together with copies of
the most recent financial statements of the Borrower delivered pursuant thereto,



Exh D — 2









 






and such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Lender Assignment. The Assignee has
independently and without reliance upon the Assignor or the Administrative Agent and based
on such information as the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Lender Assignment. The Assignee will, independently and without
reliance upon the Administrative Agent or any Lender, and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement.



     6. The Assignee appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated
to the Administrative Agent by the terms thereof, together with such powers as are incidental
thereto.



     7. The Assignee hereby requests that the Borrower provide a Note evidencing the Credit
Extensions of the Assignee.



     8. The Assignor and the Assignee agree to execute and deliver such other instruments, and take
such other action, as either party may reasonably request in connection with the transactions
contemplated by this Lender Assignment.



     9. This Lender Assignment shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; provided, however, that the Assignee shall
not assign its rights or obligations hereunder without the prior written consent of the Assignor
and any purported assignment, absent such consent, shall be void.



     10. This Lender Assignment may be executed by facsimile signatures with the same force and
effect as if manually signed and may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.
This Lender Assignment shall be governed by and construed in accordance with the laws of the state
specified in the Section of the Credit Agreement entitled “Governing Law.”



     11. The effectiveness of the assignment described herein is subject to:




     (a) if such consent is required by the Credit Agreement, receipt by the Assignor and
the Assignee of the consent of the Administrative Agent, the Issuing Bank and/or the
Borrower to the assignment described herein. By delivering a duly executed and delivered
copy of this Lender Assignment to the Administrative Agent, the Assignor and the Assignee
hereby request any such required consent and request that the Administrative Agent register
the Assignee as a Lender under the Credit Agreement effective as of the Effective Date; and




     (b) receipt by the Administrative Agent of (or other arrangements acceptable to the
Administrative Agent with respect to) any applicable assignment fee referred to in



Exh D — 3









 






Section 10.7.2(a) of the Credit Agreement and any tax forms required by
Section 3.8 of the Credit Agreement.



     By signing below, the Administrative Agent agrees to register the Assignee as a Lender under
the Credit Agreement, effective as of the Effective Date with respect to the Assigned Interest, and
will adjust the registered Percentage Share of the Assignor under the Credit Agreement to reflect
the assignment of the Assigned Interest.



     12. Attached hereto as Schedule 2 is all contact, address, account and other
administrative information relating to the Assignee.



     IN WITNESS WHEREOF, the parties hereto have caused this Lender Assignment to be executed as of
the date first above written by their respective duly authorized officers.



	 	 	 	 	 	 	 	 	 
	 	 	 	 	Assignor:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	[Name of Assignor]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	Name:
	 	 

	 	  
	 

	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	o	 	Tax forms required by
Section 3.8
of the Credit
Agreement included	 	Assignee:

[Name of Assignee]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	Name:
	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 






(Signatures continue)




Exh D — 4









 




In accordance with and subject to Section
10.7.2 of the Credit Agreement, the
undersigned consent to the foregoing
assignment as of the Effective Date:




COMSTOCK RESOURCES, INC.,
as Borrower




	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

Roland O. Burns
	 	 
	Title:

	 	Chief Financial Officer	 	 
	 
	 	 	 	 
	BANK OF MONTREAL,	 	 
	as Administrative Agent and Issuing Bank	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Title: Managing Director
	 	 






Exh D — 5









 





SCHEDULE 1 TO LENDER ASSIGNMENT




THE ASSIGNED INTEREST




Effective Date:                                         




	 	 	 	 	 
	Assigned Commitment	 	Type and amount of outstanding	 	Assigned Percentage
	Amount	 	Obligations assigned	 	Share
	$                    

	 	[type] $                    
	 	%                    







Schedule 1 — 1









 








SCHEDULE 2 TO LENDER ASSIGNMENT




ADMINISTRATIVE DETAILS




(Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic

mail addresses, account and payment information and include applicable tax form(s))




Schedule 2 — 1









 





EXHIBIT E




FORM OF [AMENDED AND RESTATED] SUBSIDIARY GUARANTY




Exh E — 1









 





EXHIBIT F-1




FORM OF OPINION OF BORROWER’S COUNSEL




Exh F-1 — 1









 





EXHIBIT F-2




FORM OF NEW YORK COUNSEL OPINION OF BORROWER




Exh F-2 — 1









 





EXHIBIT F-3




FORMS OF TEXAS COUNSEL OPINION OF BORROWER




Exh F-3 — 1









 





EXHIBIT F-4




FORMS OF LOUISIANA COUNSEL OPINION OF BORROWER




Exh F-4 — 1









 





EXHIBIT F-5




FORMS OF OKLAHOMA COUNSEL OPINION OF BORROWER




Exh F-5 — 1









 





EXHIBIT F-6




FORMS OF MISSISSIPPI COUNSEL OPINION OF BORROWER




F-6 — 1









 





EXHIBIT G




FORM OF [AMENDED AND RESTATED] SUBORDINATION AGREEMENT




Schedule 2 — 1









 





EXHIBIT H




FORM OF [AMENDED AND RESTATED] PLEDGE AGREEMENT AND

IRREVOCABLE PROXY





Schedule 2 — 1









 








EXHIBIT I




FORM OF [AMENDED AND RESTATED] SECURITY AGREEMENT




Schedule 2 — 1









 





EXHIBIT J




FORM OF ADDITIONAL LENDER CERTIFICATE




Bank of Montreal

700 Louisiana, Suite 4400

Houston, Texas 77002

Attention:      Administrative Agent




Gentlemen and Ladies:




     This Additional Lender Certificate is delivered to you pursuant to Section 2.15 of that
certain Second Amended and Restated Credit Agreement, dated as of December 15, 2006 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the
“Credit Agreement”), among COMSTOCK RESOURCES, INC., a Nevada corporation
(“Borrower”), the Lenders from time to time party thereto, BANK OF MONTREAL, as
Administrative Agent and Issuing Bank. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.



     [Language for Existing Lender]



     [Please be advised that the undersigned (a) has agreed to increase its Commitment Amount under
the Credit Agreement effective as of                      from
$                     to
$                    , (b) hereby
irrevocably purchases and assumes from each other Lender party to the Credit Agreement as of such
effective date (without recourse to any such other Lender), so much of each such other Lender’s
rights and obligations under the Credit Agreement, Commitment Amount, outstanding Loans and
participations in Letters of Credit, such that, after giving effect to such purchase, it shall have
the Percentage Share determined by dividing its increased Commitment Amount (described above) by
the aggregate amount of all Commitment Amounts of all existing and new Lenders (including itself)
under the Credit Agreement, and (c) shall continue to be a party in all respect to the Credit
Agreement and the other Loan Documents to which the Lenders are party.]



     [Language for New Lender]



     [Please be advised that the undersigned (a) has agreed to become a Lender under the Credit
Agreement effective as of                      with a Commitment Amount of
$                    , (b) hereby
irrevocably purchases and assumes from each other Lender party to the Credit Agreement as of such
effective date (without recourse to any such other Lender), so much of each such other Lender’s
rights and obligations under the Credit Agreement, Commitment Amount, outstanding Loans and
participations in Letters of Credit, such that, after giving effect to such purchase, such New
Lender shall have the Percentage Share determined by dividing its Commitment Amount (described
above) by the aggregate amount of all Commitment Amounts of all existing and new Lenders (including
itself) under the Credit Agreement, (c) shall be deemed to be a party in all respect to the Credit
Agreement and the other Loan Documents to which the Lenders are party, (d) has received a copy of
the Credit Agreement, together with



Exh F-2 — 1









 




copies of the most recent financial statements of the Borrower delivered pursuant thereto, and
such other documents and information as it has deemed appropriate to make its own credit analysis
and decision to execute and deliver this Additional Lender Certificate and become a party to the
Credit Agreement, (e) has independently and without reliance upon the Administrative Agent or any
other new or existing Lender, and based on such information as it has deemed appropriate, made its
own credit analysis and decision to execute and deliver this Additional Lender Certificate and
become a party to the Credit Agreement, (f) will, independently and without reliance upon the
Administrative Agent or any other new or existing Lender, and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, and (g) has delivered to the Administrative
Agent any tax forms required by Section 3.8 of the Credit Agreement.




     The undersigned appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated
to the Administrative Agent by the terms thereof, together with such powers as are incidental
thereto.]



	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	[LENDER]	 	 
	 	 	as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 







Exh F-2 — 2