EXHIBIT
10.1


 


AMENDED
AND RESTATED CREDIT AGREEMENT


 


DATED
AS OF MAY 21, 2004


 


AMONG


 


CLAYTON
WILLIAMS ENERGY, INC.,


 


AND
CWEI-SWR, INC.


 


AS
BORROWERS


 


WARRIOR
GAS CO., CWEI ACQUISITIONS, INC.,

ROMERE PASS ACQUISITION L.L.C. AND

CWEI ROMERE PASS ACQUISITION CORP.


 


AS
GUARANTORS


 


THE
LENDERS,


 


BANK
ONE, NA,


 


AS
THE ADMINISTRATIVE AGENT


 


UNION
BANK OF CALIFORNIA, N.A.,


 


AS
THE SYNDICATION AGENT


 


BANK
OF SCOTLAND,


 


AS
THE CO-AGENT


 


AND


 


BANC
ONE CAPITAL MARKETS, INC.,

AS LEAD ARRANGER AND SOLE BOOK RUNNER


 

















 


Table of Contents


 


	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
  THE CREDITS

  	
   

  
	
  2.1.

  	
  Commitment

  	
   

  
	
  2.2.

  	
  Required Payments;
  Termination

  	
   

  
	
  2.3.

  	
  Ratable Loans

  	
   

  
	
  2.4.

  	
  Types of Advances

  	
   

  
	
  2.5.

  	
  Commitment Fee;
  Reductions in Aggregate Commitment

  	
   

  
	
  2.6.

  	
  Minimum Amount of Each
  Advance

  	
   

  
	
  2.7.

  	
  Prepayments

  	
   

  
	
  2.8.

  	
  Method of
  Selecting Interest Periods for Advances

  	
   

  
	
  2.9.

  	
  Continuation of
  Outstanding Advances

  	
   

  
	
  2.10.

  	
  Changes in Interest Rate, etc

  	
   

  
	
  2.11.

  	
  Rates Applicable After
  Default

  	
   

  
	
  2.12.

  	
  Method of Payment

  	
   

  
	
  2.13.

  	
  Noteless Agreement;
  Evidence of Indebtedness

  	
   

  
	
  2.14.

  	
  Telephonic Notices

  	
   

  
	
  2.15.

  	
  Interest Payment Dates; Interest
  and Fee Basis

  	
   

  
	
  2.16.

  	
  Notification of Advances, Interest
  Rates, Prepayments and Commitment Reductions

  	
   

  
	
  2.17.

  	
  Lending Installations

  	
   

  
	
  2.18.

  	
  Non-Receipt of
  Funds by the Administrative Agent

  	
   

  
	
  2.19.

  	
  Facility LCs

  	
   

  
	
  2.20.

  	
  Borrower Representative

  	
   

  
	
  2.21.

  	
  Joint and Several
  Liability

  	
   

  
	
  2.22.

  	
  Replacement of Lender

  	
   

  
	
  2.23.

  	
  Limitation of Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  YIELD PROTECTION; TAXES

  	
   

  
	
  3.1.

  	
  Yield Protection

  	
   

  
	
  3.2.

  	
  Changes in Capital Adequacy
  Regulations

  	
   

  
	
  3.3.

  	
  Availability of Types of Advances

  	
   

  
	
  3.4.

  	
  Funding Indemnification

  	
   

  
	
  3.5.

  	
  Taxes

  	
   

  
	
  3.6.

  	
  Lender Statements; Survival of
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  BORROWING BASE

  	
   

  
	
  4.1.

  	
  Borrowing Base

  	
   

  
	
  4.2.

  	
  Redeterminations of the
  Borrowing Base

  	
   

  
	
  4.3.

  	
  Voluntary Decreases in
  Borrowing Base

  	
   

  
	
  4.4.

  	
  Borrowing Base Deficiency

  	
   

  
	
  4.5.

  	
  Monthly Reduction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  5.1.

  	
  Initial Credit Extension

  	
   

  
				



 


i

















 


	
  5.2.

  	
  Each Credit Extension

  	
   

  
	
  5.3.

  	
  Certificate of Effectiveness

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  6.1.

  	
  Existence and Standing

  	
   

  
	
  6.2.

  	
  Authorization and Validity

  	
   

  
	
  6.3.

  	
  No Conflict; Government Consent

  	
   

  
	
  6.4.

  	
  Financial Statements

  	
   

  
	
  6.5.

  	
  Material Adverse Change

  	
   

  
	
  6.6.

  	
  Taxes

  	
   

  
	
  6.7.

  	
  Litigation and Contingent
  Obligations

  	
   

  
	
  6.8.

  	
  Subsidiaries

  	
   

  
	
  6.9.

  	
  ERISA

  	
   

  
	
  6.10.

  	
  Accuracy of Information

  	
   

  
	
  6.11.

  	
  Material Agreements

  	
   

  
	
  6.12.

  	
  Compliance With Laws

  	
   

  
	
  6.13.

  	
  Ownership of Properties

  	
   

  
	
  6.14.

  	
  Oil and Gas Interests

  	
   

  
	
  6.15.

  	
  Plan Assets; Prohibited
  Transactions

  	
   

  
	
  6.16.

  	
  Environmental Matters

  	
   

  
	
  6.17.

  	
  Investment Company Act

  	
   

  
	
  6.18.

  	
  Public Utility Holding Company
  Act

  	
   

  
	
  6.19.

  	
  Post-Retirement Benefits

  	
   

  
	
  6.20.

  	
  Insurance

  	
   

  
	
  6.21.

  	
  Solvency

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COLLATERAL AND GUARANTIES

  	
   

  
	
  7.1.

  	
  Collateral Security and
  Guaranties

  	
   

  
	
  7.2.

  	
  Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  COVENANTS

  	
   

  
	
  8.1.

  	
  Financial and Other
  Reporting

  	
   

  
	
  8.2.

  	
  Use of Proceeds

  	
   

  
	
  8.3.

  	
  Notice of Default

  	
   

  
	
  8.4.

  	
  Conduct of Business; Fiscal Year

  	
   

  
	
  8.5.

  	
  Taxes

  	
   

  
	
  8.6.

  	
  Insurance

  	
   

  
	
  8.7.

  	
  Compliance with Laws

  	
   

  
	
  8.8.

  	
  Maintenance of Properties

  	
   

  
	
  8.9.

  	
  Inspection

  	
   

  
	
  8.10.

  	
  Dividends

  	
   

  
	
  8.11.

  	
  Indebtedness

  	
   

  
	
  8.12.

  	
  Disqualified Stock

  	
   

  
	
  8.13.

  	
  Merger

  	
   

  
	
  8.14.

  	
  Sale of Assets

  	
   

  
	
  8.15.

  	
  Investments and Acquisitions

  	
   

  
	
  8.16.

  	
  Liens

  	
   

  
	
  8.17.

  	
  Affiliates

  	
   

  
	
  8.18.

  	
  Amendments to Organizational and
  Other Documents

  	
   

  



 


ii

















 


	
  8.19.

  	
  Sale and Leaseback Transactions
  and other Off-Balance Sheet Liabilities

  	
   

  
	
  8.20.

  	
  Negative Pledge

  	
   

  
	
  8.21.

  	
  Financial Contracts

  	
   

  
	
  8.22.

  	
  Financial Covenants

  	
   

  
	
  8.23.

  	
  Operation of Oil and Gas Interests

  	
   

  
	
  8.24.

  	
  Title Data

  	
   

  
	
  8.25.

  	
  Rate Management Transactions

  	
   

  
	
  8.26.

  	
  Limitation on Exploratory
  Drilling Expenses

  	
   

  
	
  8.27.

  	
  Restriction of Senior Term
  Indebtedness Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  DEFAULTS

  	
   

  
	
  9.1.

  	
  Representations and Warranties

  	
   

  
	
  9.2.

  	
  Payments

  	
   

  
	
  9.3.

  	
  Certain Covenants

  	
   

  
	
  9.4.

  	
  Other Material Indebtedness

  	
   

  
	
  9.5.

  	
  Insolvency Proceedings

  	
   

  
	
  9.6.

  	
  Appointment of Receiver

  	
   

  
	
  9.7.

  	
  Condemnation and Seizure

  	
   

  
	
  9.8.

  	
  Judgments

  	
   

  
	
  9.9.

  	
  Rate Management Obligations

  	
   

  
	
  9.10.

  	
  Change of Control

  	
   

  
	
  9.11.

  	
  Other Loan Documents

  	
   

  
	
  9.12.

  	
  Guaranty

  	
   

  
	
  9.13.

  	
  Unfunded Liabilities

  	
   

  
	
  9.14.

  	
  Multiemployer Plan Withdrawal
  Liability

  	
   

  
	
  9.15.

  	
  Reorganization or
  Termination of Multiemployer Plan

  	
   

  
	
  9.16.

  	
  Environmental Laws

  	
   

  
	
  9.17.

  	
  Collateral Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  ACCELERATION,
  WAIVERS, AMENDMENTS AND REMEDIES

  	
   

  
	
  10.1.

  	
  Acceleration; Facility LC
  Collateral Account

  	
   

  
	
  10.2.

  	
  Amendments

  	
   

  
	
  10.3.

  	
  Preservation of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  GENERAL
  PROVISIONS

  	
   

  
	
  11.1.

  	
  Survival of Representations

  	
   

  
	
  11.2.

  	
  Governmental Regulation

  	
   

  
	
  11.3.

  	
  Headings

  	
   

  
	
  11.4.

  	
  Entire Agreement

  	
   

  
	
  11.5.

  	
  Several Obligations; Benefits
  of this Agreement

  	
   

  
	
  11.6.

  	
  Expenses; Indemnification

  	
   

  
	
  11.7.

  	
  Numbers of Documents

  	
   

  
	
  11.8.

  	
  Accounting

  	
   

  
	
  11.9.

  	
  Severability of Provisions

  	
   

  
	
  11.10.

  	
  Nonliability of Lenders

  	
   

  
	
  11.11.

  	
  Confidentiality

  	
   

  
	
  11.12.

  	
  Nonreliance

  	
   

  
	
  11.13.

  	
  Disclosure

  	
   

  
	
  11.14.

  	
  USA PATRIOT ACT NOTIFICATION

  	
   

  



 


iii

















 


	
  ARTICLE XII

  	
  THE ADMINISTRATIVE AGENT

  	
   

  
	
  12.1.

  	
  Appointment; Nature of Relationship

  	
   

  
	
  12.2.

  	
  Powers

  	
   

  
	
  12.3.

  	
  General Immunity

  	
   

  
	
  12.4.

  	
  No Responsibility for
  Loans, Recitals, etc

  	
   

  
	
  12.5.

  	
  Action on Instructions of
  Lenders

  	
   

  
	
  12.6.

  	
  Employment of Agents and
  Counsel

  	
   

  
	
  12.7.

  	
  Reliance on Documents; Counsel

  	
   

  
	
  12.8.

  	
  ADMINISTRATIVE AGENT’S
  REIMBURSEMENT AND INDEMNIFICATION

  	
   

  
	
  12.9.

  	
  Notice of Default

  	
   

  
	
  12.10.

  	
  Rights as a Lender

  	
   

  
	
  12.11.

  	
  Lender Credit Decision

  	
   

  
	
  12.12.

  	
  Successor Administrative Agent

  	
   

  
	
  12.13.

  	
  Administrative Agent and Arranger
  Fees

  	
   

  
	
  12.14.

  	
  Delegation to Affiliates

  	
   

  
	
  12.15.

  	
  Execution of Collateral
  Documents

  	
   

  
	
  12.16.

  	
  Collateral Releases

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  SETOFF; RATABLE PAYMENTS

  	
   

  
	
  13.1.

  	
  Setoff

  	
   

  
	
  13.2.

  	
  Ratable Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  BENEFIT
  OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

  	
   

  
	
  14.1.

  	
  Successors and Assigns

  	
   

  
	
  14.2.

  	
  Participations

  	
   

  
	
  14.3.

  	
  Assignments

  	
   

  
	
  14.4.

  	
  Dissemination of Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  NOTICES

  	
   

  
	
  15.1.

  	
  Notices

  	
   

  
	
  15.2.

  	
  Change of Address

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
  COUNTERPARTS

  	
   

  
	
  16.1.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII

  	
  CHOICE
  OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

  	
   

  
	
  17.1.

  	
  CHOICE OF LAW

  	
   

  
	
  17.2.

  	
  CONSENT TO JURISDICTION

  	
   

  
	
  17.3.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII

  	
  AMENDMENT AND RESTATEMENT

  	
   

  



 


iv

















 


ANNEXES


 


	
  Annex A

  	
  -

  	
  Commitment Percentages

  	
   

  



 


EXHIBITS


 


	
  Exhibit A-1

  	
  -

  	
  Form of Borrower’s Counsel Opinion

  	
   

  
	
  Exhibit A-2

  	
  -

  	
  Form of Collateral Agent’s Local Counsel
  Opinion

  	
   

  
	
  Exhibit B

  	
  -

  	
  Form of Compliance Certificate

  	
   

  
	
  Exhibit C

  	
  -

  	
  Form of Assignment and Assumption Agreement

  	
   

  
	
  Exhibit
  D

  	
  -

  	
  Form
  of Money Transfer Instructions

  	
   

  
	
  Exhibit
  E

  	
  -

  	
  Form
  of Note

  	
   

  
	
  Exhibit F

  	
  -

  	
  Form of Certificate of Effectiveness

  	
   

  
	
  Exhibit G

  	
  -

  	
  Form of Pledge Agreements

  	
   

  
	
  Exhibit H

  	
  -

  	
  Form of SWR Hedge Assumption Agreement

  	
   

  
	
  Exhibit I

  	
  -

  	
  Form of Guaranty

  	
   

  
	
  Exhibit J

  	
  -

  	
  Form of Joinder Agreement

  	
   

  



 


SCHEDULES


 


	
  Pricing
  Schedule

  	
   

  
	
  Schedule 1.1(a)

  	
  -

  	
  Existing Letters of Credit

  	
   

  
	
  Schedule 1.1(b)

  	
  -

  	
  SWR Rate Management Transactions

  	
   

  
	
  Schedule 1.1(c)

  	
  -

  	
  SWR Interest Rate Agreements

  	
   

  
	
  Schedule 1.1(d)

  	
  -

  	
  Permitted Liens

  	
   

  
	
  Schedule 6.8

  	
  -

  	
  Subsidiaries

  	
   

  
	
  Schedule 6.13

  	
  -

  	
  Ownership of Properties

  	
   

  
	
  Schedule 8.11

  	
  -

  	
  Indebtedness

  	
   

  
	
  Schedule 8.15(vi)

  	
  -

  	
  Related Partnerships

  	
   

  
	
  Schedule 8.24

  	
  -

  	
  Title Curative Requirements

  	
   

  



 


v

















 


AMENDED
AND RESTATED CREDIT AGREEMENT


 


This Agreement, dated as of May 21, 2004, is among Clayton
Williams Energy, Inc., a Delaware corporation, CWEI-SWR, Inc., a Delaware
corporation, Warrior Gas Co., a Texas corporation, CWEI Acquisitions, Inc., a
Delaware corporation, Romere Pass Acquisition L.L.C., a Delaware limited
liability company, CWEI Romere Pass Acquisition Corp., a Delaware corporation,
the Lenders, Bank One, NA, having its principal office in Chicago, Illinois, as
LC Issuer and as Administrative Agent, Union Bank of California, N.A., as Syndication
Agent and Bank of Scotland, as Co-Agent. 
The parties hereto agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


As used in this Agreement:


 


“Acquisition” means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which any
Borrower or any Subsidiaries of any Borrower (i) acquires any going business or
all or substantially all of the assets of any firm, corporation or limited
liability company, or division thereof, whether through purchase of assets, merger
or otherwise other than acquisitions of Oil and Gas Interests permitted under
Section 8.15(iii), or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) at
least a majority (in number of votes) of the securities of a corporation which
have ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage or voting power) of the outstanding ownership interests
of a partnership or limited liability company.


 


“Adjusted
Engineered Value” means, as at any date of determination, the Engineered Value
of the Borrowing Base Properties, excluding the Attributed Interests.


 


“Administrative Agent” means Bank One in its capacity as contractual
representative of the Lenders pursuant to Article XII, and not in its
individual capacity as a Lender, and any successor Administrative Agent
appointed pursuant to Article XII.


 


“Advance” means a borrowing hereunder, (i) made by the Lenders on the
same Borrowing Date, or (ii) converted or continued by the Lenders on the same
date of conversion or continuation, consisting, in either case, of the
aggregate amount of the several Loans of the same Type and, in the case of
Eurodollar Loans, for the same Interest Period.


 


“Advance
Payment Contract” means any contract whereby any Credit Party either
(a) receives or becomes entitled to receive (either directly or
indirectly) any payment (an “Advance Payment”) to be applied toward payment of
the purchase price of Hydrocarbons produced or to be produced from Oil and Gas
Interests owned by any Credit Party and which Advance Payment is, or is to be,
paid in advance of actual delivery of such production to or for the account of
the purchaser regardless of such production, or (b) grants an option or
right of refusal to the purchaser to take delivery of such production in lieu
of payment, and, in either of the foregoing instances, the Advance Payment is,
or is to be, applied as payment in full for such production when sold and
delivered or is, or is to be, applied as payment for a


 


1

















 


portion only of the purchase price thereof or of a percentage or share
of such production; provided  that
inclusion of the standard “take or pay” provision in any gas sales
or purchase contract or any other similar contract shall not, in and of itself,
constitute such contract as an Advance Payment Contract for the purposes
hereof.


 


“Affected Lender” is defined in Section 2.22.


 


“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person.  A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of voting
securities (or other ownership interests) of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of the controlled Person, whether through ownership
of stock, by contract or otherwise.


 


“Agent” means each of the Administrative Agent and Collateral Agent.


 


“Aggregate Commitment” means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.


 


“Aggregate Outstanding Credit Exposure” means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Lenders.


 


“Agreement” means this credit agreement, as it may be amended or
modified and in effect from time to time.


 


“Agreement Accounting Principles” means generally accepted accounting
principles as in effect in the United States of America from time to time,
applied in a manner consistent with that used in preparing the financial
statements referred to in Section 6.4.


 


“Alternate Base Rate” means, for any day, a rate of interest per annum
equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the
Federal Funds Effective Rate for such day plus one half of one percent (.50%)
per annum.


 


“Annex”
refers to an annex attached to this Agreement, unless another document is
specifically referenced.


 


“Applicable Margin” means, (i) with respect to any Advance of any Type
at any time, the percentage rate per annum which is applicable at such time
with respect to Advances of such Type set forth in the Pricing Schedule, and
(ii) with respect to the determination of the Commitment Fee at any time, the
percentage rate per annum which is applicable at such time with respect to the
Commitment Fee set forth in the Pricing Schedule.


 


“Approved Counterparty” means, at any time and from time to time, (i)
any Person engaged in the business of writing Rate Management Transactions for
commodity, interest rate or currency risk that is acceptable to the
Administrative Agent and has, at the time any Borrower or any Guarantor enters
into a Rate Management Transaction with such Person, a credit rating of BBB or
better from S&P and (ii) any Lender Counterparty.


 


2

















 


“Approved Fund” means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity that administers or
manages a Lender.


 


“Approved
Petroleum Engineer” means any reputable firm of independent petroleum engineers
selected by CWEI and approved by the Administrative Agent, which approval shall
not be unreasonably withheld.


 


“Arranger” means Banc One Capital Markets, Inc., a Delaware
corporation, and its successors, in its capacity as lead arranger and sole book
runner.


 


“Article” means an article of this Agreement unless another
document is specifically referenced.


 


“Attributed
Interests” means the Oil and Gas Interests of the Related Partnerships
attributed to the Credit Parties in the Reserve Report.


 


“Authorized Officer” means, as to any Person, any of its Chief
Executive Officer, its President, its Directors, its Managers (in the case of a
limited liability company), its Chief Financial Officer, its Chief Accounting
Officer, its Vice Presidents, its Treasurer or its corporate Secretary, acting
singly.


 


“Available Aggregate Commitment” means, at any time, the Borrowing Base
then in effect minus the Aggregate Outstanding Credit Exposure at such time.


 


“Average
Available Aggregate Commitment” is defined in Section 8.26.


 


“Bank One” means Bank One, NA, a national banking association, having
its principal office in Chicago, Illinois, in its individual capacity, and its
successors.


 


“Blue Heel” means Blue Heel Company, a Delaware corporation, and its
successors and assigns.


 


“Borrower Representative” means, initially, CWEI and from time to time
after the Closing Date, any other Borrower the Borrowers may designate as its
replacement upon written notice to the Administrative Agent in accordance with
Article XV.


 


“Borrowers” means CWEI, Merger Sub and each of their respective
successors and assigns, including from and after the effective time of the SWR
Merger, SWR, and each individually, a “Borrower”.


 


“Borrowing Base” has the
meaning set forth in Section 4.1.


 


“Borrowing Base Deficiency”
means, as of any date, the amount, if any, by which the Aggregate Outstanding
Credit Exposure on such date exceeds the Borrowing Base in effect on such date;
provided, that, for purposes of
determining the existence and amount of any Borrowing Base Deficiency, LC
Obligations will not be deemed to be outstanding to the extent such Obligations
are secured by cash in the manner contemplated by Section 2.19.11.


 


“Borrowing Base Properties”
means all Oil and Gas Interests of the Credit Parties and all of the Attributed
Interests evaluated by Lenders for purposes of establishing the Borrowing Base.


 


3

















 


“Borrowing Base Usage” means, as of any date and for all purposes, the
quotient, expressed as a percentage, of (i) the Aggregate Outstanding Credit
Exposure as of such date, divided by (ii) the Borrowing Base as of such date.


 


“Borrowing Date” means a date on which an Advance is made hereunder.


 


“Borrowing Notice” is defined in Section 2.8.


 


“Business Day” means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Illinois and New York City, New York
for the conduct of substantially all of their commercial lending activities, interbank
wire transfers can be made on the Fedwire system and dealings in United States
dollars are carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago, Illinois for the conduct of substantially all of their
commercial lending activities and interbank wire transfers can be made on the
Fedwire system.


 


“Capital
Markets Event” means the consummation by CWEI of a private offering of its
Capital Stock on terms and conditions acceptable to the Arranger.


 


“Capital Stock” means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation), including, without limitation,
partnership interests and membership interests, and any and all warrants,
rights or options to purchase or other arrangements or rights to acquire any of
the foregoing.


 


“Capitalized Lease” of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.


 


“Capitalized Lease Obligations” of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.


 


“Cash Equivalent Investments” means (i) short-term obligations of, or fully
guaranteed by, the United States of America, (ii) commercial paper rated A-1 or
better by S&P or P-1 or better by Moody’s, (iii) demand deposit accounts
maintained in the ordinary course of business, and (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000; provided, that in each case with respect to the
foregoing clauses (i), (ii) and (iv) that the same provides for payment of both
principal and interest (and not principal alone or interest alone) and is not
subject to any contingency regarding the payment of principal or interest.


 


“Certificate of Effectiveness” means a
Certificate of Effectiveness in the form of Exhibit F  attached
hereto to be executed by each Borrower and the Administrative Agent
upon the satisfaction of each of the conditions precedent contained in
Article V hereof.


 


“Change” is defined in Section 3.2.


 


“Change of Control” means (i) the
acquisition by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange


 


4

















 


Commission under the Securities Exchange Act of 1934) of thirty-five
percent (35%) or more of the outstanding voting securities of CWEI; or (ii) the
Williams Group shall cease to own, free and clear of all Liens or other
encumbrances, at least twenty percent (20%) of the outstanding voting
securities of CWEI on a fully diluted basis.


 


“Closing Date” means the date upon
which all of the conditions precedent set forth in Article V have been
satisfied, and each Borrower and the Administrative Agent have executed and
delivered the Certificate of Effectiveness; provided, that,
in no event shall such date be later than May 21, 2004.


 


“Closing Documents” means the
Collateral Agency Agreement, the SWR Acquisition Documents, the Senior Term
Credit Documents, and all other material documents, instruments and agreements
executed or delivered by any Credit Party in connection with, or otherwise
pertaining to, the Closing Transactions.


 


“Closing Transactions” means the
transactions to occur on the Closing Date, including, without limitation:
(a) the completion of the SWR Acquisition pursuant to the terms of the SWR
Acquisition Documents, (b) the execution and delivery of the Senior Term
Credit Documents, and the closing and consummation of the transactions
contemplated thereby pursuant to the terms thereof, and the receipt by
Borrowers of not more than $75,000,000  from the Senior Term Lenders pursuant to
the Senior Term Credit Documents and the application of such proceeds to
finance the SWR Acquisition and the costs and expenses associated therewith,
(c) the assignment to, and assumption by, Bank One of the SWR Rate Management
Transactions pursuant to the SWR Hedge Assumption Agreement, (d) the
completion of the Partnership Acquisition pursuant to the terms of the
Partnership Acquisition Documents; provided,
that the aggregate purchase price does not exceed $7,000,000 net of
SWR’s partnership interests, (e) repayment in full of all obligations,
Indebtedness and liabilities accrued and outstanding under the Existing Credit
Agreements as of the Closing Date, including, without limitation, (i) the
entire outstanding principal balance of the loans and advances made (and as defined) thereunder,
(ii) all accrued but unpaid interest, and (iii) all accrued but
unpaid commitment and other fees, (f) the cancellation (or replacement
with Facility LCs) of all Existing Letters of Credit, (g) the termination
and release of the Existing Mortgages and all other Liens securing the
obligations, Indebtedness and liabilities of SWR or any of its Subsidiaries
under the Existing Credit Agreements (including, without limitation, the delivery
of UCC-3 releases with respect to all uniform commercial code filings made
under or pursuant to the Existing Credit Agreements), and the delivery to SWR
of all original certificates and stock powers pledged and delivered by SWR and
its Subsidiaries pursuant to the terms of the Existing Credit Agreements as
security for SWR’s obligations thereunder, (h) the release of all
guarantees of the obligations, Indebtedness and liabilities of any Credit Party
under the Existing Credit Agreements, (i) the termination of the Existing
Credit Agreements, and the delivery to SWR of (or the written commitment of the
holders thereof to promptly deliver after the Closing Date) each original
promissory note issued under the Existing Credit Agreements marked “Terminated
and Paid in Full”, (j) the repayment in full of all Indebtedness of Southwest
Partners and Tex-Hal to Western National Bank and the release and termination
of any and all Liens securing such Indebtedness, and (k) the payment of
all fees and expenses of the Administrative Agent in connection with the credit
facilities provided herein.


 


“Code” means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.


 


“Collateral Agency Agreement” means that certain Collateral Agency and
Intercreditor Agreement dated as of the date hereof by and among the Collateral
Agent, the Senior Term Agent and


 


5

















 


Senior Term Lenders party to the Senior Term Credit Agreement,
Administrative Agent, the Lenders, each Borrower and each Guarantor as amended,
modified, supplemented or restated from time to time.


 


“Collateral Agent” means Bank One, NA, in its capacity as collateral
agent under the Collateral Agency Agreement, and any successor Collateral Agent
appointed pursuant to the terms of the Collateral Agency Agreement.


 


“Collateral
Documents” means, collectively, this Agreement, all Mortgages, Security
Agreements, Assignments of Production and Financing Statements, the Pledge
Agreements and other collateral documents covering the Oil and Gas Interests and related personal property,
equipment, oil and gas inventory and proceeds of the foregoing, all Guaranties,
all pledge agreements and all collateral assignments of notes and Liens, all
such documents to be in form and substance reasonably satisfactory to the
Administrative Agent.


 


“Collateral Shortfall Amount” is defined in Section 10.1.


 


“Commitment” means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite such Lender’s name on
Annex A attached hereto or as set forth in any Notice of Assignment relating to
any assignment that has become effective pursuant to Section 14.3 as such
amount may be modified from time to time pursuant to the terms hereof.


 


“Consolidated” or “consolidated”, when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with Agreement Accounting Principles,
after elimination of intercompany items.


 


“Consolidated Current Assets” means, as of any date of determination,
the total of the consolidated current assets of CWEI determined in accordance
with Agreement Accounting Principles as of such date, plus, the
Available Aggregate Commitment as of such date, less any consolidated
current assets attributable to Vendor Financing transactions, less any
amount required to be included in consolidated current assets as a result of
the application of FASB Statement 133 as of such date.


 


“Consolidated Current Liabilities” means, as of any date of
determination, the total of consolidated current obligations of CWEI as
determined in accordance with Agreement Accounting Principles as of such date, less
any consolidated current liabilities attributable to Vendor Financings, less
current maturities of the Loans, less any amount required to be included
in Consolidated Current Liabilities as a result of the application of FASB
Statement 133 as of such date.


 


“Consolidated
Current Ratio” means, as of any date of determination, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities as of such
date.


 


“Consolidated EBITDAX” means, for any
Person for any period, without duplication: (a) Consolidated Net Income of
such Person for such period; plus, to the extent deducted in the calculation of
Consolidated Net Income, (b) the sum of (i) income or franchise Taxes
paid or accrued; (ii) Consolidated Net Interest Expense; (iii) amortization,
depletion and depreciation expense; (iv) any non-cash losses or charges on
any Rate Management Transaction resulting from the requirements of SFAS 133 for
that period; (v) oil and gas exploration expenses for such period;
(vi) losses from sales or other dispositions of assets (other than
Hydrocarbons produced in the normal course of business) and other extraordinary
or non-recurring losses, and (vii) other non-cash charges (excluding
accruals for cash expenses made in the ordinary course of business); less, to
the extent included in the calculation of Consolidated Net Income, (c) the
sum of (i) the income of such Person (other than Subsidiaries of such


 


6

















 


Person and, with respect to CWEI, the Related Partnerships) unless such
income is received by such Person in a cash distribution; (ii) any
non-cash gains on any Rate Management Transaction resulting from the
requirements of SFAS 133 for that period; (iii) extraordinary or
non-recurring gains; and (iv) gains from sales or other dispositions of
assets (other than Hydrocarbons produced in the normal course of business).


 


“Consolidated Funded Indebtedness” means, as of any date, without
duplication and with respect to any Person, (i) all obligations for
borrowed money, (ii) all obligations evidenced by bonds, debentures,
notes, or other similar instruments, (iii) all other indebtedness (including
obligations under Capitalized Leases, other than usual and customary oil, gas
and mineral leases) on which interest charges are customarily paid or accrued,
(iv) all guarantees of indebtedness, including reimbursement obligations
with respect to letters of credit, (v) the unfunded or unreimbursed
portion of all letters of credit issued for the account of such Person,
(vi) any amount owed by such Person representing the deferred purchase
price of property or services other than accounts payable incurred in the
ordinary course of business and in accordance with customary trade terms and
which are not more than 120 days past the invoice date, and (vii) all
liability as a general partner of a partnership for obligations of that
partnership of the nature described in (i) through (vi) preceding.


 


“Consolidated Net Income” means, for
any Person for any period, the net income (or loss) of such Person and its
Consolidated Subsidiaries
for such period.


 


“Consolidated Net Interest Expense”
means, for any Person for any period, the remainder of the following for such
Person and its Consolidated Subsidiaries for such period: (a) interest
expense, minus (b) interest income.


 


“Consolidated Subsidiary” or “Consolidated Subsidiaries” means, for
any Person, any Subsidiary or other entity the accounts of which would be consolidated with those of
such Person in its consolidated financial statements.


 


“Contingent Obligation” of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement, take-or-pay contract or the obligations of any such Person
as general partner of a partnership with respect to the liabilities of the
partnership.


 


“Controlled Group” means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether
or not incorporated) under common control which, together with CWEI or any of
its Subsidiaries, are treated as a single employer under Section 414 of
the Code.


 


“Conversion/Continuation Notice” is defined in Section 2.9.


 


“Credit Extension” means the making of an Advance or the issuance of a
Facility LC hereunder.


 


“Credit Extension Date” means the Borrowing Date for an Advance or the
issuance date for a Facility LC.


 


7

















 


“Credit Parties” means, collectively,
each Borrower and each Guarantor, and “Credit
Party” means any one of the foregoing.


 


“Crude Oil” means all crude oil and condensate.


 


“Current Financials” means (a) the
annual audited consolidated balance sheet of CWEI and the related consolidated
statements of operations and cash flows for the Fiscal Year ended
December 31, 2003, (b) the quarterly unaudited consolidated balance
sheet of CWEI for the Fiscal Quarter ended March 31, 2004, and the related
unaudited consolidated statements of operations and cash flows for the portion
of CWEI’s Fiscal Year ended March 31, 2004, and (c) the annual
audited consolidated balance sheet of SWR and the related consolidated
statements of operations and cash flows for the Fiscal Year ended December 31,
2003.


 


“CWEI” means Clayton Williams Energy, Inc., a Delaware corporation, and
its successors and assigns.


 


“CWEI
Acquisitions” means CWEI Acquisitions, Inc., a Delaware corporation, and its
successors and assigns.


 


“Default” means an event described in Article IX.


 


“Determination Date” is defined in Section 4.2.


 


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


 


“Dollar”, “Dollars” and the sign “$” mean lawful money of the United
States of America.


 


“Domestic Subsidiary” means, with respect to any Person, a Subsidiary
of such Person that is incorporated or formed under the laws of the United
States of America or the District of Columbia.


 


“Engineered
Value” means, the value attributed to the Borrowing Base Properties for
purposes of the most recent redetermination of the Borrowing Base pursuant to
Article IV (or for purposes of determining the Initial Borrowing Base in
the event no such redetermination has occurred), based upon the discounted
present value of the estimated net cash flow to be realized from the production
of Hydrocarbons from such Oil and Gas Interests as set forth in the Reserve
Report.


 


“Environmental Laws” means any and all federal, state, provincial,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other governmental restrictions
relating to (i) the protection of the environment, (ii) the effect of the
environment on human health, (iii) emissions, discharges or releases of
pollutants, contaminants, hazardous substances or wastes into surface water,
ground water or land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous substances or wastes or the clean-up or other
remediation thereof.


 


8

















 


“ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.


 


“Eurodollar Advance” means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the applicable Eurodollar
Rate.


 


“Eurodollar Base Rate” means, with respect to a Eurodollar Advance for
the relevant Interest Period, the applicable British Bankers’ Association LIBOR
rate for deposits in Dollars as reported by any generally recognized financial
information service as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, and having a maturity equal to such
Interest Period, provided  that,
if no such British Bankers’ Association LIBOR rate is available to the
Administrative Agent, the applicable Eurodollar Base Rate for the relevant
Interest Period shall instead be the rate determined by the Administrative
Agent to be the rate at which Bank One or one of its Affiliate banks offers to
place deposits in Dollars with first-class banks in the London interbank market
at approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, in the approximate amount of Bank One’s relevant
Eurodollar Loan and having a maturity equal to such Interest Period.


 


“Eurodollar Loan” means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.


 


“Eurodollar Rate” means, with respect to a Eurodollar Advance for the
relevant Interest Period a per annum rate of interest (based on a year of 360
days) equal to, the sum of (i) the quotient of (a) the Eurodollar Base Rate
applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin.


 


“Excluded Taxes” means, in the case of each Lender or applicable
Lending Installation and the Administrative Agent, taxes imposed on its overall
net income, and franchise taxes imposed on it, by (i) the jurisdiction under
the laws of which such Lender or the Administrative Agent is incorporated or
organized or (ii) the jurisdiction in which the Administrative Agent’s or such
Lender’s principal executive office or such Lender’s applicable Lending
Installation is located.


 


“Exhibit” refers to an exhibit attached to this Agreement, unless
another document is specifically referenced.


 


“Existing Credit Agreements” means,
collectively, that certain (i) Amended and Restated Credit Agreement dated
as of September 15, 2003, by and among Union Bank of California, N.A., as
administrative agent, lead arranger and bookrunner, Guaranty Bank, as
documentation agent, the lenders a party thereto, and SWR, as borrower
thereunder, (ii) Senior Second Lien Secured Credit Agreement dated as of
September 15, 2003, by and among SWR, as the borrower thereunder,
Macquarie in its individual capacity and as administrative agent, and the
subordinated noteholders from time to time a party thereto, as each may have
been amended or modified prior to the date hereof.


 


“Existing
Letters of Credit” means the letters of credit issued prior to the SWR Merger
for the account of SWR or any of its Subsidiaries and outstanding on the date
hereof and described on Schedule 1.1(a).


 


“Existing Mortgages” means the mortgages,
deeds of trust, security agreements, assignments, pledges and other documents,
instruments and agreements, which establish Liens on certain of SWR’s Oil and
Gas Interests to secure SWR’s obligations under the Existing Credit Agreements.


 


9

















 


“Facility LC” is defined in Section 2.19.1.


 


“Facility LC Application” is defined in Section 2.19.3.


 


“Facility LC Collateral Account” is defined in Section 2.19.11.


 


“Facility Termination Date” means May 21, 2007.


 


“Federal Funds Effective Rate” means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:00
a.m. (Chicago time) on such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent in its sole discretion.


 


“Financial Contract” of a Person means (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any Rate Management
Transaction.


 


“Fiscal Quarter” means the three (3)
month periods ending on March 31, June 30, September 30 and
December 31 of each Fiscal Year.


 


“Fiscal Year” means a twelve (12) month
period ending December 31.


 


“Floating Rate” means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.


 


“Floating Rate Advance” means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.


 


“Floating Rate Loan” means a Loan which, except as otherwise provided
in Section 2.11, bears interest at the Floating Rate.


 


“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.


 


“Gas Balancing Agreement” means any
agreement or arrangement whereby any Credit Party, or any other party having an
interest in any Hydrocarbons to be produced from Oil and Gas Interests in which
any Credit Party owns an interest, has a right to take more than its
proportionate share of production therefrom.


 


“Guarantor” means Warrior, CWEI Acquisitions, Romere and Romere Corp.
and after the effective time of the SWR Merger, each Material Domestic
Subsidiary of CWEI (other than any Borrower), and, if required pursuant to
Section 8.28 each Domestic Subsidiary of CWEI (other than a Borrower) that
hereafter executes and delivers to the Administrative Agent and the Lenders, a
Guaranty.


 


10

















 


“Guaranty” means a Guaranty, substantially in the form of Exhibit I to
be executed by each Material Domestic Subsidiary of CWEI (other than any
Borrower) in favor of the Administrative Agent and the Lenders, pursuant to
which such Subsidiary guaranties payment and performance in full of the
Obligations, as it may be amended or modified and in effect from time to time.


 


“Highest Lawful Rate” shall mean, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas law permits the higher interest rate, stated as a rate per annum.  On each day, if any, that Chapter 303 of the
Texas Finance Code, as amended (formerly Tex. Rev. Civ. Stat. Ann. Art.
5069-1D.003) establishes the Highest Lawful Rate, such rate shall be the
“indicated (weekly) rate ceiling” (as defined in Chapter 303 of the Texas
Finance Code, as amended) for that day.


 


“Hydrocarbons” means all Crude Oil and Natural Gas produced from or
attributable to the Oil and Gas Interests of CWEI and its Subsidiaries.


 


“Incentive
Partnership” means any trust or limited partnership to which a Credit Party, as
general partner, contributes a portion of its after-payout working interest in
wells drilled within certain areas, and key employees and consultants who
promote the drilling and acquisition programs, as limited partners contribute
cash.


 


“Indebtedness” of a Person means such Person’s (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary
course of such Person’s business payable on terms customary in the trade and
which are not outstanding more than one hundred twenty (120) days past the
invoice date), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from Property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) obligations of such Person to purchase
securities or other Property arising out of or in connection with the sale of
the same or substantially similar securities or Property, (vi) with respect to
CWEI or any of its Subsidiaries, Vendor Financings, (vii) Contingent
Obligations, (viii) Capitalized Lease Obligations, (ix) Letters of Credit,
(x) Rate Management Obligations and (xi) any other obligation for borrowed
money or other similar financial accommodation which in accordance with
Agreement Accounting Principles would be shown as a liability on the
consolidated balance sheet of such Person.


 


“Initial Borrowing Base” means a Borrowing Base in the amount of
$180,000,000, which shall be in effect during the period commencing at the time
the SWR Merger becomes effective and continuing until the first Redetermination
after the Closing Date.


 


“Interest Period” means, with respect to a Eurodollar Advance, a period
of one, two, three or, if available, six months commencing on a Business Day
selected by the Borrower Representative pursuant to this Agreement.  Such Interest Period shall end on the day
which corresponds numerically to such date one, two, three or six months
thereafter, provided,
however, that if there is no such numerically corresponding day in
such next, second, third or sixth succeeding month, such Interest Period shall
end on the last Business Day of such next, second, third or sixth succeeding
month.  If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.


 


11

















 


“Investment” of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities or interests owned
by such Person; any deposit accounts and certificate of deposit owned by such
Person; and structured notes, derivative financial instruments and other
similar instruments or contracts owned by such Person.


 


“Joinder Agreement” means a joinder agreement in the form attached
hereto as Exhibit J.


 


“LC Fee” is defined in Section 2.19.4.


 


“LC Issuer” means Bank One (or any subsidiary or affiliate of Bank One
designated by Bank One) in its capacity as issuer of Facility LCs hereunder.


 


“LC Obligations” means, at any time, the sum, without duplication, of
(i) the aggregate undrawn stated amount under all Facility LCs outstanding at
such time plus (ii) the aggregate unpaid amount at such time of all
Reimbursement Obligations.


 


“LC Payment Date” is defined in Section 2.19.5.


 


“Lender Counterparty” means each Lender or any Affiliate of a Lender
counterparty to a Rate Management Transaction.


 


“Lenders” means the lending institutions listed on Annex A and their
respective successors and assigns.


 


“Lending Installation” means, with respect to a Lender or the Administrative
Agent, the office, branch, Subsidiary or Affiliate of such Lender or the
Administrative Agent listed on Annex A attached hereto or otherwise selected by
such Lender or the Administrative Agent pursuant to Section 2.17.


 


“Letter of Credit” of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.


 


“Lien” means any lien (statutory or other), mortgage, charge, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).


 


“Loan” means, with respect to a Lender, such Lender’s loan made
pursuant to Article II (or any conversion or continuation thereof).


 


“Loan Documents” means, collectively, this Agreement, the Facility LC
Applications, the Collateral Agency Agreement, any Notes issued pursuant to
Section 2.13, the Collateral Documents, any Guaranty and the SWR Hedge
Assumption Agreement.


 


“Macquarie” means Macquarie Americas Corp., a Delaware corporation, and
its successors and assigns.


 


12

















 


“Material
Adverse Effect” means a material adverse effect on (a) the assets, liabilities,
financial condition, results of operations or prospects of the Credit Parties
taken as a whole, (b) the right or ability of any Credit Party to fully,
completely and timely perform its material obligations under the Loan
Documents, or (c) the validity or enforceability of any Loan Document against
any Credit Party which is a party thereto or the rights and remedies of the Administrative
Agent, the LC Issuer, the
Collateral Agent or the Lenders thereunder.


 


“Material
Domestic Subsidiary” means any Domestic Subsidiary of CWEI other than a
Borrower that owns or holds Property (including Oil and Gas Interests) with an
aggregate fair market value greater than five percent (5%) of the aggregate
fair market value of all of the Property (including Oil and Gas Interests) of
CWEI and its Subsidiaries taken as a whole.


 


“Material
Gas Imbalance” means, with respect to all Gas Balancing Agreements to which any
Credit Party is a party or by which any Oil and Gas Interests owned by any
Credit Party is bound, a net overproduced gas imbalance to any Credit Party in
excess of $750,000.


 


“Material Indebtedness” means Indebtedness, other than indebtedness
with respect to Rate Management Obligations, in an outstanding principal amount
of $1,000,000 or more in the aggregate (or the equivalent thereof in any
currency other than Dollars).


 


“Material Indebtedness Agreement” means any agreement under which any
Material Indebtedness was created or is governed or which provides for the
incurrence of Indebtedness in an amount which would constitute Material
Indebtedness (whether or not an amount of Indebtedness constituting Material
Indebtedness is outstanding thereunder).


 


“Merger Sub” means CWEI-SWR, Inc., a Delaware corporation, and its
successors and assigns.


 


“Modify” and “Modification” are defined in Section 2.19.1.


 


“Monthly
Reductions” is defined in Section 4.5.


 


“Moody’s” means Moody’s Investors Service, Inc.


 


“Mortgages”
means all mortgages, deeds of trust, amendments to mortgages, security
agreements, assignments of production, pledge agreements, collateral mortgages,
collateral chattel mortgages, collateral assignments, financing statements and
other documents, instruments and agreements evidencing, creating, perfecting or
otherwise establishing the Liens required by Section 7.1.  All Mortgages shall be in form and substance
satisfactory to the Administrative Agent in its sole discretion.


 


“Multiemployer Plan” means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which any Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.


 


“Natural Gas” means all natural gas, distillate or sulphur, natural gas
liquids and all products recovered in the processing of natural gas (other than
condensate) including, without limitation, natural gasoline, coalbed methane
gas, casinghead gas, iso-butane, normal butane, propane and ethane (including
such methane allowable in commercial ethane).


 


13

















 


“Non-Consenting Lender” is defined in Section 2.22.


 


“Non-U.S. Lenders” is defined in Section 3.5(iv).


 


“Note” is defined in Section 2.13.


 


“Obligations” means all obligations of every nature of each Credit
Party from time to time owed to the Agents (including former Agents), the LC
Issuer, the Lenders or any of them and the Lender Counterparties, under any
Loan Document or Rate Management Transaction, whether for principal, interest
(including interest which, but for the filing of a petition in bankruptcy with
respect to such Credit Party, would have accrued on any Obligation, whether or
not a claim is allowed against such Credit Party for such interest in the
related bankruptcy proceeding), all Reimbursement Obligations, payments for
early termination of Rate Management Transactions, fees, expenses,
indemnification or otherwise.


 


“Off-Balance Sheet Liability” of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any Sale and Leaseback
Transaction which is not a Capitalized Lease, (iii) any liability under any
so-called “synthetic lease” transaction entered into by such Person, (iv) any
Material Gas Imbalance, (v) any Advance Payment Contract, or (vi) any
obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the balance sheets of such Person, but excluding from
the foregoing clauses (iii) through (vi) Operating Leases and usual and
customary oil, gas and mineral leases.


 


“Oil and Gas Interest(s)” means: (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties and assets
of any kind and nature, direct or indirect, including, without limitation,
working, royalty and overriding royalty interests, mineral interests, leasehold
interests, production payments, operating rights, net profits interests, other
non-working interests, contractual interests, non-operating interests and
rights in any pooled, unitized or communitized acreage by virtue of such
interest being a part thereof; (b) interests in and rights with respect to
Hydrocarbons and other minerals or revenues therefrom and contracts and
agreements in connection therewith and claims and rights thereto (including oil
and gas leases, operating agreements, unitization, communitization and pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, hedging, exchange and processing contracts and
agreements and, in each case, interests thereunder), and surface interests, fee
interests, reversionary interests, reservations and concessions related to any
of the foregoing; (c) easements, rights-of-way, licenses, permits, leases, and
other interests associated with, appurtenant to, or necessary for the operation
of any of the foregoing; (d) interests in oil, gas, water, disposal and
injection wells, equipment and machinery (including well equipment and
machinery), oil and gas production, gathering, transmission, compression,
treating, processing and storage facilities (including tanks, tank batteries,
pipelines and gathering systems), pumps, water plants, electric plants,
gasoline and gas processing plants, refineries and other tangible or
intangible, movable or immovable, real or personal property and fixtures
located on, associated with, appurtenant to, or necessary for the operation of
any of the foregoing; and (e) all seismic, geological, geophysical and
engineering records, data, information, maps, licenses and interpretations.


 


“Operating Lease” of a Person means any lease of Property (other than a
Capitalized Lease or a lease of an Oil and Gas Interest by such Person as
lessee which has an original term (including any required renewals and any
renewals effective at the option of the lessor) of one year or more.


 


14

















 


“Organizational Documents” means (i) with respect to any corporation,
its certificate or articles of incorporation or organization, as amended, and
its by-laws, as amended, (ii) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (iii) with respect to any general partnership, its partnership
agreement, as amended, and (iv) with respect to any limited liability company,
its articles of organization, as amended, and its operating agreement, as
amended.


 


“Original
Credit Agreement” means that certain Ninth Restated Loan Agreement, dated as of
July 18, 2002,  among CWEI and Warrior,
as borrowers,  CWEI Acquisitions and
Romere, as guarantors, the lenders from time to time a party thereto and Bank
One as administrative agent, as amended from time to time prior to the Closing
Date.


 


“Other Taxes” is defined in Section 3.5(i).


 


“Outstanding Credit Exposure” means, as to any Lender at any time, the
sum of (i) the aggregate principal amount of its Loans outstanding at such
time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at
such time.


 


“Participants” is defined in Section 14.2.1.


 


“Partnership
Acquisition” means the
acquisition by CWEI of certain Oil and Gas Interests and the stock of Tex-Hal
from Southwest Partners pursuant to the terms of the Partnership Acquisition
Documents.


 


“Partnership
Acquisition Documents” means the
Partnership Purchase Agreement and all other certificates and other documents
and instruments now or hereafter executed and delivered by, between or among
CWEI, SWR and Southwest Partners pursuant to the Partnership Purchase Agreement
or in connection with the Partnership Acquisition.


 


“Partnership
Purchase Agreement” means that
certain Asset Purchase Agreement dated as of May 21, 2004, by and among
CWEI, SWR and Southwest Partners, as amended or modified.


 


“Payment Date” means the last day of each Fiscal Quarter in the case of
Floating Rate Loans and, in the case of Eurodollar Loans, the last day of the
applicable Interest Period, and if such Interest Period is longer than three
(3) months, on the last day of each three (3) month interval during such
Interest Period.


 


“PBGC” means the Pension Benefit Guaranty Corporation, or any successor
thereto.


 


“Permitted Liens”  means (i)
royalties, overriding royalties, reversionary interests, production payments
and similar burdens granted by any Credit Party or Related Partnership with
respect to the Oil and Gas Interests owned by such Credit Party or Related
Partnership, as the case may be, if the net cumulative effect of such burdens
does not operate to deprive any Credit Party or any Related Partnership of any
material right in respect of its assets or properties (except for rights
customarily granted with respect to such interests); (ii) statutory Liens,
including Liens for taxes or other assessments that are not yet delinquent (or
that, if delinquent, are being contested in good faith by appropriate
proceedings and for which a Credit Party, or a Related Partnership, as the case
may be, has set aside on its books adequate reserves in accordance with Agreement Accounting Principles);
(iii) easements, rights of way, servitudes, permits, surface leases and other
rights in respect to surface operations, pipelines, grazing, logging, canals,
ditches, reservoirs or the like, conditions, covenants and other restrictions,
and easements of


 


15

















 


streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect of any
Credit Party’s or Related Partnership’s assets or properties; (iv) materialmen’s,
mechanic’s, repairman’s, employee’s, contractor’s, sub-contractor’s, operator’s
and other Liens incidental to the construction, maintenance, development or
operation of any Credit Party’s or any Related Partnership’s assets or
properties to the extent not delinquent (or which, if delinquent, are being
contested in good faith by appropriate proceedings and for which such Credit
Party or such Related Partnership has set aside on its books adequate reserves
in accordance with Agreement
Accounting Principles); (v) all contracts, agreements and instruments,
and all defects and irregularities and other matters affecting any Credit
Party’s or any Related Partnership’s assets and properties which were in
existence at the time such Credit Party’s or such Related Partnership’s assets
and properties were originally acquired by a Credit Party or a Related
Partnership and all routine operational agreements entered into in the ordinary
course of business, which contracts, agreements, instruments, defects,
irregularities and other matters and routine operational agreements are not
such as to, individually or in the aggregate, interfere materially with the
operation, value or use of any Credit Party’s or any Related Partnership’s
assets and properties, considered in the aggregate; (vi) Liens in connection
with workmen’s compensation, unemployment insurance or other social security,
old age pension or public liability obligations; (vii) legal or equitable
encumbrances deemed to exist by reason of the existence of any litigation or
other legal proceeding or arising out of a judgment or award with respect to
which an appeal is being prosecuted in good faith; (viii) rights reserved to or
vested in any municipality, governmental, statutory or other public authority
to control or regulate any Credit Party’s or any Related Partnership’s assets
and properties in any manner, and all applicable laws, rules and orders from
any governmental authority; (ix) other
Liens imposed by law, such as carriers’, warehousemen’s and landlord’s liens
and other similar liens arising in the ordinary course of business of a Credit
Party or a Related Partnership which secures payment of obligations not more
than 60 days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
books of such Credit Party or Related Partnership; (x) Liens created by
or pursuant to this Agreement or the Collateral Documents; (xi) Liens existing
at the date of this Agreement which have been disclosed to the Lenders on
Schedule 1.1(d) hereto; (xii) Liens to secure Vendor Financings;
(xiii) Liens to secure the Indebtedness permitted pursuant to
Section 8.11(vii) and (xiv) Liens granted to the Collateral Agent to
secure the Senior Term Indebtedness as provided in, and subject to, the terms
of the Collateral Agency Agreement


 


“Person” means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.


 


“Plan” means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which any Borrower or any member of the Controlled Group may
have any liability.


 


“Pledge Agreement” means those certain Pledge Agreements substantially
in the form of Exhibit G attached hereto (with applicable conforming
changes) to be executed by CWEI and certain of its Subsidiaries pursuant to
which such Person shall pledge to Collateral Agent, for the ratable benefit of
the Lenders and the Senior Term Lenders, all of the issued and outstanding
Capital Stock owned by such Person of each Subsidiary of such Person that is a
Guarantor, all partnership interests in the Related Partnerships (to the extent
permitted under the partnership agreement of such Related Partnerships) and all
intercompany Indebtedness held by such Person, in each case to the extent
required by Section 7.1(a) to secure the Obligations, as they may be
amended or modified and in effect from time to time.


 


16

















 


“Pricing Schedule” means the Schedule attached hereto identified
as such.


 


“Prime Rate” means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.


 


“Property” of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person including any Oil and Gas Interests.


 


“Pro Rata Share” means, with respect to a Lender, a portion equal to a
fraction the numerator of which is such Lender’s Commitment and the denominator
of which is the Aggregate Commitment.


 


“Proved
Nonproducing Oil and Gas Interests” means all Oil and Gas Interests (including
Attributed Interests) which constitute proved developed nonproducing reserves.


 


“Proved Oil and
Gas Interests” means, collectively, Proved Producing Oil and Gas Interests,
Proved Nonproducing Oil and Gas Interests, and Proved Undeveloped Oil and Gas
Interests.


 


“Proved Producing
Oil and Gas Interests” means all Oil and Gas Interests (including Attributed
Interests) which constitute proved developed producing reserves.


 


“Proved Undeveloped Oil and Gas Interests” means all Oil and Gas
Interests (including Attributed Interests) which constitute proved undeveloped
reserves


 


“Purchase Money Indebtedness” means (i) any Indebtedness incurred at
the time of or within 30 days prior to or after the acquisition of any fixed
assets for the purpose of financing all or any part of the purchase price thereof,
and (ii) any renewals, extensions or refinancings thereof permitted by this
Agreement.


 


“Purchasers” is defined in Section 14.3.1.


 


“Rate Management Obligations” of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.


 


“Rate Management Transaction” means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into by CWEI
or any Subsidiary (including SWR or Blue Heel and including the SWR Interest
Rate Agreements but excluding the SWR Rate Management Transactions) which is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other
financial measures.


 


“Redetermination” means any Scheduled Redetermination or Special
Redetermination.


 


17

















 


“Regulation D” means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.


 


“Regulation U” means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.


 


“Reimbursement
Obligations” means, at any time, the aggregate of all obligations of the
Borrowers then outstanding under Section 2.19 to reimburse the LC Issuer
for amounts paid by the LC Issuer in respect of any one or more drawings under
Facility LCs.


 


“Related Partnerships” means the limited partnerships described on
Schedule 8.15(vi) of which SWR is the general partner or managing general
partner.


 


“Reportable Event” means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such section, with
respect to a Plan, excluding, however, such events as to which the PBGC has by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided, however, that a
failure to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.


 


“Reports” is defined in Section 10.6.


 


“Required Lenders” means Lenders in the aggregate having at least
sixty-six and two-thirds percent (66 2/3%) of the Aggregate Commitment or, if
the Aggregate Commitment has been terminated, Lenders in the aggregate holding
at least sixty-six and two-thirds percent (66 2/3%) of the Aggregate
Outstanding Credit Exposure.


 


“Reserve Report” means an unsuperseded engineering analysis of the
Borrowing Base Properties, in form and substance reasonably acceptable to the
Administrative Agent, prepared in accordance with customary and prudent
practices in the petroleum engineering industry and Financial Accounting
Standards Board Statement 69.  Each
Reserve Report required to be delivered by April 1 of each year pursuant
to Section 4.2 shall be as of January 1 of such year and shall be
prepared by the Approved Petroleum Engineer. 
Each other Reserve Report shall be prepared at CWEI’s option by either
(i) the Approved Petroleum Engineer, or (ii) CWEI’s in-house staff and the
Reserve Report required to be delivered by October 1 of each year shall be
as of July 1 of such year. 
Notwithstanding the foregoing, in connection with any Special
Redetermination requested by the Borrower Representative or the Administrative
Agent, the Reserve Report shall be in form and scope reasonably acceptable to
the Administrative Agent.


 


“Reserve Requirement” means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
eurocurrency liabilities.


 


18

















 


“Risk-Based Capital Guidelines” is defined in Section 3.2.


 


“Romere” means Romere Pass Acquisition L.L.C., a Delaware limited
liability company, and its successors and assigns.


 


“Romere Corp” means CWEI Romere Pass Acquisition Corp., a Delaware
corporation, and its successors and assigns.


 


“S&P” means Standard and Poor’s Ratings Services, a division of The
McGraw Hill Companies, Inc.


 


“Sale and Leaseback Transaction” means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.


 


“Schedule” refers to a specific schedule to this Agreement, unless
another document is specifically referenced.


 


“Scheduled Redetermination” means any redetermination of the Borrowing
Base pursuant to Section 4.2 other than a Special Redetermination.


 


“Section” means a numbered section of this Agreement, unless
another document is specifically referenced.


 


“Senior
Term Agent” means Bank One, NA, in its capacity as agent for the Senior Term
Lenders under the Senior Term Credit Agreement or any permitted successor
thereto in such capacity.


 


“Senior Term Credit Agreement” means that certain Senior Term Credit
Agreement dated as of May 21, 2004 among the Borrowers, the Senior Term Agent,
the Guarantors and the Senior Term Lenders pursuant to which the Senior Term
Lenders therein agree to make a $75,000,000 term loan available to Borrowers on
the Closing Date, as it may be amended or modified and in effect from time to
time as permitted hereunder.


 


“Senior
Term Credit Documents” means, collectively, the Senior Term Credit Agreement,
the Senior Term Notes and any other agreements, documents, instruments or
certificates executed and delivered from time to time in connection therewith.


 


“Senior
Term Indebtedness” means the Indebtedness evidenced by the Senior Term Credit
Documents.


 


“Senior
Term Lenders” means the holders of the Senior Term Indebtedness.


 


“Senior
Term Notes” means the notes, if any, issued pursuant to the Senior Term Credit
Agreement, as amended, modified, supplemented or restated from time to time in
compliance herewith.


 


“Single Employer Plan” means a Plan maintained by any Borrower or any
member of the Controlled Group for employees of such Borrower or such member of
the Controlled Group.


 


“Southwest Partners” means Southwest Partners, L.P., a Delaware limited
partnership, and its successors and assigns.


 


19

















 


“Special Redetermination” means a redetermination of the Borrowing Base
made at the request of the Borrowers or the Required Lenders at any time other
than on the dates set for a Scheduled Redetermination.


 


“Stated Rate” is defined in Section 2.23.


 


“Subsidiary” of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, limited liability company, association, joint venture
or similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or
controlled.  Unless otherwise expressly
provided, all references herein to a “Subsidiary” shall mean a Subsidiary of
CWEI.


 


“Substantial Portion” means, with respect to the Property of CWEI and
its Subsidiaries, Property which represents more than 10% of the consolidated
assets of CWEI and its Subsidiaries or property which is responsible for more
than 10% of the consolidated net sales, in each case, as would be shown in the
consolidated financial statements of CWEI and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made (or if financial statements have not been delivered
hereunder for that month which begins the twelve-month period, then the
financial statements delivered hereunder for the quarter ending immediately
prior to that month).


 


“SWR” means Southwest Royalties, Inc., a Delaware corporation, and its
successors and assigns.


 


“SWR Acquisition” means the acquisition of
SWR pursuant to the SWR Merger Agreement.


 


“SWR Acquisition Documents” means the
SWR Merger Agreement, the Certificate of Merger and all other certificates and
other documents and instruments now or hereafter executed and delivered by,
between or among CWEI, Merger Sub and SWR pursuant to the SWR Merger Agreement
or in connection with the SWR Acquisition.


 


“SWR
Hedge Assumption Agreement” means an Assignment and Assumption Agreement by and
among the Administrative Agent and Macquarie in substantially the form of
Exhibit H and pursuant to which the Administrative Agent assumes the SWR Rate
Management Obligations, as it may be amended or modified and in effect from
time to time.


 


“SWR
Interest Rate Agreements” means those certain Rate Management Transactions
consisting of rate swaps entered into by SWR prior to the SWR Merger and
described on Schedule 1.1(c).


 


“SWR
Interests” means, collectively, the “Ownership
Interests” as such term is defined in the SWR Merger Agreement,
including the Attributed Interests.


 


“SWR
Merger” means the merger of Merger Sub with and into SWR pursuant to the SWR
Merger Agreement.


 


“SWR Merger Agreement” means that certain Agreement and Plan of Merger dated as
of May 3, 2004, by and among CWEI, Merger Sub and SWR as amended or modified.


 


20

















 


“SWR
Rate Management Obligations” means all Rate Management Obligations of SWR with
respect to the SWR Rate Management Transactions.


 


“SWR
Rate Management Transactions” means those certain Rate Management Transactions
consisting of commodity swaps entered into by SWR prior to the SWR Merger and
described on Schedule 1.1(b).


 


“SWR
Reserve Report” means the reserve report effective as of January 1, 2004,
covering the SWR Interests and prepared by Ryder Scott Company, L.P.,
independent petroleum engineering firm, as set forth in the data books provided
to CWEI on or about March 30, 2004.


 


“Taxes” means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.


 


“Terminated Lender” is defined in Section 2.23.


 


“Tex-Hal”
means Tex-Hal Partners, Inc., a Delaware corporation, and its successors and
assigns.


 


“Transferee” is defined in Section 14.4.


 


“Type” means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature
as a Floating Rate Loan or a Eurodollar Loan.


 


“Unfunded Liabilities” means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.


 


“Unmatured Default” means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.


 


“Unsecured
Notes” means those certain 10 1⁄2 % Senior Notes due 2004 issued by SWR pursuant
to that certain Indenture dated as of October 15, 1997, as amended,
modified or supplemented from time to time.


 


“Vendor
Financings” means (i) non-recourse vendor financings incurred by CWEI or
its Subsidiaries for services, equipment or material on other than customary
trade payable terms not exceeding $10,000,000 in the aggregate at any one time
outstanding (calculated based upon the invoice amount for such services,
equipment or material), or (ii) recourse vendor financings of a like
nature not exceeding $6,000,000 in the aggregate at any one time outstanding
incurred by CWEI or its Subsidiaries for the first six (6) wells to be drilled
pursuant to that certain CWEI South Louisiana Vendor Financing Agreement dated
as of May 15, 2002 among CWEI, Parker USA Drilling Company, et al.


 


“Warrior” means Warrior Gas Co., a Texas corporation, and its
successors and assigns.


 


“Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one


 


21

















 


or more Wholly-Owned Subsidiaries of such Person, or by such Person and
one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership,
limited liability company, association, joint venture or similar business
organization 100% of the ownership interests having ordinary voting power of
which shall at the time be so owned or controlled.


 


“Williams Group” means Clayton Williams, Jr., his spouse and
descendants (whether natural or adopted) and any trust, family limited
partnership, or other entity solely for the benefit of Clayton Williams, Jr.,
his spouse or such descendants.


 


The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.  The use herein of the word “include” or “including”, when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as “without limitation” or “but not limited to” or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.


 


As used herein, the terms “proved reserves,” “proved developed reserves,”
“proved developed producing reserves,” “proved developed nonproducing
reserves,” and “proved undeveloped reserves” have the meaning given such terms
from time to time and at the time in question by the Society of Petroleum
Engineers of the American Institute of Mining Engineers.


 


ARTICLE II


 


THE
CREDITS


 


2.1.                              Commitment.  From and including the date of this Agreement and prior to the
Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to (i) make Loans to the Borrowers and
(ii) participate in Facility LCs issued upon the request of any Borrower, provided that, after giving effect to the
making of each such Loan and the issuance of each such Facility LC, such
Lender’s Outstanding Credit Exposure shall not exceed its Pro Rata Share of the
Borrowing Base.  Subject to the terms of
this Agreement, the Borrowers may borrow, repay and reborrow at any time prior
to the Facility Termination Date. The Commitments to extend credit hereunder
shall expire on the Facility Termination Date. 
The LC Issuer will issue Facility LCs hereunder on the terms and
conditions set forth in Section 2.19. 
Notwithstanding the foregoing, no Lender will be obligated to make any
Credit Extension, and no Borrower shall be entitled to obtain any Credit
Extension, if the making of such Credit Extension would cause the Aggregate
Outstanding Credit Exposure to exceed the Borrowing Base then in effect.  No Lender shall be obligated to make any
Credit Extension and no Borrower shall be entitled to any Credit Extension
during the existence of a Borrowing Base Deficiency.  Nothing in this Section 2.1 shall be deemed to limit any
Lender’s obligation to reimburse the LC Issuer with respect to any drawing
under any Facility LCs pursuant to Section 2.19.


 


2.2.                              Required
Payments; Termination.  The Aggregate Outstanding Credit Exposure
and all other unpaid Obligations shall be paid in full by the Borrowers on the
Facility Termination Date.


 


2.3.                              Ratable Loans. 
Each Advance hereunder shall consist of Loans made from the several
Lenders ratably according to their Pro Rata Shares.


 


22


















 


2.4.          Types of Advances.  The Advances may be Floating Rate Advances or Eurodollar
Advances, or a combination thereof, as selected by the Borrower Representative
in accordance with Sections 2.8 and 2.9.


 


2.5.          Commitment Fee; Reductions in Aggregate Commitment.  The Borrowers agree to pay to the
Administrative Agent for the account of each Lender according to its Pro Rata
Share a commitment fee at a rate per annum equal to the Applicable Margin on
the average daily Available Aggregate Commitment from the date hereof to and
including the Facility Termination Date, payable on the last day of each Fiscal
Quarter hereafter and on the Facility Termination Date.  All accrued commitment fees shall be payable
on the effective date of any termination of the obligations of the Lenders to
make Loans hereunder.


 


2.6.          Minimum Amount of Each Advance.  Each Eurodollar Advance shall be in the
minimum amount of $250,000 (and in multiples of $250,000 if in excess thereof),
and each Floating Rate Advance shall be in the minimum amount of $100,000 and
in multiples of $100,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in
the amount of the Available Aggregate Commitment.


 


2.7.          Prepayments.


 


2.7.1          Optional Prepayments.  The Borrowers may
from time to time pay, without penalty or premium, all outstanding Floating
Rate Advances, or, in a minimum aggregate amount of $100,000 or any integral
multiple of $100,000 in excess thereof, any portion of the outstanding Floating
Rate Advances upon two Business Days’ prior notice to the Administrative
Agent.  The Borrowers may from time to
time pay, subject to the payment of any funding indemnification amounts
required by Section 3.4 but without penalty or premium, all outstanding
Eurodollar Advances, or, in a minimum aggregate amount of $250,000 or any
integral multiple of $250,000 in excess thereof, any portion of the outstanding
Eurodollar Advances upon three Business Days’ prior notice to the
Administrative Agent.


 


2.7.2          Mandatory Prepayments.  Upon the occurrence of any Borrowing Base Deficiency, the Borrowers shall make
the mandatory prepayments of the Loans to the extent required by
Section 4.4.  Upon the occurrence
of a Capital Markets Event, the Borrowers shall make a mandatory prepayment of
the Loans in an amount sufficient to cause Available Aggregate Commitment to be
equal to or greater than $15,000,000 after giving effect to such payment.  Upon the occurrence of any sale, transfer or
other disposition of any Borrowing Base Properties, the Borrowers shall make a
mandatory prepayment of the Loans in an amount equal to the net proceeds
received from such sale, transfer or other disposition which amounts may be
reborrowed subject to and in accordance with the terms of this Agreement.


 


2.8.          Method of Selecting Interest Periods for Advances.  The Borrower Representative shall select the
Type of Advance and, in the case of each Eurodollar Advance, the Interest
Period applicable thereto from time to time. 
The Borrower Representative shall give the Administrative Agent
irrevocable notice (a “Borrowing Notice”) not later than 11:00 a.m. (Chicago,
Illinois time) on the Borrowing Date of each Floating Rate Advance and three
(3) Business Days before the Borrowing Date for each Eurodollar Advance (except
that, in respect of the initial Advance, not later than 11:00 a.m. on the
Closing Date), specifying:


 


(i)            the Borrowing Date, which shall be a Business Day,
of such Advance,


 


(ii)           the aggregate amount of such Advance,


 


23

















 


(iii)          the Type of Advance selected, and


 


(iv)          in the case of each Eurodollar Advance, the Interest
Period applicable thereto; provided, that the Borrowers shall not be
permitted to have outstanding at any one time Eurodollar Advances with more
than six (6) different Interest Periods and during the first sixty (60) days
after the Closing Date each Interest Period for any Eurodollar Advance
requested on or after the Closing Date shall be a one month Interest Period.


 


Not later than 3:00 p.m. (Chicago, Illinois time) on each Borrowing
Date, each Lender shall make available its Loan or Loans in funds immediately
available in Chicago, Illinois to the Administrative Agent at its address
specified pursuant to Article XV. 
The Administrative Agent will make the funds so received from the
Lenders available to the Borrowers at the Administrative Agent’s aforesaid
address.


 


2.9.          Continuation of Outstanding Advances.  Floating Rate Advances shall continue as
Floating Rate Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances pursuant to this Section 2.9 or are
repaid in accordance with Section 2.7. 
Each Eurodollar Advance shall continue as a Eurodollar Advance until the
end of the then applicable Interest Period therefor, at which time such
Eurodollar Advance shall be automatically converted into a Floating Rate
Advance unless (x) such Eurodollar Advance is or was repaid in accordance with
Section 2.7 or (y) the Borrower Representative shall have given the
Administrative Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period.  Subject to the terms of Section 2.6,
the Borrower Representative may elect from time to time to convert all or any
part of a Floating Rate Advance into a Eurodollar Advance.  The Borrower Representative shall give the
Administrative Agent irrevocable notice (a “Conversion/Continuation Notice”) of
each conversion of a Floating Rate Advance into a Eurodollar Advance or
continuation of a Eurodollar Advance not later than 10:00 a.m. (Chicago time)
at least three Business Days prior to the date of the requested conversion or
continuation, specifying:


 


(i)            the requested date, which shall be a Business Day,
of such conversion or continuation,


 


(ii)           the aggregate amount and Type of the Advance which
is to be converted or continued, and


 


(iii)          the amount of such Advance which is to be converted
into or continued as a Floating Rate Advance or a Eurodollar Advance, as the
case may be, and, with respect to each Eurodollar Advance, the duration of the
Interest Period applicable thereto.


 


2.10.        Changes in Interest Rate, etc.  Each Floating Rate Advance shall bear
interest on the outstanding principal balance thereof, for each day from and
including the date of such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9,
to but excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating
Rate for such day.  Changes in the rate
of interest on that portion of any Advance maintained as a Floating Rate
Advance will take effect simultaneously with each change in the Alternate Base
Rate.  Each Eurodollar Advance shall
bear interest on the outstanding principal amount thereof from and including
the first day of the Interest Period applicable thereto to (but not including)
the last day of such Interest Period at the interest rate determined by the
Administrative Agent as applicable to such Eurodollar Advance based upon the
Borrower


 


24

















 


Representative’s selections under Sections 2.8 and 2.9 and otherwise in
accordance with the terms hereof.  No
Interest Period may end after the Facility Termination Date.


 


2.11.        Rates Applicable After Default.  Notwithstanding anything to the contrary
contained in Section 2.8, 2.9 or 2.10, during the continuance of a Default
the Required Lenders may, at their option, by notice to the Borrowers (which
notice may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 10.2 requiring unanimous consent of the Lenders to
changes in interest rates), declare that no Advance may be made as, converted
into or continued as a Eurodollar Advance. 
During the continuance of a Default, the Required Lenders may, at their
option, by notice to the Borrowers (which notice may be revoked at the option
of the Required Lenders notwithstanding any provision of Section 10.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that, (i) each Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum, (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate in effect from time to
time plus 2% per annum and (iii) the LC Fee shall be increased by 2% per annum,
provided that, during the
continuance of a Default under Section 9.5 or 9.6, the interest rates set
forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in
clause (iii) above shall be applicable to all Advances without any election or
action on the part of the Administrative Agent or any Lender.


 


2.12.        Method of Payment.  All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Administrative Agent at the Administrative Agent’s address
specified pursuant to Article XV, or at any other Lending Installation of
the Administrative Agent specified in writing by the Administrative Agent to the
Borrower Representative, by noon (Chicago, Illinois time) on the date when due
and shall (except in the case of Reimbursement Obligations for which the LC
Issuer has not been fully indemnified by the Lenders, or as specifically
required hereunder) be applied ratably by the Administrative Agent among the
Lenders.  Each payment delivered to the Administrative Agent for the
account of any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds that the Administrative Agent received
at its address specified pursuant to Article XV or at any Lending
Installation specified in a notice received by the Administrative Agent from such
Lender.  The Administrative Agent is
hereby authorized to charge the account of the Borrowers maintained with Bank
One for each payment of principal, interest, Reimbursement Obligations and fees
as it becomes due hereunder. Each reference to the Administrative Agent in this
Section 2.12 shall also be deemed to refer, and shall apply equally, to
the LC Issuer, in the case of payments required to be made by the Borrowers to
the LC Issuer pursuant to Section 2.19.6.


 


2.13.        Noteless Agreement; Evidence of Indebtedness.  Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrowers to such Lender resulting from each Loan made by such Lender from
time to time, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.


 


(i)            The Administrative Agent shall also maintain
accounts in which it will record (a) the amount of each Loan made hereunder,
the Type thereof and the Interest Period with respect thereto, (b) the amount
of any principal or interest due and payable or to become due and payable from
the Borrowers to each Lender hereunder, (c) the original stated amount of each
Facility LC and the amount of LC Obligations outstanding at any time, and (d)
the amount of any sum received by the Administrative Agent hereunder from the
Borrowers and each Lender’s share thereof.


 


(ii)           The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein


 


25

















 


recorded; provided, however, that the failure of the Administrative
Agent or any Lender to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrowers to repay the Obligations in
accordance with their terms.


 


(iii)          Any Lender may request that its Loans be evidenced
by a promissory note in substantially the form of Exhibit E (a “Note”).  In such event, the Administrative Agent
shall prepare, and the Borrowers shall execute and deliver to such Lender a
Note payable to the order of such Lender. 
Thereafter, the Loans evidenced by such Note and interest thereon shall
at all times (prior to any assignment pursuant to Section 14.3) be
represented by one or more Notes payable to the order of the payee named
therein, except to the extent that any such Lender subsequently returns any
such Note for cancellation and requests that such Loans once again be evidenced
as described in paragraphs (i) and (ii) above.


 


2.14.        Telephonic Notices.  Each Borrower hereby authorizes the Lenders
and the Administrative Agent to extend, convert or continue Advances, effect
selections of Types of Advances and to transfer funds based on telephonic
notices made by any person or persons the Administrative Agent or any Lender in
good faith believes to be acting on behalf of the Borrower Representative or
the Borrowers, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically.  The
Borrower Representative agrees to deliver promptly to the Administrative Agent
a written confirmation of each telephonic notice signed by an Authorized
Officer.  If the written confirmation
differs in any material respect from the action taken by the Administrative
Agent and the Lenders, the records of the Administrative Agent and the Lenders
shall govern absent manifest error.


 


2.15.        Interest Payment Dates; Interest and
Fee Basis.  Interest
accrued on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which the Floating Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity.  Interest
accrued on that portion of the outstanding principal amount of any Floating
Rate Advance converted into a Eurodollar Advance on a day other than a Payment
Date shall be payable on the date of conversion.  Interest accrued on each Eurodollar Advance shall be payable on
the last day of its applicable Interest Period, on any date on which the
Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at
maturity.  Interest accrued on each
Eurodollar Advance having an Interest Period longer than three months shall
also be payable on the last day of each three-month interval during such
Interest Period.  Interest on all
Eurodollar Advances shall be calculated for actual days elapsed on the basis of
a 360-day year.  Interest on all Floating
Rate Advances and commitment fees shall be calculated for actual days elapsed on
the basis of a 365 or 366 day year, as applicable.  Interest shall be payable for the day an Advance is made but not
for the day of any payment on the amount paid if payment is received prior to
noon (Chicago, Illinois time) at the place of payment.  If any payment of principal of or interest
on an Advance shall become due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.


 


2.16.        Notification of Advances, Interest Rates,
Prepayments and Commitment Reductions.  Promptly after receipt thereof, the Administrative Agent will
notify each Lender of the contents of each Borrowing Notice,
Conversion/Continuation Notice and repayment notice received by it
hereunder.  Promptly after notice from
the LC Issuer, the Administrative Agent will notify each Lender of the contents
of each request for issuance of a Facility LC hereunder.  The Administrative Agent will notify each
Lender of the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.


 


26

















 


2.17.        Lending Installations.  Each Lender may book its Loans and its
participation in any LC Obligations and the LC Issuer may book the Facility LCs
at any Lending Installation selected by such Lender or the LC Issuer, as the
case may be, and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to
any such Lending Installation and the Loans, Facility LCs, participations in LC
Obligations and any Notes issued hereunder shall be deemed held by each Lender
or the LC Issuer, as the case may be, for the benefit of any such Lending
Installation.  Each Lender and the LC
Issuer may, by written notice to the Administrative Agent and the Borrowers in
accordance with Article XV, designate replacement or additional Lending
Installations through which Loans will be made by it or Facility LCs will be
issued by it and for whose account Loan payments or payments with respect to
Facility LCs are to be made.  Each
Lender may, by written notice to the Administrative Agent and the Borrower
Representative in accordance with Article XV, designate replacement or
additional Lending Installations through which Loans will be made by it and for
whose account Loan payments are to be made.


 


2.18.        Non-Receipt of Funds by the Administrative Agent.  Unless any Borrower or a Lender, as the case
may be, notifies the Administrative Agent prior to the date on which it is
scheduled to make payment to the Administrative Agent of (i) in the case of a
Lender, the proceeds of a Loan or (ii) in the case of such Borrower, a payment
of principal, interest or fees to the Administrative Agent for the account of
the Lenders, that it does not intend to make such payment, the Administrative
Agent may assume that such payment has been made.  The Administrative Agent may, but shall not be obligated to, make
the amount of such payment available to the intended recipient in reliance upon
such assumption.  If such Lender or any
Borrower, as the case may be, has not in fact made such payment to the
Administrative Agent, the recipient of such payment shall, on demand by the
Administrative Agent, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the
case of payment by any Borrower, the interest rate applicable to the relevant
Loan.


 


2.19.        Facility LCs.


 


2.19.1. 
Issuance.  The LC Issuer
hereby agrees, on the terms and conditions set forth in this Agreement, to
issue standby and commercial letters of credit (each, a “Facility LC”) and to
renew, extend, increase, decrease or otherwise modify each Facility LC
(“Modify,” and each such action a “Modification”), from time to time from and
including the date of this Agreement and prior to the Facility Termination Date
upon the request of any Borrower Representative; provided  that immediately
after each such Facility LC is issued or Modified, (i) the aggregate amount of
the outstanding LC Obligations shall not exceed $20,000,000 and (ii) the
Aggregate Outstanding Credit Exposure shall not exceed the Borrowing Base.  No Facility LC shall have an expiry date
later than the earlier of (x) the fifth Business Day prior to the Facility
Termination Date and (y) one year after its issuance (or in the case of any
renewal or extension thereof, one year after such renewal or extension).


 


2.19.2. 
Participations.  Upon the
issuance or Modification by the LC Issuer of a Facility LC in accordance with
this Section 2.19, the LC Issuer shall be deemed, without further action
by any party hereto, to have unconditionally and irrevocably sold to each
Lender, and each Lender shall be deemed, without further action by any party hereto,
to have unconditionally and irrevocably purchased from the LC Issuer, a
participation in such Facility LC (and each Modification thereof) and the
related LC Obligations in proportion to its Pro Rata Share.


 


27

















 


2.19.3. 
Notice.  Subject to
Section 2.19.1, the Borrower Representative shall give the LC Issuer
notice prior to 10:00 a.m. (Chicago, Illinois time) at least five Business Days
prior to the proposed date of issuance or Modification of each Facility LC,
specifying the Borrower requesting such Facility LC, the beneficiary, the
proposed date of issuance (or Modification) and the expiry date of such
Facility LC, and describing the proposed terms of such Facility LC and the
nature of the transactions proposed to be supported thereby.  Upon receipt of such notice, the LC Issuer
shall promptly notify the Administrative Agent, and the Administrative Agent
shall promptly notify each Lender, of the contents thereof and of the amount of
such Lender’s participation in such proposed Facility LC.  The issuance or Modification by the LC
Issuer of any Facility LC shall, in addition to the conditions precedent set
forth in Article IV (the satisfaction of which the LC Issuer shall have no
duty to ascertain), be subject to the conditions precedent that such Facility
LC shall be satisfactory to the LC Issuer and that the Borrowers shall have
executed and delivered such application agreement and/or such other instruments
and agreements relating to such Facility LC as the LC Issuer shall have
reasonably requested (each, a “Facility LC Application”).  In the event of any conflict between the
terms of this Agreement and the terms of any Facility LC Application, the terms
of this Agreement shall control.


 


2.19.4. 
LC Fees.  The Borrowers
shall pay to the Administrative Agent, for the account of the Lenders ratably
in accordance with their respective Pro Rata Shares, with respect to each
standby Facility LC, a letter of credit fee at a per annum rate equal to the
Applicable Margin for Eurodollar Loans in effect from time to time on the
average daily undrawn stated amount under such standby Facility LC, such fee to
be payable in arrears on each Payment Date for Floating Rate Loans.  In addition, with respect to each Facility
LC, the Borrowers shall also pay to the LC Issuer for its own account (x) a
one-time letter of credit fee in an amount equal to one-eighth of one percent
0.125% of the initial stated amount thereof (or, with respect to a Modification
of any such Facility LC which increases the stated amount thereof, such
increase in the stated amount), such fee to be payable on the date of such
issuance or increase (each such fee described in the preceding sentence and
this clause (x) an (“LC Fee”), and (y) documentary and processing charges in
connection with the issuance or Modification of and draws under Facility LCs in
accordance with the LC Issuer’s standard schedule for such charges as in
effect from time to time.


 


2.19.5. 
Administration; Reimbursement by Lenders.  Upon receipt from the beneficiary of any
Facility LC of any demand for payment under such Facility LC, the LC Issuer
shall notify the Administrative Agent and the Administrative Agent shall
promptly notify the Borrowers and each other Lender as to the amount to be paid
by the LC Issuer as a result of such demand and the proposed payment date (the
“LC Payment Date”).  The responsibility
of the LC Issuer to the Borrowers and each Lender shall be only to determine
that the documents (including each demand for payment) delivered under each
Facility LC in connection with such presentment shall be in conformity in all
material respects with such Facility LC. 
The LC Issuer shall endeavor to exercise the same care in the issuance
and administration of the Facility LCs as it does with respect to letters of
credit in which no participations are granted, it being understood that in the
absence of any gross negligence or willful misconduct by the LC Issuer, each
Lender shall be unconditionally and irrevocably liable without regard to the
occurrence of any Default or any condition precedent whatsoever, to reimburse
the LC Issuer on demand for (i) such Lender’s Pro Rata Share of the amount of
each payment made by the LC Issuer under each Facility LC to the extent such
amount is not reimbursed by the Borrowers pursuant to Section 2.19.6
below, plus (ii) interest on the foregoing amount to be reimbursed by such
Lender, for each day from the date of the LC Issuer’s demand for such
reimbursement (or, if such demand is made after 11:00 a.m.


 


28

















 


(Chicago, Illinois time) on such date, from the next succeeding
Business Day) to the date on which such Lender pays the amount to be reimbursed
by it, at a rate of interest per annum equal to the Federal Funds Effective
Rate for the first three days and, thereafter, at a rate of interest equal to
the rate applicable to Floating Rate Advances.


 


2.19.6. 
Reimbursement by Borrower. 
The Borrowers shall be irrevocably and unconditionally obligated to
reimburse the LC Issuer on or before the applicable LC Payment Date for any
amounts to be paid by the LC Issuer upon any drawing under any Facility LC,
without presentment, demand, protest or other formalities of any kind; provided
that none of the Borrowers nor any Lender shall hereby be precluded from
asserting any claim for direct (but not consequential) damages suffered by any
Borrower or such Lender to the extent, but only to the extent, caused by (i)
the willful misconduct or gross negligence of the LC Issuer in determining
whether a request presented under any Facility LC issued by it complied with
the terms of such Facility LC or (ii) the LC Issuer’s failure to pay under any
Facility LC issued by it after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC.  All such amounts paid by the LC Issuer and
remaining unpaid by the Borrowers shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to (x) the rate applicable to Floating
Rate Advances for such day if such day falls on or before the applicable LC
Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate
Advances for such day if such day falls after such LC Payment Date.  The LC Issuer will pay to each Lender
ratably in accordance with its Pro Rata Share all amounts received by it from
any Borrower for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer,
but only to the extent such Lender has made payment to the LC Issuer in respect
of such Facility LC pursuant to Section 2.19.5.  Subject to the terms and conditions of this Agreement (including
without limitation the submission of a Borrowing Notice in compliance with
Section 2.8 and the satisfaction of the applicable conditions precedent
set forth in Article V), any Borrower may request an Advance hereunder for
the purpose of satisfying any Reimbursement Obligation.


 


2.19.7. 
Obligations Absolute. 
Each Borrower’s obligations under this Section 2.19 shall be
absolute, unconditional, joint and several under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which any
Borrower may have or have had against the LC Issuer, any Lender or any
beneficiary of a Facility LC.  Each
Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer
and the Lenders shall not be responsible for, and each Borrower’s Reimbursement
Obligation in respect of any Facility LC shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, or any dispute between or among any
Borrower, any of their Affiliates, the beneficiary of any Facility LC or any
financing institution or other party to whom any Facility LC may be transferred
or any claims or defenses whatsoever of any Borrower or of any of its
Affiliates against the beneficiary of any Facility LC or any such
transferee.  The LC Issuer shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Facility LC.  Each Borrower agrees
that any action taken or omitted by the LC Issuer or any Lender under or in
connection with each Facility LC and the related drafts and documents, if done
without gross negligence or willful misconduct, shall be binding upon each
Borrower and shall not put the LC Issuer or any Lender under any liability to
any Borrower.  Nothing in this
Section 2.19.7 is intended to limit the right of any Borrower to make a
claim against the LC Issuer for damages as contemplated by the proviso to the
first sentence of Section 2.19.6.


 


29

















 


2.19.8. 
Actions of LC Issuer.  The
LC Issuer shall be entitled to rely, and shall be fully protected in relying,
upon any Facility LC, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document 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, independent accountants and other
experts selected by the LC Issuer.  The
LC Issuer shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Required Lenders as it reasonably deems appropriate or it
shall first be indemnified to its reasonable 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. Notwithstanding any other
provision of this Section 2.19, the LC Issuer shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and any future holders of a participation in any Facility LC.


 


2.19.9. 
Indemnification.  Each
Borrower hereby, jointly and severally, agrees to indemnify and hold harmless
each Lender, the LC Issuer and the Administrative Agent, and their respective
directors, officers, agents and employees from and against any and all claims
and damages, losses, liabilities, costs or expenses which such Lender, the LC
Issuer or the Administrative Agent may incur (or which may be claimed against
such Lender, the LC Issuer or the Administrative Agent by any Person
whatsoever) by reason of or in connection with the issuance, execution and
delivery or transfer of or payment or failure to pay under any Facility LC or
any actual or proposed use of any Facility LC, including, without limitation,
any claims, damages, losses, liabilities, costs or expenses which the LC Issuer
may incur by reason of or in connection with (i) the failure of any other
Lender to fulfill or comply with its obligations to the LC Issuer hereunder
(but nothing herein contained shall affect any rights any Borrower may have
against any defaulting Lender) or (ii) by reason of or on account of the
LC Issuer issuing any Facility LC which specifies that the term “Beneficiary”
included therein includes any successor by operation of law of the named
Beneficiary, but which Facility LC does not require that any drawing by any
such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that no Borrower shall be required to indemnify any
Lender, the LC Issuer or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the LC Issuer in
determining whether a request presented under any Facility LC complied with the
terms of such Facility LC or (y) the LC Issuer’s failure to pay under any
Facility LC after the presentation to it of a request strictly complying with
the terms and conditions of such Facility LC. Nothing in this
Section 2.19.9 is intended to limit the obligations of any Borrower under
any other provision of this Agreement.


 


2.19.10. 
Lenders’ Indemnification. 
Each Lender shall, ratably in accordance with its Pro Rata Share,
indemnify the LC Issuer, its Affiliates and their respective directors,
officers, agents and employees (to the extent not reimbursed by the Borrowers)
against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitees’ gross negligence or willful misconduct or the LC Issuer’s
failure to pay under any Facility LC after the presentation to it of a request
strictly complying with the terms and conditions of the Facility LC) that such
indemnitees may suffer or


 


30

















 


incur in connection with this Section 2.19 or any action taken or
omitted by such indemnitees hereunder.


 


2.19.11. 
Facility LC Collateral Account. 
Each Borrower agrees that it will, upon the request of the
Administrative Agent or the Required Lenders at any time that a Default or
Unmatured Default has occurred and is continuing and until the final expiration
date of any Facility LC and thereafter as long as any amount is payable to the
LC Issuer or the Lenders in respect of any Facility LC, maintain a special
collateral account pursuant to arrangements satisfactory to the Administrative
Agent (the “Facility LC Collateral Account”) at the Administrative Agent’s
office at the address specified pursuant to Article XV, in the name of
such Borrower but under the sole dominion and control of the Administrative
Agent, for the benefit of the Lenders and in which such Borrower shall have no
interest other than as set forth in Section 10.1.  Each Borrower hereby pledges, assigns and grants
to the Administrative Agent, on behalf of and for the ratable benefit of the
Lenders and the LC Issuer, a security interest in all of the Borrower’s right,
title and interest in and to all funds which may from time to time be on
deposit in the Facility LC Collateral Account to secure the prompt and complete
payment and performance of the Obligations. 
The Administrative Agent will invest any funds on deposit from time to
time in the Facility LC Collateral Account in certificates of deposit of Bank
One having a maturity not exceeding 30 days. 
Nothing in this Section 2.19.11 shall either obligate the
Administrative Agent to require the Borrower to deposit any funds in the
Facility LC Collateral Account or limit the right of the Administrative Agent
to release any funds held in the Facility LC Collateral Account in each case
other than as required by Section 10.1.


 


2.19.12. 
Rights as a Lender.  In
its capacity as a Lender, the LC Issuer shall have the same rights and
obligations as any other Lender.


 


2.20.        Borrower Representative.  Each Borrower hereby appoints the Borrower
Representative as its representative, hereunder, for all purposes, including,
for the purpose of, requesting Advances and receiving account statements and
other notices and communications to the Borrowers (or any of them) from any
Agent or any Lender.  Each Agent and the
Lenders may rely, and shall be fully protected in relying, on any request for
borrowing, disbursement instruction, report, information or any other notice or
communication made or given by such Person, whether in its own name, on behalf
of any other Borrower or on behalf of “the Borrowers,” and no Agent nor any
Lender shall have any obligation to make any inquiry or request any
confirmation from or on behalf of any other Borrower as to the binding effect
on it of any such request, instruction, report, information, notice or
communication, nor shall the joint and several character of the Borrowers’
liability for the Obligations be affected. 
Each Agent and each Lender intend to maintain a single loan account in
the name of “Clayton Williams Energy, Inc.” hereunder and each Borrower
expressly agrees to such arrangement and confirms that such arrangement shall
have no effect on the joint and several character of its liability for the
Obligations.


 


2.21.        Joint and Several Liability.  The Obligations shall constitute one joint and
several direct and general obligation of the Borrowers.  Notwithstanding anything to the contrary
contained herein, each of the Borrowers shall be jointly and severally, with
each other Borrower, directly and unconditionally liable to the Administrative
Agent and the Lenders for all Obligations and shall have the obligations of
co-maker with respect to the Loans, the Notes, and the other Obligations, it
being agreed that the advances to each Borrower inure to the benefit of all
Borrowers, and that the Administrative Agent and the Lenders are relying on
such joint and several liability of the Borrowers as co-makers in extending the
Loans hereunder.


 


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2.22.        Replacement of Lender.  In the event that (i) any Borrower is
required pursuant to Section 3.1, 3.2 or 3.5 to make any additional
payment to any Lender or if any Lender’s obligation to make or continue, or to
convert Floating Rate Advances into, Eurodollar Advances shall be suspended
pursuant to Section 3.3 (any Lender so affected an “Affected Lender”), or
(ii) in connection with any proposed amendment, modification, termination,
waiver or consent with respect to any of the provisions of this Agreement or
any other Loan Document as contemplated by Section 10.2, the consent of
Required Lenders shall have been obtained but the consent of one or more of
such other Lenders (each a “Non-Consenting Lender”) whose consent is required
has not been obtained; then, the Borrowers may elect to replace such Affected
Lender or Non-Consenting Lender (a “Terminated Lender”) as a Lender party to
this Agreement, provided that,
with respect to the replacement of an Affected Lender, no Default or Unmatured
Default shall have occurred and be continuing at the time of such replacement,
and provided further that,
concurrently with the replacement of any Terminated Lender, (x) another bank or
other entity which is reasonably satisfactory to the Administrative Agent shall
agree, as of such date, to purchase for cash the Advances and other Obligations
due to the Terminated Lender pursuant to an assignment substantially in the
form of Exhibit C and to become a Lender for all purposes under this Agreement
and to assume all obligations of the Terminated Lender to be terminated as of
such date and to comply with the requirements of Section 14.3 applicable
to assignments, and (y) the Borrowers shall pay to such Terminated Lender in
same day funds on the day of such replacement (A) all amounts that are due to
such Terminated Lender pursuant to Sections 3.1, 3.2 and 3.5, and (B) an
amount, if any, equal to the payment which would have been due to such Lender
on the day of such replacement under Section 3.4 had the Loans of such Terminated
Lender been prepaid on such date rather than sold to the replacement
Lender.  The Lenders agree that a
Terminated Lender will not be entitled to receive liquidated damages pursuant
to Section 2.7 as a result of its assignment under this Section 2.22.


 


2.23.        Limitation of Interest.  The Borrowers, the Administrative Agent and the
Lenders intend to strictly comply with all applicable laws, including
applicable usury laws.  Accordingly, the
provisions of this Section 2.23 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section 2.23, even if such provision declares that
it controls.  As used in this
Section 2.23, the term “interest” includes the aggregate of all charges,
fees, benefits or other compensation which constitute interest under applicable
law, provided that, to the
maximum extent permitted by applicable law, (a) any non-principal payment shall
be characterized as an expense or as compensation for something other than the
use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations.  In no event shall
any Borrower or any other Person be obligated to pay, or any Lender have any
right or privilege to reserve, receive or retain, (a) any interest in excess of
the maximum amount of nonusurious interest permitted under the laws of the State
of Texas or the applicable laws (if any) of the United States or of any other
applicable state, or (b) total interest in excess of the amount which such
Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Obligations
at the Highest Lawful Rate.  On each
day, if any, that the interest rate (the “Stated Rate”) called for under this
Agreement or any other Loan Document exceeds the Highest Lawful Rate, the rate
at which interest shall accrue shall automatically be fixed by operation of
this sentence at the Highest Lawful Rate for that day, and shall remain fixed
at the Highest Lawful Rate for each day thereafter until the total amount of
interest accrued equals the total amount of interest which would have accrued
if there were no such ceiling rate as is imposed by this sentence.  Thereafter, interest shall accrue at the
Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful
Rate when the provisions of the immediately preceding sentence shall again
automatically operate to limit the interest accrual rate.  The daily interest rates to be used in
calculating interest at the Highest Lawful Rate shall be determined by dividing
the applicable Highest Lawful Rate per annum by the number of days in the
calendar year for


 


32

















 


which such calculation is being made. 
None of the terms and provisions contained in this Agreement or in any
other Loan Document which directly or indirectly relate to interest shall ever
be construed without reference to this Section 2.23, or be construed to
create a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate.  If the term of any Obligation is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or
by reason of any required or permitted prepayment, and if for that (or any
other) reason any Lender at any time, including but not limited to, the stated
maturity, is owed or received (and/or has received) interest in excess of
interest calculated at the Highest Lawful Rate, then and in any such event all
of any such excess interest shall be canceled automatically as of the date of
such acceleration, prepayment or other event which produces the excess, and, if
such excess interest has been paid to such Lender, it shall be credited pro tanto
against the then-outstanding principal balance of the Borrowers’ obligations to
such Lender, effective as of the date or dates when the event occurs which
causes it to be excess interest, until such excess is exhausted or all of such
principal has been fully paid and satisfied, whichever occurs first, and any
remaining balance of such excess shall be promptly refunded to its payor.  Chapter 346 of the Texas Finance Code (which
regulates certain revolving credit accounts (formerly Tex. Rev. Civ. Stat. Ann.
Art. 5069, Ch. 15)) shall not apply to this Agreement or to any Loan, nor shall
this Agreement or any Loan be governed by or be subject to the provisions of
such Chapter 346 in any manner whatsoever.


 


2.24.        Subordination
of Other Obligations of the Credit Parties.  Any Indebtedness of any Credit Party now or hereafter held by any
other Credit Party is hereby subordinated in right of payment to the prior
payment in full in cash of the Obligations, provided prior to a Default, each
Credit Party holding such Indebtedness may receive ordinary course or regularly
scheduled payments of such Indebtedness. 
Any such Indebtedness of any Credit Party to any other Credit Party
collected or received by such Credit Party after a Default has occurred and is
continuing shall be held in trust for the Lenders and shall forthwith be paid
over to the Administrative Agent for the benefit of the Lenders to be credited
and applied against the Obligations but without affecting, impairing or
limiting in any manner the liability of any Credit Party under any other
provision of this Agreement or any Guaranty.


 


ARTICLE III


 


YIELD
PROTECTION; TAXES


 


3.1.          Yield Protection.  If, on or after the date of this Agreement,
the adoption of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change in the interpretation or administration thereof by any
governmental or quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender or applicable Lending Installation or the LC Issuer with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:


 


(i)            subjects any Lender or any applicable Lending
Installation or the LC Issuer to any Taxes, or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Lender or the LC
Issuer in respect of its Loans, Facility LCs or participations therein, or


 


(ii)           imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Lender or any applicable Lending Installation or the LC Issuer (other than
reserves and assessments taken into account in determining the interest rate
applicable to Eurodollar Advances), or


 


33

















 


(iii)          imposes any other condition the result of which is
to increase the cost to any Lender or any applicable Lending Installation or
the LC Issuer of making, funding or maintaining its Eurodollar Loans or of
issuing or participating in Facility LCs, or reduces any amount receivable by
any Lender or any applicable Lending Installation or the LC Issuer in
connection with its Eurodollar Loans, Facility LCs or participations therein,
or requires any Lender or any applicable Lending Installation or the LC Issuer
to make any payment calculated by reference to the amount of Eurodollar Loans,
Facility LCs or participations therein, held or interest or LC Fees received by
it, by an amount deemed material by such Lender or the LC Issuer as the case
may be,


 


and the result of any of the foregoing is to increase the cost to such
Lender or applicable Lending Installation or the LC Issuer, as the case may be,
of making or maintaining its Eurodollar Loans or Commitment or of issuing or
participating in Facility LCs or to reduce the return received by such Lender
or applicable Lending Installation or the LC Issuer, as the case may be, in
connection with such Eurodollar Loans, Commitment,  Facility LCs or participations therein, then, within 15 days of
demand by such Lender  or the LC Issuer, as the case may be, the
Borrowers shall pay such Lender or the LC Issuer, as the case may be,  such
additional amount or amounts as will compensate such Lender or the LC Issuer,
as the case may be,  for such increased cost or reduction in
amount received.


 


3.2.          Changes in Capital Adequacy Regulations.  If a Lender or the LC Issuer determines the
amount of capital required or expected to be maintained by such Lender or the
LC Issuer, any Lending Installation of such Lender or the LC Issuer, or any
corporation controlling such Lender or the LC Issuer is increased as a result
of a Change, then, within 15 days of demand by such Lender or the LC Issuer,
the Borrowers shall pay such Lender or the LC Issuer the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender or the LC Issuer determines is attributable
to this Agreement, its Outstanding Credit Exposure or its Commitment to make
Loans and issue or participate in Facility LCs, as the case may be, hereunder
(after taking into account such Lender’s or the LC Issuer’s policies as to
capital adequacy).  “Change” means (i)
any change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or the LC Issuer or any Lending Installation or any
corporation controlling any Lender or the LC Issuer.  “Risk-Based Capital Guidelines” means (i) the risk-based capital
guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing
the July 1988 report of the Basle Committee on Banking Regulation and
Supervisory Practices Entitled “International Convergence of Capital
Measurements and Capital Standards,” including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.


 


3.3.          Availability of Types of Advances.  If any Lender determines that maintenance of
its Eurodollar Loans at a suitable Lending Installation would violate any
applicable law, rule, regulation, or directive, whether or not having the force
of law, or if the Required Lenders determine that (i) deposits of a type and
maturity appropriate to match fund Eurodollar Advances are not available or
(ii) the interest rate applicable to Eurodollar Advances does not accurately
reflect the cost of making or maintaining Eurodollar Advances, then the
Administrative Agent shall suspend the availability of Eurodollar Advances and
require any affected Eurodollar Advances to be repaid or converted to Floating
Rate Advances, subject to the payment of any funding indemnification amounts
required by Section 3.4.


 


34

















 


3.4.          Funding Indemnification.  If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower Representative for
any reason other than default by the Lenders, the Borrowers will indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain such Eurodollar Advance.


 


3.5.          Taxes.  (i) All payments by the Borrowers to or for the account of
any Lender, the LC Issuer or the Administrative Agent hereunder or under any
Note or Facility LC Application shall be made free and clear of and without
deduction for any and all Taxes.  If any
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender, the LC Issuer or the Administrative Agent,
(a) 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 3.5) such Lender, the LC Issuer or the Administrative
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (b) the Borrowers shall make such
deductions, (c) the Borrowers shall pay the full amount deducted to the
relevant authority in accordance with applicable law and (d) the Borrowers
shall furnish to the Administrative Agent the original copy of a receipt
evidencing payment thereof within 30 days after such payment is made.


 


(i)            In addition, the Borrowers hereby agree to pay any
present or future stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under any Note or Facility LC Application or from the execution or delivery of,
or otherwise with respect to, this Agreement or any Note or Facility LC
Application (“Other Taxes”).


 


(ii)           The Borrowers hereby agree to indemnify the Administrative
Agent, the LC Issuer and each Lender for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed on
amounts payable under this Section 3.5) paid by the Administrative Agent,
the LC Issuer or such Lender as a result of its Commitment, any Loans made by
it hereunder, or otherwise in connection with its participation in this
Agreement and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. 
Payments due under this indemnification shall be made within 30 days of
the date the Administrative Agent, the LC Issuer or such Lender makes demand
therefor pursuant to Section 3.6.


 


(iii)          Each Lender that is not incorporated under the laws
of the United States of America or a state thereof (each a “Non-U.S. Lender”)
agrees that it will, not more than ten (10) Business Days after the date of
this Agreement, (i) deliver to the Administrative Agent two duly completed
copies of United States Internal Revenue Service Form W-8BEN or W-8ECI,
certifying in either case that such Lender is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes, and (ii) deliver to the Administrative Agent a United
States Internal Revenue Form W-8 or W-9, as the case may be, and certify that
it is entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower Representative and the Administrative Agent (x)
renewals or additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, such additional forms or amendments thereto as may be
reasonably requested by the Borrowers or the Administrative Agent.  All forms or amendments described in the
preceding sentence shall certify that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of


 


35

















 


any United States federal income taxes, unless an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form or amendment with respect to it
and such Lender advises the Borrower Representative and the Administrative
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.


 


(iv)          For any period during which a Non-U.S. Lender has
failed to provide the Borrower Representative with an appropriate form pursuant
to clause (iv), above (unless such failure is due to a change in treaty, law or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, occurring subsequent to the date on which a form
originally was required to be provided), such Non-U.S. Lender shall not be
entitled to indemnification under this Section 3.5 with respect to Taxes
imposed by the United States; provided that, should a Non-U.S. Lender
which is otherwise exempt from or subject to a reduced rate of withholding tax
become subject to Taxes because of its failure to deliver a form required under
clause (iv), above, the Borrowers shall take such steps as such Non-U.S. Lender
shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.


 


(v)           Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this Agreement or
any Note pursuant to the law of any relevant jurisdiction or any treaty shall
deliver to the Borrower Representative (with a copy to the Administrative
Agent), at the time or times prescribed by applicable law, such properly
completed and executed documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced rate.


 


(vi)          If the U.S. Internal Revenue Service or any other
governmental authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or properly completed, because
such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered its exemption from withholding ineffective, or for
any other reason), such Lender shall indemnify the Administrative Agent fully
for all amounts paid, directly or indirectly, by the Administrative Agent as
tax, withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the
Administrative Agent under this subsection, together with all costs and
expenses related thereto (including attorneys fees and time charges of
attorneys for the Administrative Agent, which attorneys may be employees of the
Administrative Agent).  The obligations
of the Lenders under this Section 3.5(vii) shall survive the payment of
the Obligations and termination of this Agreement.


 


3.6.          Lender Statements; Survival of
Indemnity.  To the
extent reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Loans to reduce any liability of the Borrowers
to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not,
in the judgment of such Lender, disadvantageous to such Lender.  Each Lender shall deliver a written
statement of such Lender to the Borrower Representative (with a copy to the
Administrative Agent) as to the amount due, if any, under Section 3.1,
3.2, or 3.4.  Such written statement
shall set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding on the
Borrowers in the absence of manifest error. 
Determination of amounts payable under such Sections in connection with
a Eurodollar Loan shall be calculated as though each Lender funded its
Eurodollar Loan through the


 


36

















 


purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not.  Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by the
Borrower Representative of such written statement.  The obligations of the Borrowers under Sections 3.1, 3.2, and 3.4
shall survive payment of the Obligations and termination of this Agreement.


 


ARTICLE IV


 


BORROWING
BASE


 


4.1.          Borrowing Base.  The aggregate amount of credit available to
the Borrowers under this Agreement shall be limited by a Borrowing Base (herein
so called) which shall be determined by the Lenders at the times and in
accordance with the standards and procedures set forth in this
Article IV.  The Initial Borrowing
Base shall be $180,000,000.


 


4.2.          Redeterminations of the Borrowing Base.  The Lenders shall redetermine the Borrowing
Base semi-annually on May 1 and November 1 of each year beginning
November 1, 2004 or as Special Redeterminations.  By April 1 each year, beginning April 1, 2005, the
Borrowers shall furnish to the Lenders a Reserve Report in form and substance
reasonably satisfactory to the Administrative Agent prepared by an Approved
Petroleum Engineer, said Reserve Report to utilize economic and pricing
parameters used by the Administrative Agent as established from time to time,
together with such other information, reports and data concerning the value of
the Borrowing Base Properties as the Administrative Agent shall deem reasonably
necessary to determine the value of such Borrowing Base Properties.  By October 1 of each year beginning
October 1, 2004, or within thirty (30) days after (i) the failure of
a Capital Markets Event to occur within ninety (90) days after the Closing Date
and the receipt by the Borrowers of notice from the Administrative Agent or the
Required Lenders that a Special Redetermination is required, (ii) the
receipt by the Borrowers of notice from the Administrative Agent that the
Lenders require a Special Redetermination, or (iii) the Borrowers give
notice to the Administrative Agent of their desire to have a Special
Redetermination performed, the Borrowers shall furnish to the Lenders a Reserve
Report in form and substance reasonably satisfactory to the Administrative
Agent, said Reserve Report to utilize economic and pricing parameters used by
the Administrative Agent as established from to time, together with such other
information, reports and data concerning the value of such Borrowing Base
Properties as the Administrative Agent shall deem reasonably necessary to
determine the value of such Borrowing Base Properties.  The Administrative Agent shall by written
notice to the Borrowers no later than May 1 and November 1 of each
year, or within a reasonable time thereafter (herein called the “Determination
Date”), notify the Borrowers of the designation by the Lenders of the new
Borrowing Base and for the period beginning on such Determination Date and
continuing until, but not including, the next Determination Date.  If a Special Redetermination is to be made
by the Lenders, the Administrative Agent shall notify the Borrowers within a
reasonable time after receipt of all requested information of the new Borrowing
Base, and such new Borrowing Base shall continue until the next Determination
Date.  If the Borrowers do not furnish
all such information, reports and data by any date specified in this
Section 4.2, unless such failure is not the fault of the Borrowers, the
Lenders may nonetheless designate the Borrowing Base at any amounts which the
Lenders in their reasonable discretion determine and may redesignate the
Borrowing Base from time to time thereafter until the Lenders receive all such
information, reports and data, whereupon the Lenders shall designate a new
Borrowing Base, as described above.  The
procedure for determining the Borrowing Base at each redetermination shall be
that the Borrowers shall submit to the Administrative Agent and the Lenders, in
writing, a proposed amount as the Borrowing Base as of the next redetermination
date.  Increases in the Borrowing Base
will require approval of all Lenders, but other changes in the Borrowing


 


37

















 


Base will be subject to the approval of Required Lenders.  If any redetermined Borrowing Base is not
approved by Required Lenders within twenty (20) days after the submission to
the Administrative Agent and the Lenders by the Borrowers of the proposed
amount, the Administrative Agent shall notify each of the Lenders that the
proposed Borrowing Base has not been approved and each Lender will submit
within ten (10) days thereafter its proposed Borrowing Base.  The redetermined Borrowing Base shall be
then determined based upon the weighted arithmetic average of the proposed
amounts submitted by each Lender, said proposals to be weighted according to
each Lender’s Pro Rata Share.  Each
Lender shall determine the amount of the Borrowing Base based upon the loan
collateral value which such Lender in its sole discretion (using such
methodology, assumptions and discount rates as such Lender customarily uses in
assigning collateral value to Borrowing Base Properties, oil and gas gathering
systems, gas processing and plant operations) assigns to such Borrowing Base
Properties at the time in question and based upon such other credit factors
consistently applied (including, without limitation, the assets, liabilities,
cash flow, business, properties, prospects, management and ownership of CWEI
and the Subsidiaries) as such Lender customarily considers in evaluating
similar oil and gas credits.  It is
expressly understood that the Lenders have no obligation to designate the
Borrowing Base at any particular amounts, except in the exercise of their
discretion, whether in relation to the Commitments or otherwise; provided,
that the Lenders shall not designate a Borrowing Base in an amount
in excess of the Aggregate Commitment.


 


4.3.          Voluntary Decreases in Borrowing Base.  Within ten (10) Business Days after
notification to the Borrowers of a Borrowing Base redetermination pursuant to
the provisions of this Article IV, the Borrower Representative may by
written notice to the Administrative Agent specify a lesser amount as the
Borrowing Base in which event the Borrowing Base shall be such lesser amount
until the next Borrowing Base redetermination.


 


4.4.          Borrowing Base Deficiency.  In the event a Borrowing Base Deficiency
exists, the Borrowers shall, within thirty (30) days after notification from
the Administrative Agent elect to either (A) by instruments satisfactory in
form and substance to the Lenders, provide the Lenders with additional
collateral with value and quality satisfactory to the Lenders in their sole
discretion to eliminate such Borrowing Base Deficiency, or (B) prepay, without
premium or penalty, the principal amount of the Loans in an amount sufficient
to eliminate such Borrowing Base Deficiency, or (C) prepay, without premium or
penalty, an amount sufficient to eliminate such Borrowing Base Deficiency in
six (6) equal monthly installments due and payable on the last Business Day of
each of the next six (6) consecutive months; provided
that the total amount of such Borrowing Base Deficiency must be
repaid before the next Scheduled Determination


 


4.5.          Monthly Reduction.  In connection with each Redetermination of
the Borrowing Base pursuant to Section 4.2, the Lenders shall determine
the amount, if any, of the monthly reduction in the Borrowing Base required
based on the same information reviewed and in accordance with the same
procedure applied with respect to such Redetermination.  On the last day of each month after the
Closing Date, the Borrowing Base shall be reduced by the Monthly Reduction then
in effect (the “Monthly Reduction”). The initial Monthly Reduction shall be
$0.00.


 


ARTICLE V


 


CONDITIONS
PRECEDENT


 


5.1.          Initial Credit Extension.  The Lenders shall not be required to make
the initial Credit Extension hereunder unless the Borrowers have satisfied each
of the following conditions:


 


38

















 


(a)           Closing Deliveries.  The
Borrowers shall have furnished to the Administrative Agent with sufficient copies for the Lenders:


 


(i)           Copies of the Organizational Documents of each
Credit Party, together with all amendments, and a certificate of good standing,
each certified by the appropriate governmental officer in its jurisdiction of
incorporation as well as any other information required by Section 326 of
the USA PATRIOT ACT or necessary for the Administrative Agent or any Lender to
verify the identity of each Credit Party as required by Section 326 of the
USA PATRIOT ACT.


 


(ii)           Copies, certified by the Secretary or other
Authorized Officer of each Credit Party, of its Organizational Documents and,
if applicable, its Board of Directors’ resolutions and of resolutions or
actions of any other body authorizing the execution of the Loan Documents to
which such Credit Party is a party.


 


(iii)          An incumbency certificate, executed by the Secretary
or other Authorized Officer of each Credit Party, which shall identify by name
and title and bear the signatures of the Authorized Officers and any other
officers of each Credit Party authorized to sign the Loan Documents to which
such Credit Party is a party, upon which certificate the Administrative Agent
and the Lenders shall be entitled to rely until informed of any change in
writing by such Credit Party.


 


(iv)          A certificate, signed by the Chief Financial Officer
of CWEI stating that on the initial Credit Extension Date, no Default or
Unmatured Default has occurred and is continuing, and after giving effect to
the Closing Transactions and the initial Credit Extensions, (1) Available
Aggregate Commitment is not less than $5,000,000 and (2) CWEI is in compliance
on a pro forma basis, with the financial covenants set forth in
Section 8.22 and accompanied by reasonably detailed calculations
demonstrating compliance with the foregoing clauses (1) and (2).


 


(v)           A written opinion of the Borrowers’ counsel,
addressed to the Administrative Agent and Lenders in substantially the form of
Exhibit A-1, and written opinions of the Collateral Agent’s local counsel,
addressed to the Collateral Agent in substantially the form of Exhibit A-2.


 


(vi)          Any Notes requested by a Lender pursuant to
Section 2.13 payable to the order of each such requesting Lender.


 


(vii)         The Mortgages to be executed on the Closing Date
pursuant to Section 7.1(a) of this Agreement, duly executed and delivered
by each Credit Party or party thereto, together with such other assignments,
conveyances, amendments, agreements and other writings, including, without
limitation, UCC-1 financing statements, tax affidavits and applicable
department of revenue documentation, creating first and prior Liens in not less
than eighty percent (80%) of the Adjusted Engineered Value of the Borrowing
Base Properties.


 


(viii)        If the initial Credit Extension includes the
issuance of a Facility LC, a properly completed Facility LC Application.


 


(ix)           The SWR Hedge Assumption Agreement pursuant to which
the Administrative Agent shall have assumed the obligations of SWR with respect
to the SWR Rate Management Transactions.


 


39

















 


(x)            The Pledge Agreements duly executed and delivered by
each Credit Party that is, or upon the consummation of the Closing Transaction
will become, the owner of Capital Stock of any Material Domestic Subsidiary,
partnership interests of any Related Partnership (to the extent permitted under
the partnership agreement of such Related Partnership) or any intercompany
Indebtedness permitted under Section 8.11(v), together with (a) all
certificates (or other evidence acceptable to the Administrative Agent)
evidencing one hundred percent (100%) of the issued and outstanding Capital
Stock of each Material Domestic Subsidiary of CWEI of every class, which
certificates shall be duly endorsed or accompanied by appropriate stock powers
(as applicable) executed in blank, (b) the originals of all
instruments, if any, evidencing intercompany Indebtedness permitted under
Section 8.11(v) which instruments shall be duly endorsed in blank, and (c) such
other agreements and writings, including, without limitation, UCC-1 financing
statements, as reasonably requested by the Administrative Agent.


 


(xi)           A Guaranty duly executed and delivered by Warrior,
CWEI Acquisitions, Romere and Romere Corp.


 


(xii)          Such financing statements
(including, without limitation, the financing statements referenced in subclauses (vii),
and (ix) above) as Administrative Agent shall specify to fully
evidence and perfect all Liens contemplated by the Loan Documents, all of which
shall be filed of record in such jurisdictions as Agent shall require in its
sole discretion.


 


(xiii)         Written money transfer instructions, in
substantially the form of Exhibit D, addressed to the Administrative Agent
and signed by an Authorized Officer of the Borrower Representative, together
with such other related money transfer authorizations as the Administrative
Agent may have reasonably requested.


 


(xiv)        A copy of each Closing Document and all other
material documents, instruments and agreements executed and/or delivered by any
Credit Party in connection with the Closing Transactions, together with a
certificate from an Authorized Officer of each Borrower certifying that such
copies are accurate and complete and represent the complete understanding and
agreement of the parties with respect to the subject matter thereof.


 


(xv)         The insurance certificate described in
Section 6.20.


 


(xvi)        Such other documents as any Lender or its counsel
may have reasonably requested.


 


(b)           Title
Review.  The Administrative Agent or
its counsel shall have completed a review of title to the Borrowing Base
Properties, and such review shall not have revealed any condition or
circumstance which would reflect that the representations and warranties
contained in Section 6.14 hereof are inaccurate in any material respect
and shall be sufficient to verify and confirm the title of the Credit Parties
to not less than seventy percent (70%) of the Adjusted Engineered Value of the
Borrowing Base Properties, taken as a whole.


 


(c)           Closing Transactions.  Subject only to the disbursement and
application of the initial Advance or other Credit Extension, the Closing
Transactions shall have occurred and been consummated on the terms set forth in
the Closing Documents (or the Administrative Agent shall be satisfied that such
transactions will occur and be consummated simultaneously with the Closing
Date).


 


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(d)           No Unmatured Default or
Default; Legal Matters.  No
Unmatured Default or Default shall have occurred and be continuing or would
result from the consummation of the Closing Transactions and all legal matters
incident to the making of the initial Advance shall be satisfactory to the
Lenders and their counsel.


 


(e)           No Litigation.  No litigation, arbitration or similar
proceeding shall be pending or, to the knowledge of any Borrower, threatened
which calls into question the validity or enforceability of this Agreement, the
other Loan Documents, the Closing Transactions or the transactions contemplated
hereby or thereby.


 


(f)            Closing and Other Fees.  The Borrowers shall have paid (1) to
the Administrative Agent for the ratable benefit of each Lender, and shall have
paid to the Administrative Agent and its Affiliates (for their own account),
the fees to be paid on the Closing Date pursuant to Section 2.2, and
(2) all fees, expenses and disbursements of counsel for the Administrative
Agent to the extent invoiced on or prior to the Closing Date, together with
such additional amounts as shall constitute such counsel’s reasonable estimate
of fees, expenses and disbursements incurred by such counsel through the
Closing Date; provided, that, such estimate shall not thereafter
preclude further settling of accounts between the Borrowers and the
Administrative Agent.


 


(g)           SWR Audited Financials.  CWEI shall have delivered to the
Administrative Agent copies of the audited financial statements of SWR for the
twelve month period ending December 31, 2003 and the results of which are
not materially different from the unaudited financial statements for such
period previously provided to the Arranger; provided that the Arranger and the
Lenders acknowledge that the audited financials will include a going concern
qualification and reflect that all Indebtedness evidenced by the Existing
Credit Agreements are current Indebtedness.


 


(h)           Other Matters.  All matters related to this Agreement, the
other Loan Documents, the Credit Parties, the Closing Documents and the Closing
Transactions shall be reasonably acceptable to each Lender, and each Credit
Party shall have delivered to the Administrative Agent and each Lender such
evidence as they shall request to substantiate any matters related to this
Agreement, the other Loan Documents, the Credit Parties, the Closing Documents
and the Closing Transactions as the Administrative Agent or any Lender shall
reasonably request.


 


5.2.          Each Credit Extension.  The Lenders shall not be required to make
any Credit Extension unless on the applicable Credit Extension Date:


 


(i)            There exists no Default or Unmatured Default.


 


(ii)           The representations and warranties contained in
Article VI are true and correct as of such Credit Extension Date except to
the extent any such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall have been
true and correct on and as of such earlier date.


 


(iii)          All legal matters incident to the making of such
Credit Extension shall be satisfactory to the Administrative Agent and its
counsel.


 


Each Borrowing Notice or request for issuance of a Facility LC with
respect to each such Credit Extension shall constitute a representation and
warranty by the Borrowers that the conditions contained in Sections 5.2(i) and
(ii) have been satisfied.


 


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5.3.          Certificate of Effectiveness.  Upon satisfaction or waiver in writing by
the Administrative Agent and each Lender of each of the conditions set forth in
Sections 5.1 and 5.2, Borrower and the Administrative Agent shall execute the
Certificate of Effectiveness.  Each Lender
hereby authorizes the Administrative Agent to execute the Certificate of
Effectiveness on its behalf and acknowledges and agrees that the execution of
the Certificate of Effectiveness by Administrative Agent shall be binding on
each such Lender.


 


ARTICLE VI


 


REPRESENTATIONS AND WARRANTIES


 


Each Credit Party represents and warrants to the Lenders that on the
date hereof (and after giving effect to the Closing Transactions):


 


6.1.          Existence and Standing.  Each of CWEI and its Subsidiaries is a
corporation, partnership or limited liability company duly and properly
incorporated or organized, as the case may be, validly existing and (to the
extent such concept applies to such entity) in good standing under the laws of
its jurisdiction of incorporation or organization and has all requisite authority
to conduct its business in each jurisdiction wherein failure to have such
authorization may result in a Material Adverse Effect.


 


6.2.          Authorization and Validity.  Each of CWEI and its Subsidiaries has the power and authority and
legal right to execute and deliver the Loan Documents to which it is a party
and to perform its obligations thereunder. 
The execution and delivery by each Credit Party of the Loan Documents to
which it is a party and the performance of its obligations thereunder have been
duly authorized by proper corporate or limited liability company proceedings,
and the Loan Documents to which each Credit Party is a party constitute legal,
valid and binding obligations of such Credit Party enforceable against such
Credit Party in accordance with their terms in all material respects, except as
enforceability may be limited by general principles of equity and bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally.


 


6.3.          No Conflict; Government Consent.  Neither the execution and delivery by any
Credit Party of the Loan Documents to which it is a party, nor the consummation
of the transactions therein contemplated, nor compliance with the provisions
thereof will violate (i) any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on CWEI or any Subsidiary or on the
Property of CWEI or any Subsidiary, or (ii) the Organizational Documents of any
Credit Party, or (iii) the provisions of any indenture, instrument or agreement
to which CWEI or any Subsidiary is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of CWEI or such Subsidiary pursuant to the terms of any such
indenture, instrument or agreement.  No
order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by CWEI or such Subsidiary, is required to
be obtained by CWEI or such Subsidiary in connection with the execution and
delivery of the Loan Documents, the borrowings under this Agreement, the
payment and performance by the Credit Parties of the Obligations or the
legality, validity, binding effect or enforceability of any of the Loan
Documents.


 


6.4.          Financial Statements.  The Current Financials heretofore delivered
to the Lenders were prepared in accordance with Agreement Accounting Principles
in effect on the date such statements were prepared and fairly present, in all
material respects, the consolidated financial condition and operations of


 


42

















 


CWEI and its Subsidiaries and SWR and its Subsidiaries at such date and
the consolidated results of their operations for the period then ended.


 


6.5.          Material Adverse Change.  Since December 31, 2003, there has been
no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of CWEI and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.


 


6.6.          Taxes.  CWEI and its Subsidiaries have filed all
United States, as applicable, federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by CWEI or any Subsidiary,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no action has been taken to enforce any Lien
securing such taxes.  No tax liens have
been filed and no claims are being asserted with respect to any such
taxes.  The charges, accruals and
reserves on the books of CWEI and each Subsidiary in respect of any taxes or
other governmental charges are adequate. 
If CWEI or any Subsidiary is a limited liability company, each such
limited liability company qualifies for partnership tax treatment under United
States federal tax law.


 


6.7.          Litigation and Contingent
Obligations.  There is
no litigation, arbitration, governmental investigation, proceeding or inquiry
pending or, to the knowledge of any of their officers, threatened against or
affecting CWEI or any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect or which seeks to prevent, enjoin or delay the
making of any Credit Extensions.  Other
than any liability incident to any litigation, arbitration or proceeding which
could not reasonably be expected to have a Material Adverse Effect, neither
CWEI nor any Subsidiary has any material Contingent Obligations not permitted under
this Agreement or provided for or disclosed in the financial statements
referred to in Section 6.4.


 


6.8.          Subsidiaries.  Schedule 6.8 contains
an accurate list of all Subsidiaries of CWEI as of the date of this Agreement
and after giving effect to the Closing Transactions, setting forth their
respective jurisdictions of organization and the percentage of their respective
Capital Stock or other ownership interests owned by CWEI or other
Subsidiaries.  All of the issued and
outstanding shares of Capital Stock or other ownership interests of CWEI and
such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable.


 


6.9.          ERISA.  The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate exceed $1,500,000.  Neither CWEI nor any other member of the
Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $1,500,000 in the
aggregate.  Each Plan complies in all
material respects with all applicable requirements of law and regulations, no
Reportable Event has occurred with respect to any Plan, neither CWEI nor any
other member of the Controlled Group has withdrawn from any Plan or initiated
steps to do so, and no steps have been taken to reorganize or terminate any
Plan.


 


6.10.        Accuracy of Information.  No information, exhibit or report furnished
by CWEI or any Subsidiary to the Administrative Agent or to any Lender in
writing in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein
not misleading as of the date it was furnished.  No representation is made as to the projections other than that
the projections are based on information that a Credit Party believed to be
accurate and were calculated in a manner a Credit Party believed to be
accurate.


 


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6.11.        Material Agreements.  Except for certain defaults under the
Existing Credit Agreements previously disclosed to the Administrative Agent and
Lenders, neither CWEI nor any Subsidiary is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in (i) any agreement to which it is a party, which default could
reasonably be expected to have a Material Adverse Effect or (ii) any agreement
or instrument evidencing or governing Material Indebtedness.  Simultaneous with or prior
to the initial Advance, the Borrowers shall have executed and delivered the SWR
Acquisition Documents and shall have consummated the transactions contemplated
thereby to be consummated on or prior to the Closing Date (including, without
limitation, the SWR Merger) without amendment, modification or waiver of any
material condition.  All of the
representations and warranties of each of the Credit Parties (including to the
knowledge of CWEI, SWR and its Subsidiaries) contained in the SWR Acquisition
Documents are true and correct as of the Closing Date.


 


6.12.        Compliance With Laws.  CWEI and its Subsidiaries have complied with
all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof having
jurisdiction over the conduct of their respective businesses or the ownership
of their respective Property except for any failure to comply with any of the
foregoing which could not reasonably be expected to have a Material Adverse
Effect.


 


6.13.        Ownership of Properties.  Except as set forth on Schedule 6.13,
on the date of this Agreement, CWEI and its Subsidiaries will have good and
defensible title, free of all Liens other than Permitted Liens, to all of the
material Property (other than Oil and Gas Interests) and assets reflected in
CWEI’s most recent consolidated financial statements provided to the
Administrative Agent.  On the date of
this Agreement, SWR has good and defensible title, free of all Liens, other
than Permitted Liens, to the partnership interests in the Related Partnerships
set forth on Schedule 8.15(vi).


 


6.14.        Oil and Gas Interests.  The Credit Parties and/or the Related Partnerships have good and
defensible title to all Oil and Gas Interests (including Attributed Interests)
described in the most recent Reserve Report provided to the Administrative
Agent, free and clear of all Liens except Permitted Liens.  All such Oil and Gas Interests (including
Attributed Interests) are valid, subsisting, and in full force and effect, and
all rentals, royalties, and other amounts due and payable in respect thereof
have been duly paid.  Without regard to
any consent or non-consent provisions of any joint operating agreement covering
any Credit Party’s or any Related Partnership’s Proved Oil and Gas Interests,
such Credit Party’s and/or such Credit Party’s Attributed Interest in any
Related Partnership’s share of (i) the costs for each Proved Oil and Gas Interests
described in the Reserve Report is not materially greater than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the respective designations “working
interests,” “WI,” “gross working interest,” “GWI,” or similar terms (except in
such cases where there is a corresponding increase in the net revenue
interest), and (ii) production from, allocated to, or attributed to each
such Proved Oil and Gas Interests is not materially less than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the designations “net revenue interest,”
“NRI,” or similar terms.  Each well
drilled in respect of Proved Producing Oil and Gas Interests described in the
Reserve Report (y) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and a Credit Party or a Related Partnership is
currently receiving payments for its share of production (including production
from the Attributed Interests), with no funds in respect of any thereof being
presently held in suspense, other than any such funds being held in suspense
pending delivery of appropriate division orders, and (z) has been drilled,
bottomed, completed, and operated in compliance with all applicable Laws, in
the case of clauses (y) and (z), except where any failure to satisfy clause (y)
or to comply with clause (z) would not have a Material Adverse Effect, and no
such well which is currently producing Hydrocarbons is subject to any penalty
in production by reason of such well having produced in excess of its allowable
production.


 


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6.15.        Plan Assets; Prohibited Transactions.  No Credit Party is an entity deemed to hold
“plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Credit
Extensions hereunder gives rise to a prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code.


 


6.16.        Environmental Matters.  In the ordinary course of its business, the
officers of CWEI and each Subsidiary consider the effect of Environmental Laws
on the business of CWEI and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to CWEI or any
Subsidiary due to Environmental Laws. 
On the basis of this consideration, CWEI has concluded that there are no
violations of Environmental Laws that, individually or in the aggregate, are
reasonably expected to have a Material Adverse Effect.  Neither CWEI nor any Subsidiary has received
any notice to the effect that its operations are not in material compliance
with any of the requirements of applicable Environmental Laws or are the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.


 


6.17.        Investment Company Act.  Neither CWEI nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.


 


6.18.        Public Utility Holding Company Act.  Neither CWEI nor any Subsidiary is a
“holding company” or a “subsidiary company” of a “holding company”, or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding
company”, within the meaning of the Public Utility Holding Company Act of 1935,
as amended.


 


6.19.        Post-Retirement Benefits.  The present value of the expected cost of
post-retirement medical and insurance benefits payable by CWEI and its
Subsidiaries to its employees and former employees, as estimated by CWEI in
accordance with procedures and assumptions deemed reasonable by the Required
Lenders, does not exceed $1,500,000.


 


6.20.        Insurance.  The certificate signed by the
President or Chief Financial Officer of CWEI, that attests to the existence and
adequacy of, and summarizes, the property and casualty insurance program
carried by CWEI and its Subsidiaries with respect to itself and its
Subsidiaries and that has been furnished by the CWEI to the Administrative
Agent and the Lenders, is complete and accurate in all material respects and
demonstrates the Credit Parties’ compliance with Section 8.6.  This summary includes the insurer’s or
insurers’ name(s), policy number(s), expiration date(s), amount(s) of coverage,
type(s) of coverage, exclusion(s), and deductibles.  This summary also includes similar information, and describes any
reserves, relating to any self-insurance program that is in effect.


 


6.21.        Solvency.


 


(i)            Immediately after the consummation of the Closing
Transactions and immediately following the making of each Credit Extension, if
any, made on the date hereof and after giving effect to the application of the
proceeds of any Loans, (a) the fair value of the assets of CWEI and its
Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts
and liabilities, subordinated, contingent or otherwise, of CWEI and its
Subsidiaries on a consolidated basis; (b) the present fair saleable value of
the Property of CWEI and its


 


45

















 


Subsidiaries on a consolidated basis will be greater than the amount
that will be required to pay the probable liability of CWEI and its
Subsidiaries on a consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) CWEI and its Subsidiaries on a consolidated
basis will be able to pay their debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured; and
(d) CWEI and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be
conducted after the date hereof.


 


(ii)           CWEI does not intend to, or to permit any Subsidiary
to, and does not believe that it or any Subsidiary will, incur debts beyond its
ability to pay such debts as they mature, taking into account the timing of and
amounts of cash to be received by it or any such Subsidiary and the timing of
the amounts of cash to be payable on or in respect of its Indebtedness or the
Indebtedness of any such Subsidiary.


 


ARTICLE VII


 


COLLATERAL AND GUARANTIES


 


7.1.          Collateral Security and Guaranties.


 


(a)           The Obligations shall be secured by first and prior
Liens (subject only to Permitted Liens described in clauses (i) through (ix)
and clause (xi) of the definition thereof) covering and encumbering
(i) not less than eighty percent (80%) of the Adjusted Engineered Value of
the Borrowing Base Properties, (ii) all of the issued and outstanding
Capital Stock of each Material Domestic Subsidiary of each Credit Party and not
less than sixty-five percent (65%) of the issued and outstanding Capital Stock
of each Foreign Subsidiary of each Credit Party, (iii) all partnership
interests in the Related Partnerships owned by each Credit Party, to the extent
permitted under the partnership agreement of each such Related Partnership, and
(iv) all intercompany Indebtedness held by each Credit Party.  On the Closing Date, each Credit Party shall
deliver to Collateral Agent for the ratable benefit of each Lender, the
Mortgages in form and substance acceptable to the Administrative Agent and duly
executed by such Credit Party, together with such other assignments,
conveyances, amendments, agreements and other writings, including, without
limitation, UCC-1 financing statements (each duly authorized and executed, as
applicable) as the Administrative Agent shall deem necessary or appropriate to
grant, evidence and perfect first and prior Liens (subject only to Permitted
Liens of the type described in clauses (i) through (ix) and clause (xi) of the
definition thereof) in the Borrowing Base Properties and other interests of
each Credit Party required by this Section 7.1(a).  Each Credit Party hereby authorizes
Collateral Agent, and its agents, successors and assigns, to file any and all
necessary financing statements under the Uniform Commercial Code, assignments
or continuation statements as necessary from time to time (in the
Administrative Agent’s discretion) to perfect (or continue perfection of) the
Liens granted pursuant to the Loan Documents.


 


(b)           From time to time after the Closing Date and at such
times as the Administrative Agent or Required Lenders shall request (including,
without limitation, in connection with any title and curative review and work
performed after the Closing Date in connection with the Closing Transactions),
each Credit Party shall execute and deliver to Collateral Agent, for the
ratable benefit of each Lender, Mortgages in form and substance acceptable to
Administrative Agent and duly executed by such Credit Party together with such
other assignments, conveyances, amendments, agreements and other writings,
including, without limitation, UCC-1


 


46

















 


financing statements (each duly authorized and executed, as applicable)
as Administrative Agent shall deem necessary or appropriate to grant, evidence
and perfect the Liens required by Section 7.1(a) with respect to any Oil
and Gas Interests acquired by any Credit Party subsequent to the last date on
which such Credit Party was required to execute and deliver Mortgages pursuant
to this Section 7.1(b) or which, for any other reason are not the subject of
valid, enforceable, perfected first priority Liens (subject only to Permitted
Liens of the type described in clauses (i) through (ix) and clause (xi) of the
definition thereof) in favor of Collateral Agent for the ratable benefit of
Lenders.


 


(c)           At any time any Credit Party is required to execute
and deliver Mortgages to Collateral Agent pursuant to this Section 7.1,
each Credit Party shall also deliver to the Administrative Agent such opinions
of counsel (including, if so requested, title opinions, and in each case
addressed to the Administrative Agent) and other evidence of title as
Administrative Agent shall deem necessary or appropriate to verify
(i) such Credit Party’s title to not less than seventy percent (70%) of
the Adjusted Engineered Value of the Borrowing Base Properties, and
(ii) the validity, perfection and priority of the Liens created by such
Mortgages and such other matters regarding such Mortgages as Administrative
Agent shall reasonably request.


 


(d)           To the extent required or contemplated by the terms
of Section 7.1(a) or Section 8.15, CWEI shall, and shall cause each
of its Subsidiaries to execute and deliver to the Collateral Agent a Pledge
Agreement, together with (i) all certificates (or other evidence
acceptable to the Administrative Agent) evidencing the issued and outstanding
Capital Stock required to be pledged pursuant to Section 7.1(a) duly
endorsed or accompanied by stock powers executed in blank (as applicable), and
(ii) such UCC-1 financing statements as the Administrative Agent shall
deem necessary or appropriate to grant, evidence and perfect the Liens required
by Section 7.1(a) in the issued and outstanding Capital Stock of such
Subsidiaries all partnership interests of any Related
Partnership (to the extent permitted under the partnership agreement of such
Related Partnership) and any intercompany Indebtedness permitted under
Section 8.11(v).


 


7.2.          Guarantees.  Payment and performance of the Obligations shall be fully
guaranteed by each Material Domestic Subsidiary (other than any Borrower) and,
if required pursuant to Section 8.28, each Domestic Subsidiary of CWEI
(other than a Borrower) pursuant to a Guaranty, and CWEI shall cause each such
Subsidiary to execute and deliver to the Administrative Agent and Lenders such
Guaranty.


 


ARTICLE VIII


 


COVENANTS


 


During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:


 


8.1.          Financial and Other Reporting.  Each Credit Party will maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with Agreement Accounting Principles, and furnish to
the Administrative Agent:


 


(i)            Within 120 days after the close of each of its
Fiscal Years, an unqualified (except for qualifications relating to changes in
accounting principles or practices reflecting changes in Agreement Accounting
Principles and required or approved by CWEI’s independent certified public
accountants) audit report certified by independent certified public accountants
acceptable


 


47

















 


to the Administrative Agent, prepared in accordance with Agreement
Accounting Principles on a consolidated basis for CWEI and its Subsidiaries,
including a consolidated balance sheet as of the end of such period, related
profit and loss and reconciliation of surplus statements, and a statement of
cash flows and beginning with Fiscal Year 2004 setting forth in each case in
comparative form the figures for the previous Fiscal Year, accompanied by any management
letter prepared by said accountants.


 


(ii)           Within 60 days after the close of each of the first
three (3) Fiscal Quarters of each Fiscal Year of CWEI, for CWEI and its
Subsidiaries, consolidated unaudited balance sheets as at the close of each
such period and consolidated profit and loss and reconciliation of surplus
statements and a statement of cash flows for such Fiscal Quarter and for the
period from the beginning of such Fiscal Year to the end of such Fiscal
Quarter, all certified by its Chief Financial Officer.


 


(iii)          As soon as delivered, and in any event no later than
April 1 and October 1 of each year, the Reserve Reports required on
such dates pursuant to Section 4.2.


 


(iv)          Together with the financial statements required
under Sections 8.1(i) and 8.1(ii), a compliance certificate in substantially
the form of Exhibit B signed by the Chief Financial Officer of CWEI showing the
calculations necessary to determine compliance with this Agreement and stating
that, to the knowledge of the Authorized Officers, no Default or Unmatured
Default exists, or if any Default or Unmatured Default exists, stating the
nature and status thereof.


 


(v)           Together with the Reserve Reports required under
Section 8.1(iii), a report, in reasonable detail, setting forth the Rate
Management Transactions then in effect, the notional volumes of and prices for,
on a monthly basis and in the aggregate, the Crude Oil and Natural Gas for each
such Rate Management Transaction and the term of each such Rate Management
Transaction.


 


(vi)          As soon as possible and in any event within 10 days
after receipt by CWEI or any Subsidiary, a copy of (a) any notice or claim to
the effect that CWEI or any Subsidiary is or may be liable to any Person as a
result of the release by CWEI, any Subsidiary, or any other Person of any toxic
or hazardous waste or substance into the environment, and (b) any notice
alleging any violation of any national, provincial or local environmental,
health or safety law or regulation by CWEI or any Subsidiary, which, in either
case with respect to the foregoing clauses (a) and (b), could reasonably be
expected to have a Material Adverse Effect.


 


(vii)         Promptly upon the furnishing thereof to the
shareholders of CWEI, copies of all financial statements, reports and proxy statements
so furnished.


 


(viii)        Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or other regular reports
which CWEI or any of its Subsidiaries files with the Securities and Exchange
Commission.


 


(ix)           Together with the financial statements required
under Section 8.1(i), a certificate of good standing for CWEI and each
other Credit Party that has pledged collateral in support of the Obligations
from the appropriate governmental officer in its jurisdiction of incorporation
or organization.


 


48

















 


(x)            Such other information (including non-financial
information) as the Administrative Agent or the Required Lenders may from time
to time reasonably request.


 


If any information which is required to be furnished to the
Administrative Agent under this Section 8.1 is required by law or
regulation to be filed with a government body on an earlier date, then the
information required hereunder shall be furnished to the Administrative Agent
within five (5) Business Days after such earlier date.


 


8.2.          Use of Proceeds.  The Borrowers will use the proceeds of the
Credit Extensions for (i) financing the SWR Acquisition, (ii)
refinancing the Indebtedness evidenced by the Existing Credit Agreements, (iii)
financing the exploration, development and/or acquisition of Oil and Gas
Interests, related and ancillary pipelines and related assets, and (iv) working
capital and other general corporate purposes.


 


8.3.          Notice of Default.  CWEI will give prompt notice in writing to
the Administrative Agent and Lenders of the occurrence of any Default or
Unmatured Default and of any other development, financial or otherwise, which
could reasonably be expected to have a Material Adverse Effect.


 


8.4.          Conduct of Business; Fiscal Year.  Each Borrower will, and will cause each
other Credit Party to, carry on and conduct its business in substantially the
same manner and in substantially the same fields of enterprise as it is
presently conducted and do all things necessary to remain duly incorporated or
organized, validly existing and (to the extent such concept applies to such
entity) in good standing as a corporation, partnership or limited liability
company in its jurisdiction of incorporation or organization, as the case may
be, and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted except wherein failure to
maintain such authority would not reasonably be expected to have a Material
Adverse Effect.  CWEI shall not, nor
shall it permit any of its Subsidiaries to change its Fiscal Year-end from
December 31.


 


8.5.          Taxes.  Each Borrower will, and will cause each of
its Subsidiaries to, timely file national and applicable foreign, provincial,
state and local tax returns required by law which returns shall be complete and
correct in all material respects and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with Agreement Accounting Principles.


 


8.6.          Insurance.  Each Borrower will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent
with sound business practice, and CWEI will furnish to the Administrative Agent
and any Lender upon request full information as to the insurance carried. In
addition, upon request of the Administrative Agent, CWEI will furnish or cause
to be furnished to the Administrative Agent from time to time a summary of the
respective insurance coverage of each Credit Party in form and substance
reasonably satisfactory to the Administrative Agent, and, if requested, will
furnish the Administrative Agent copies of the applicable policies.  Upon demand by Administrative Agent, any insurance
policies covering any such property shall be endorsed (i) to provide that such
policies may not be cancelled, reduced or affected in any manner for any reason
without fifteen (15) days prior notice to Administrative Agent, (ii) to provide
for insurance against fire, casualty and other hazards normally insured
against, in amounts customary in the industry for similarly situated business
and properties, and (iii) to provide for such other matters as the Lenders may
reasonably require.  Each Credit Party
shall at all times maintain insurance in amounts customary in the industry for
similarly situated business and properties with respect to the Collateral
against their liability for injury to persons or


 


49

















 


property, which insurance shall be by financially sound and reputable
insurers and shall without limitation provide the following coverages:  comprehensive general liability (including
coverage for damage to underground resources and equipment, damage caused by
blowouts or cratering, damage caused by explosion, damage to underground
minerals or resources caused by saline substances, broad form property damage
coverage, broad form coverage for contractually assumed liabilities and broad
form coverage for acts of independent contractors), worker’s compensation and
automobile liability.  Each Credit Party
shall at all times maintain insurance with respect to the Collateral which
shall insure such Credit Party against seepage and pollution expense if deemed
economical in the reasonable discretion of such Credit Party.


 


8.7.          Compliance with Laws.  Each Borrower will, and will cause each of
its Subsidiaries to, comply with all applicable laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which it may be
subject including, without limitation, all Environmental Laws except wherein
failure to comply could not reasonably be expected to have a Material Adverse
Effect.


 


8.8.          Maintenance of Properties.  Each Borrower will, and will cause each
other Credit Party to, use its best efforts to maintain, preserve, protect and
keep its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times
consistent with customary applicable industry standards, except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.


 


8.9.          Inspection.  Each Borrower will, and will cause each other Credit Party to,
permit the Administrative Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Property, books and financial
records of such Credit Party, to examine and make copies of the books of
accounts and other financial records of such Credit Party, and to discuss the
affairs, finances and accounts of such Credit Party with, and to be advised as
to the same by, their respective officers upon advance notice at such
reasonable times and intervals as the Administrative Agent or any Lender may
reasonably designate.  The Administrative
Agent and each Lender will use its best efforts to keep all such information
confidential and will not without prior written consent disclose or reveal the
information or any part thereof to any Person other than as permitted under
Section 11.11.


 


8.10.        Dividends.  No Borrower will, nor will any Borrower permit any of its
Subsidiaries to, declare or pay any dividends or make any distributions on its
Capital Stock (other than dividends payable in its own common stock) or redeem,
repurchase or otherwise acquire or retire any of its Capital Stock at any time
outstanding, except, any Subsidiary of CWEI may declare and pay dividends or
make distributions to its direct parent.


 


8.11.        Indebtedness.  No Borrower will, nor will any Borrower permit any of its
Subsidiaries to, create, incur or suffer to exist any Indebtedness, except:


 


(i)            The Loans, the Guaranties and the Reimbursement
Obligations.


 


(ii)           Indebtedness existing on the date hereof and
described in Schedule 8.11.


 


(iii)          Indebtedness arising under Rate Management
Transactions permitted under clause (v) of Section 8.15.


 


(iv)          Indebtedness of any Borrower and any Guarantor
arising under the Senior Term Credit Documents.


 


50

















 


(v)           Indebtedness of any Borrower to any other Borrower,
or of any Guarantor to any Borrower or to any other Guarantor, or of any
Borrower to any Guarantor; provided, that all such Indebtedness
shall be unsecured and subordinated in right of payment to the payment in full
of all of the Obligations in a manner and on terms and conditions reasonably
satisfactory to the Administrative Agent, provided further, that, upon the written
request of the Administrative Agent and within thirty (30) days of such
request, the Credit Parties shall cause such Indebtedness to be evidenced by
promissory notes reasonably satisfactory to the Administrative Agent, and shall
cause such promissory notes to be subject to a first priority Lien in favor of
the Collateral Agent for the benefit of the Lenders and the Senior Term Lenders
on terms and conditions reasonably satisfactory to the Administrative Agent.


 


(vi)          Indebtedness consisting of Vendor Financings.


 


(vii)         Purchase Money Indebtedness and Capitalized Lease
Obligations in an aggregate amount at any time outstanding not to exceed
$1,000,000.


 


(viii)        Indebtedness of SWR and Blue Heel evidenced by the
Unsecured Notes in an aggregate principal amount at any time outstanding not to
exceed $8,870,000; provided, that within ten (10) Business
Days after the Closing Date, CWEI establishes and thereafter maintains a demand
deposit account with the Administrative Agent with an initial balance on the
Closing Date of not less than $9,000,000 and a collected balance thereafter at
least equal to the outstanding principal balance of the Unsecured Notes and
withdrawals and disbursements from such demand deposit account are made solely
to pay the consideration required to redeem or purchase such Unsecured Notes.


 


(ix)           Unsecured Indebtedness not included in the foregoing
clauses (i) through (viii) which does not exceed at any time outstanding
$5,000,000.


 


(x)            Indebtedness arising under renewals or extensions of
(but not increases in the principal amount) of the Indebtedness described in
any of the foregoing clauses (ii), (iv) and (viii).


 


8.12.        Disqualified Stock.  No Borrower will, nor will any Borrower
permit any of its Subsidiaries to, issue any Disqualified Stock.


 


8.13.        Merger.  Except for the SWR Merger, no Borrower will, nor will any
Borrower permit any other Credit Party to merge or consolidate with or into any
other Person, except that so long as no Default or Unmatured Default has
occurred and is continuing or would be caused thereby, any Credit Party may
merge with or into any other Credit Party; provided
that, if CWEI is a party to such merger, CWEI is the continuing or
surviving Person in such merger.


 


8.14.        Sale of Assets.  No Borrower will, nor will any Borrower
permit any other Credit Party to, lease, sell or otherwise dispose of its
Property (including any Attributed Interests) to any other Person, except:


 


(i)            Sales of Hydrocarbons in the ordinary course of
business.


 


(ii)           Provided no Default or Unmatured Default exists or
would result therefrom, the sale, lease, transfer, abandonment, exchange or
other disposition of (a) Oil and Gas Interests to the extent permitted under
Section 8.23, (b) Oil and Gas Interests to the Incentive Partnerships


 


51

















 


and to various employees of the Credit Parties as incentive
compensation to such employees; provided, that the aggregate amount of Oil
and Gas Interests transferred and assigned with respect to any well for such
purposes shall not exceed five percent (5%) of the Credit Parties’ undivided
interest in such well, taken as a whole, (c) Attributed Interest to any Credit
Party pursuant to Section 8.15(iii), (d) equipment and related items in
the ordinary course of business, that are obsolete or no longer necessary in
the business of any Credit Party or that is being replaced by equipment of
comparable value and utility and (e) subject to Section 2.7.2, other
Property of any Credit Party other than Capital Stock of any Credit Party but
including Oil and Gas Interests (including Attributed Interests), with a value
not to exceed, $5,000,000 in the aggregate for all Credit Parties, on a
consolidated basis, between Scheduled Redeterminations. For purposes of the
foregoing clause (e), the value of any Oil and Gas Interests included in the Borrowing
Base Properties (including Attributed Interests) shall be the greater of the
Engineered Value of such Oil and Gas Interests or Attributed Interests, as the
case may be, or the gross proceeds received from such sale, transfer,
abandonment, exchange or other disposition of such Oil and Gas Interests or
Attributed Interest, as the case may be (or in the case of any exchange, the
net Engineered Value realized or resulting from such exchange) and the value of
any other Property shall be the value determined in good faith by CWEI.


 


(iii)          With the prior written consent of Required Lenders,
the sale, transfer or other disposition of Borrowing Base Properties; not
otherwise permitted pursuant to the preceding clause (ii).


 


8.15.        Investments and Acquisitions.  No Borrower will, nor will any Borrower
permit any other Credit Party to, make or suffer to exist any Investments
(including without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to
become or remain a partner in any partnership or joint venture, or to make any
Acquisition, except:


 


(i)            Cash Equivalent Investments.


 


(ii)           Existing Investments in the Subsidiaries (including
the Investments contemplated by the Closing Transactions) and other Investments
in existence on the date hereof and described in Schedule 6.8.


 


(iii)          Investments with or acquired from Persons not an
Affiliate of a Credit Party (other than the Related Partnerships) that are
(a) customary in the oil and gas business, (b) made in the ordinary
course of such Borrower’s or such Credit Party’s business, and (c) made in the
form of, or pursuant to, oil, gas and mineral leases, operating agreements,
farm-in agreements, farm-out agreements, development agreements, unitization
agreements, joint bidding agreements, services contracts and other similar
agreements that a reasonable and prudent oil and gas industry owner or operator
would find acceptable.


 


(iv)          Investments by any Credit Party consisting of
intercompany Indebtedness permitted under Section 8.11(v) and other
Investments by any Credit Party in any other Credit Party other than Capital
Stock of any direct or indirect parent of such Credit Party.


 


(v)           Investments by any Borrower consisting of the Rate
Management Transactions entered into with Approved Counterparties in the
ordinary course of business and not for speculative purposes; provided
that such
Rate Management Transactions (a) would not cause the aggregate notional amount
of Hydrocarbons under all Rate Management Transactions then in effect to exceed
eighty percent (80%) of the “forecasted production from proved reserves” (as


 


52

















 


defined below) of CWEI and its Material Domestic Subsidiaries for the
forthcoming three (3) year period, (b) together with any other Rate
Management Transactions then in effect for the purpose of hedging Borrowers’
interest rate exposure would not cause the notional amount of all such Rate
Management Transactions then in effect for such purpose to exceed one hundred
percent (100%) of the total Consolidated Funded Indebtedness of Borrowers
projected to be outstanding for any period covered by such Rate Management
Transaction, or (c) are for the purpose of hedging the foreign currency risk
associated with the Credit Parties’ operations, if any. As used in this clause
(v) of Section 8.15, “forecasted production from proved reserves” means
the forecasted production of Crude Oil and Natural Gas as reflected in the most
recent Reserve Report delivered to the Administrative Agent pursuant to clause
(iii) of Section 8.1, after giving effect to any pro forma adjustments for
the consummation of any acquisitions or dispositions since the effective date
of such Reserve Report.


 


(vi)          Investments by any Borrower consisting of the
purchase, redemption or acquisition of partnership interests in the Related
Partnerships pursuant to the exercise of certain rights under the partnership
agreements of such Related Partnerships by the holders of such interests.


 


(vii)         Investments by any Credit Party consisting of the payment of
each Incentive Partnerships’ share of the costs and expenses incurred to drill,
complete and operate oil and gas wells located on the properties covered by the
Oil and Gas Interests owned by such Incentive Partnerships; provided that such
Incentive Partnerships’ share of such costs and expenses do not exceed 5% of
the total amount of such costs and expenses for all Credit Parties in such
properties and such Credit Party receives all revenues from such Oil and Gas
Interests until payout of its costs and expenses, plus interest.


 


(viii)        Other Investments not otherwise described in clauses
(i) through (vii) above; provided that, the aggregate amount of all
other Investments made pursuant to this clause (viii) outstanding at any time
shall not exceed $1,000,000 (calculated based on the original cost of such
Investment).


 


8.16.        Liens.  No Borrower will, nor will any Borrower
permit any other Credit Party or any Related Partnership to, create, incur, or
suffer to exist any Lien in, of or on the Property of any Credit Party or any
Related Partnership, except Permitted Liens.


 


8.17.        Affiliates.  No Borrower will, nor will
any Borrower permit any other Credit Party to, enter into any transaction (including,
without limitation, the purchase or sale of any Property or service) with, or
make any payment or transfer to, any Affiliate except transactions not
otherwise prohibited under this Agreement or any other Loan Document made in
the ordinary course of business and pursuant to the reasonable requirements of
such Credit Party’s business and upon fair and reasonable terms no less
favorable to such Credit Party than such Credit Party would obtain in a
comparable arms-length transaction.


 


8.18.        Amendments to Organizational and
Other Documents.  No
Borrower will, nor will any Borrower permit any other Credit Party to, enter
into or permit any modification or amendment of, or waive any material right or
obligation of any Person under (a) its Organizational Documents other than
amendments, modifications and waivers which will not, individually or in the
aggregate, have a Material Adverse Effect, or (b) any Senior Term Credit
Document if the effect of any such modification or amendment is to (i) increase
the maximum principal amount of the Senior Term Indebtedness or rate of
interest on any of the Senior Term Indebtedness (other than as a result of the
imposition of a default rate


 


53

















 


of interest in accordance with the terms of the Senior Term Credit
Documents), (ii) change or add any event of default or any covenant with
respect to the Senior Term Indebtedness if the effect of such change or
addition is to cause any one or more of the Senior Term Credit Documents to be
more restrictive on any Credit Party than such Senior Term Credit Documents
were prior to such change or addition, (iii) change the dates upon which
payments of principal or interest on the Senior Term Indebtedness are due, (iv)
change any redemption or prepayment provisions of the Senior Term Indebtedness,
or (v) grant any Liens in any assets or properties of any Credit Party, other
than the Liens granted under the Loan Documents.


 


8.19.        Sale and Leaseback Transactions and
other Off-Balance Sheet Liabilities.  No Borrower will, nor will any Borrower permit any other Credit
Party to, enter into or suffer to exist any (i) Sale and Leaseback Transaction
or (ii) any other transaction pursuant to which it incurs or has incurred
Off-Balance Sheet Liabilities, except for Rate Management Transactions
permitted under the terms of Section 8.15 and Advance Payment Contracts; provided,
that the aggregate amount of all Advance Payments received by any Credit
Party that have not been satisfied by delivery of production at any time does
not exceed, in the aggregate $750,000.


 


8.20.        Negative Pledge.  No Borrower will, nor will any Borrower
permit any of its Subsidiaries or any Related Partnership to, enter into or
become bound by any agreement that prohibits or otherwise restricts the right
of such Borrower, any such Subsidiary or any such Related Partnership to
create, assume or suffer to exist any Lien on any of their Property in favor of
the Collateral Agent for the ratable benefit of the Lenders (other than (i) this
Agreement, (ii) the Senior Term Credit Agreement, (iii) restrictions
existing on the Closing Date under any partnership agreement of any Related
Partnership as in effect on the Closing Date and (iv) agreements
evidencing Indebtedness permitted under Section 8.11(vii); provided that any such prohibition in the
agreements described in this clause (iv) is limited to the Property
securing such Indebtedness).


 


8.21.        Financial Contracts.  No Borrower will, nor will any Borrower
permit any other Credit Party to, enter into or remain liable upon any
Financial Contract, except Rate Management Transactions permitted under
Section 8.15(v).


 


8.22.        Financial Covenants.


 


8.22.1.     Consolidated Current Ratio. CWEI will not permit the Consolidated
Current Ratio as of the end of any Fiscal Quarter ending (i) prior to the
earlier of the occurrence of a Capital Markets Event and September 30,
2004, to be less than .90 to 1.00, or (ii) on or after September 30, 2004,
or thereafter to be less than 1.00 to 1.00.


 


8.22.2.     EBITDAX Leverage Ratio.  CWEI will not permit the ratio, determined
as of the end of each of its Fiscal Quarters, of (i) Consolidated Funded
Indebtedness to (ii) Consolidated EBITDAX for the then most-recently ended four
Fiscal Quarters to be greater than 3.0 to 1.0.


 


8.23.        Operation of Oil and Gas Interests.


 


(a)           Each Borrower will, and will cause each other Credit
Party to, maintain, develop and operate its Oil and Gas Interests in a good and
workmanlike manner, and observe and comply with all of the terms and provisions,
express or implied, of all oil and gas leases relating to such Oil and Gas
Interests so long as such Oil and Gas Interests are capable of producing
Hydrocarbons and accompanying elements in paying quantities, except where such
failure to comply could not reasonably be expected to have a Material Adverse
Effect.


 


54



















 


(b)           Each Borrower
will, and will cause each other Credit Party to, comply in all respects with
all contracts and agreements applicable to or relating to its Oil and Gas
Interests or the production and sale of Hydrocarbons and accompanying elements
therefrom, except to the extent a failure to so comply could not reasonably be
expected to have a Material Adverse Effect.


 


(c)           Each Borrower
will, and will cause each other Credit Party to, at all times maintain,
preserve and keep all operating equipment used with respect to its Oil and Gas
Interests in proper repair, working order and condition, and make all necessary
or appropriate repairs, renewals, replacements, additions and improvements
thereto so that the efficiency of such operating equipment shall at all times
be properly preserved and maintained, except where such failure to comply could
not reasonably be expected to have a Material Adverse Effect; provided, further
that, no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if such Credit Party shall in good faith
determine that such action is not necessary or desirable for the continued
efficient and profitable operation of the business of such Credit Party.


 


8.24.        Title Data.  In addition to
the title information required by Section 5.1(b), each Borrower shall, and
shall cause each other Credit Party to, cause to be delivered to the
Administrative Agent (i) within sixty (60) days of the Closing Date, curative
information, in form and substance satisfactory to the Administrative Agent,
with respect to the matters described on the attached Schedule 8.24 and (ii) at
any time and from time to time, such title opinions and other information
necessary or appropriate to verify and confirm the title of the Credit Parties to
not less than seventy percent (70%) of the Adjusted Engineered Value of the
Borrowing Base Properties, taken as a whole.


 


8.25.        Rate Management Transactions.  Within ten (10) Business
Days after the Closing Date, the Borrowers shall provide to the Administrative
Agent, evidence reasonably satisfactory to the Administrative Agent that the
Borrowers have entered into Rate Management Transactions with Approved
Counterparties, and on terms and conditions reasonably acceptable to the
Administrative Agent, with respect to not less than sixty percent (60%) of
Administrative Agent’s forecasted production from the Proved Producing Oil and
Gas Interests of CWEI and its Subsidiaries (excluding SWR and its Subsidiaries)
through at least December 31, 2005.  Once confirmed,
no Rate Management Transaction may be amended or modified, or cancelled without
the prior written consent of Required Lenders. 
Each Borrower shall collaterally assign all of its right, title and
interest in each Rate Management Transaction to the Collateral Agent and shall,
if requested by the Administrative Agent or the Required Lenders, cause each
such agreement or contract to (1) expressly permit such assignment and (2) upon
the occurrence of any default or event of default under such agreement or contract,
(a) to permit the Lenders to cure such default or event of default and assume
the obligations of such Borrower under such agreement or contract and
(b) to prohibit the termination of such agreement or contract by the
counterparty thereto if the Lenders assume the obligations of the Credit
Parties under such agreement or contract and the Lenders take the actions
required under the foregoing clause (a). 
Upon the request of the Administrative Agent, the Borrower
Representative shall, within thirty (30) days of such request, provide to the
Administrative Agent and each Lender copies of all agreements, documents and
instruments evidencing the Rate Management Transactions not previously
delivered to the Administrative Agent and Lenders, certified as true and
correct by an Authorized Officer of the Borrower Representative, and such other
information regarding such Rate Management Transactions as the Administrative
Agent and Lenders may reasonably request.


 


8.26.        Limitation on Exploratory Drilling
Expenses.  Except for
drilling expenses required to be incurred to avoid or prevent imminent actual
physical injury of individual persons or imminent damages or environmental
contamination of Property as a result of events outside the control of any
Credit Party, unless and until the Average Available Aggregate
Commitment is equal to or great than fifteen percent


 


55

















 


(15%) of the Borrowing Base for
a period of ten (10) consecutive Business Days, the Credit Parties shall not
incur, on a consolidated basis, more than $12,000,000  in any Fiscal Quarter in
drilling expenses for exploratory wells commenced after the Closing Date.  “Average Available Aggregate Commitment”
means for any period of ten (10) consecutive Business Days, the sum of the
Available Aggregate Commitment as of the end of each such Business Day divided
by ten (10).


 


8.27.        Restriction of Senior Term Indebtedness
Payments.  Prior to
the termination of all Commitments and the payment and performance in full of
the Obligations, CWEI will not nor will CWEI permit any other Credit Party to,
directly or indirectly, retire, redeem, defease, repurchase or prepay prior to
the scheduled maturity any part of the principal of, or interest on, the Senior
Term Indebtedness; provided that (i)
so long as (a) no Default or Unmatured Default exists on the date any such
payment is made or would be caused thereby, and (b) before and after giving
effect to any such payment, the Available Aggregate Commitment is not less than
ten percent (10%) of the Borrowing Base then in effect, the Borrowers may
prepay all or any portion of the outstanding principal balance of the Senior
Term Indebtedness and any accrued but unpaid interest required to be
paid in connection with such prepayment and (ii) so long as (a) no Default or
Unmatured Default exists on the date such payment is made or would be caused
thereby and (b) the Borrowers are in compliance with Section 2.7.2 after giving
effect to such payment, upon the occurrence of a Capital Markets Event, the
Borrowers may prepay the outstanding principal balance of the Senior Term
Indebtedness, and any accrued but unpaid interest required to be paid in
connection with such prepayment, with the net proceeds of such Capital Markets
Event.


 


8.28.        Credit Parties. No Borrower
shall permit  the aggregate fair
market value of all of the Property of all of the Credit Parties (excluding
ownership interests in Subsidiaries of any Credit Party) as at the last date of
any Fiscal Quarter to comprise less than fifteen percent (15%) of the aggregate
fair market value of all of the Property of CWEI and its Subsidiaries
(excluding ownership interests in Subsidiaries of any Credit Party) as at the
last date of such Fiscal Quarter, and any such failure continues for a period
of thirty (30) days following the last day of such Fiscal Quarter without the
delivery to the Administrative Agent of (A) a Guaranty executed by one or
more Domestic Subsidiaries with Property sufficient to cure any failure set
forth above and (B) opinions of counsel to such Domestic Subsidiaries
(which shall cover, among other things, the legality, validity, binding effect
and enforceability of the Guaranty), all in form, content and scope reasonably
satisfactory to the Administrative Agent.


 


ARTICLE
IX


 


DEFAULTS


 


The occurrence of any one or more of the following events shall
constitute a Default:


 


9.1.          Representations and Warranties.  Any representation or warranty made or
deemed made by or on behalf of CWEI or any of its Subsidiaries to the Lenders
or any Agent under or in connection with this Agreement, any Credit Extension,
or any certificate or information delivered in connection with this Agreement
or any other Loan Document shall be materially false, incorrect or misleading
on the date as of which made and such Default shall continue for more than ten
(10) days after written notice from the Administrative Agent to the Borrowers
of such Default.


 


9.2.          Payments.  Nonpayment of principal of any Loan when due, nonpayment of any
Reimbursement Obligation within one Business Day after the same becomes due, or
nonpayment of interest upon any Loan or of any commitment fee, LC Fee or other
obligations under any of the Loan Documents within three (3) Business Days
after the same becomes due.


 


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9.3.          Certain Covenants.  The breach by CWEI or any of its
Subsidiaries of any of the terms or provisions of this Agreement or any of the
Collateral Documents which is not remedied within ten (10) days after written
notice from the Administrative Agent.


 


9.4.          Other Material
Indebtedness.  Failure of any Credit Party to pay when due any Material
Indebtedness; or the default by any Credit Party in the performance (in each
case, beyond the applicable grace period with respect thereto, if any) of any
term, provision or condition contained in any Material Indebtedness Agreement,
or any other event shall occur or condition exist, the effect of which default,
event or condition is to cause, or to permit the holder(s) of such Material
Indebtedness or the lender(s) under any Material Indebtedness Agreement to
cause, such Material Indebtedness to become due prior to its stated maturity or
any commitment to lend under any Material Indebtedness Agreement to be
terminated prior to its stated expiration date; or any Material Indebtedness of
any Credit Party shall be declared to be due and payable or required to be
prepaid or repurchased (other than by a regularly scheduled payment) prior to
the stated maturity thereof; or any Credit Party shall not pay, or admit in
writing its inability to pay, its debts generally as they become due.


 


9.5.          Insolvency Proceedings.  Any Credit Party shall (i) have an order for relief or a
receiving order entered with respect to it under the bankruptcy laws as now or
hereafter in effect in the United States, as applicable, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (iv) institute any proceeding seeking an order for relief under the
bankruptcy laws as now or hereafter in effect in the United States, as
applicable, or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such proceeding filed
against it, (v) take any corporate or partnership action to authorize or effect
any of the foregoing actions set forth in this Section 9.5 or (vi) fail to
contest in good faith any appointment or proceeding described in
Section 9.6.


 


9.6.          Appointment of Receiver.  Without the application, approval or consent
of any Credit Party, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for any Credit Party or any Substantial Portion of
its Property, or a proceeding described in Section 9.5(iv) shall be
instituted against any Credit Party and such appointment continues undischarged
or such proceeding continues undismissed or unstayed for a period of sixty (60)
consecutive days.


 


9.7.          Condemnation and Seizure.  Any court, government or governmental agency
shall condemn, seize or otherwise appropriate, or take custody or control of,
all or any portion of the Property of any Credit Party which, when taken
together with all other Property of the Credit Parties so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, could reasonably be
expected to have a Material Adverse Effect.


 


9.8.          Judgments.  Any Credit Party shall fail within 30 days
to pay, bond or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $1,000,000 (or the equivalent thereof in
currencies other than Dollars) in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, which judgment(s), in any such
case, is/are not stayed on appeal or otherwise being appropriately contested in
good faith.


 


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9.9.          Rate Management
Obligations.  Nonpayment by any Credit Party of any Rate Management Obligation
when due or the breach by any Credit Party of any term, provision or condition
contained in any Rate Management Transaction or any transaction of the type
described in the definition of “Rate Management Transactions,” whether or not
any Lender Counterparty is a party thereto if the amount due or which could
become due as a result of such default or breach is equal to or greater than
$1,000,000.


 


9.10.        Change of
Control.  Any Change in Control shall occur.


 


9.11.        Other Loan Documents.  The occurrence of any “default”, as defined
in any Loan Document (other than this Agreement) or the breach of any of the
terms or provisions of any Loan Document (other than this Agreement), which
default or breach continues beyond any period of grace therein provided and
such default or breach continues for a period of thirty (30) days after the earlier
of (i) the date any Authorized Officer of CWEI acquires knowledge of such
failure, or (ii) written notice of such failure has been given to CWEI by the
Administrative Agent or any Lender.


 


9.12.        Guaranty.  Any
Guaranty shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or unenforceability of any
Guaranty, or any Guarantor shall fail to comply with any of the terms or
provisions of any Guaranty to which it is a party, or any Guarantor shall deny
that it has any further liability under any Guaranty to which it is a party, or
shall give notice to such effect.


 


9.13.        Unfunded Liabilities.  The Unfunded Liabilities of all Single
Employer Plans shall exceed in the aggregate $1,000,000 or any Reportable Event
shall occur in connection with any Plan.


 


9.14.        Multiemployer Plan Withdrawal
Liability.  CWEI or
any other member of the Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred withdrawal liability to
such Multiemployer Plan in an amount which, when aggregated with all other
amounts required to be paid to Multiemployer Plans by any Credit Party or any
other member of the Controlled Group as withdrawal liability (determined as of
the date of such notification), exceeds $750,000 or requires payments exceeding
$1,000,000 per annum.


 


9.15.        Reorganization or Termination of
Multiemployer Plan.  CWEI or
any other member of the Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if as a result of such reorganization or termination the aggregate annual
contributions of CWEI and the other members of the Controlled Group (taken as a
whole) to all Multiemployer Plans which are then in reorganization or being
terminated have been or will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of each such Multiemployer
Plan immediately preceding the plan year in which the reorganization or
termination occurs by an amount exceeding $1,000,000.


 


9.16.        Environmental
Laws.  Any Credit Party shall (i) be the subject of
any proceeding or investigation pertaining to the release by such Credit Party
or any other Person of any toxic or hazardous waste or substance into the
environment, or (ii) violate any Environmental Law, which, in the case of an
event described in clause (i) or clause (ii), could reasonably be expected to
have a Material Adverse Effect.


 


9.17.        Collateral Documents.  Any Collateral Document shall for any reason
fail to create a valid and perfected security interest, except as permitted by
the terms of this Agreement or any Collateral


 


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Document, or any Collateral
Document shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or unenforceability of any
Collateral Document, or any Credit Party shall fail to comply with any of the
terms or provisions of any Collateral Document.


 


ARTICLE
X


 


ACCELERATION, WAIVERS, AMENDMENTS
AND REMEDIES


 


10.1.        Acceleration; Facility LC Collateral
Account.


 


(i)            If any Default
described in Section 9.5 or 9.6 occurs with respect to any Credit Party,
the obligations of the Lenders to make Loans hereunder and the obligation and
power of the LC Issuer to issue Facility LC’s shall automatically terminate and
the Obligations shall immediately become due and payable without any election
or action on the part of the Administrative Agent, the LC Issuer or any Lender and each
Borrower will be and become thereby unconditionally and jointly and severally
obligated, without any further notice, act or demand, to pay to the
Administrative Agent an amount in immediately available funds, which funds
shall be held in the Facility LC Collateral Account, equal to the difference of
(x) the amount of LC Obligations at such time, less (y) the amount on deposit
in the Facility LC Collateral Account at such time which is free and clear of
all rights and claims of third parties and has not been applied against the
Obligations (such difference, the “Collateral Shortfall Amount”).  If any other Default occurs,
the Required Lenders (or the Administrative Agent with the consent of the
Required Lenders) may (a) terminate or suspend the obligations of the Lenders
to make Loans hereunder and the obligation and power of the LC Issuer to issue
Facility LCs, or declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrowers hereby
expressly waive, and (b) upon notice to the Borrowers and in addition
to the continuing right to demand payment of all amounts payable under this
Agreement, make demand on the Borrowers to pay, and the Borrowers will,
forthwith upon such demand and without any further notice or act, pay to the
Administrative Agent the Collateral Shortfall Amount, which funds shall be
deposited in the Facility LC Collateral Account; provided that, if such
Default consists solely of the Default described in Section 9.10, the
Obligations shall not be due and payable until one hundred and twenty (120)
days after the date the Administrative Agent first receives notice or becomes
aware that a Change of Control has occurred unless some other Default occurs
prior to the end of such one hundred and twenty (120) day period.


 


(ii)           If at any time
while any Default is continuing, the Administrative Agent determines that the
Collateral Shortfall Amount at such time is greater than zero, the
Administrative Agent may make demand on the Borrowers to pay, and the Borrowers
will, forthwith upon such demand and without any further notice or act, pay to
the Administrative Agent the Collateral Shortfall Amount, which funds shall be
deposited in the Facility LC Collateral Account.


 


(iii)          The
Administrative Agent may at any time or from time to time after funds are
deposited in the Facility LC Collateral Account, apply such funds to the
payment of the Obligations and any other amounts as shall from time to time
have become due and payable by the Borrowers to Administrative Agent, the
Lenders or the LC Issuer under the Loan Documents.


 


(iv)          At any time
while any Default is continuing, neither the Borrowers nor any Person claiming
on behalf of or through any Borrower shall have any right to withdraw any of
the


 


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funds held in
the Facility LC Collateral Account. 
After all of the Obligations have been indefeasibly paid in full and the
Aggregate Commitment has been terminated, any funds remaining in the Facility
LC Collateral Account shall be returned by the Agent to the Borrowers or paid
to whomever may be legally entitled thereto at such time.


 


(v)           If, within
thirty (30) days after acceleration of the maturity of the Obligations or
termination of the obligations of the Lenders to make Loans and the obligations
and power of the LC Issuer to issue Facility LCs hereunder as a result of any
Default (other than any Default as described in Section 9.5 or 9.6 with
respect to any Credit Party) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required
Lenders (in their sole discretion) shall so direct, then the Administrative
Agent shall, by notice to the Borrowers, rescind and annul such acceleration
and/or termination.


 


10.2.        Amendments.  Subject to the provisions of this
Section 10.2, the Required Lenders (or the Administrative Agent with the
consent in writing of the Required Lenders) and each Credit Party may enter
into agreements supplemental hereto for the purpose of adding or modifying any
provisions to the Loan Documents or changing in any manner the rights of the
Lenders or such Credit Party hereunder or waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of all of the Lenders:


 


(i)            Extend the
final maturity of any Loan, or extend the expiry date of any Facility LC to a
date after the Facility Termination Date or forgive all or any portion of the
principal amount thereof or any Reimbursement Obligation related thereto, or
reduce the rate or extend the time of payment of interest or fees thereon or
Reimbursement Obligations related thereto.


 


(ii)           Reduce the
percentage specified in the definition of Required Lenders.


 


(iii)          Extend the
Facility Termination Date, or reduce the amount or extend the payment date for,
the mandatory payments required under Sections 2.2 or 2.7.2, or increase the
amount of the Aggregate Commitment or of the Commitment of any Lender
hereunder, or the commitment to issue Facility LCs, or increase the Borrowing
Base above the Borrowing Base then in effect or permit any Borrower to assign
its rights under this Agreement.


 


(iv)          Amend this
Section 10.2.


 


(v)           Release any
guarantor of any Advance or, except as otherwise provided in
Section 12.16, release any of the Collateral.


 


No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent and no amendment of any provision relating to the LC
Issuer shall be effective without the written consent of the LC Issuer.  The Administrative Agent may waive payment
of the fee required under Section 14.3.3 without obtaining the consent of
any other party to this Agreement.


 


10.3.        Preservation of
Rights.  No delay or omission of the Lenders, the LC Issuer or the
Administrative Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Credit Extension notwithstanding the
existence of a Default or the inability of any Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver
or acquiescence.  Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other


 


60

















 


right, and no waiver, amendment
or other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 10.2, and then only to the extent in such writing
specifically set forth.  All remedies
contained in the Loan Documents or afforded by law shall be cumulative and all
shall be available to the Administrative Agent, the LC Issuer and the Lenders
until the Obligations have been paid in full.


 


ARTICLE
XI


 


GENERAL PROVISIONS


 


11.1.        Survival of Representations.  All representations and warranties of each
Credit Party contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.


 


11.2.        Governmental
Regulation.  Anything
contained in this Agreement to the contrary notwithstanding, neither the LC
Issuer nor any Lender shall be obligated to extend credit to any Borrower in
violation of any limitation or prohibition provided by any applicable statute
or regulation.


 


11.3.        Headings.  Section
headings in the Loan Documents are for convenience of reference only, and shall
not govern the interpretation of any of the provisions of the Loan Documents.


 


11.4.        Entire Agreement.  The Loan Documents embody the entire
agreement and understanding among the Borrowers, the Guarantors, the
Administrative Agent, the LC Issuer and the Lenders and supersede all prior
agreements and understandings among the Borrowers, the Guarantors, the
Administrative Agent, the LC Issuer and the Lenders relating to the subject
matter thereof other than those contained in the fee letter described in
Section 12.13 which shall survive and remain in full force and effect
during the term of this Agreement.  THIS WRITTEN
CREDIT 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.


 


11.5.        Several Obligations; Benefits of this
Agreement.  The
respective obligations of the Lenders hereunder are several and not joint and
no Lender shall be the partner or agent of any other (except to the extent to
which the Administrative Agent is authorized to act as such).  The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder.  This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns, provided, however, that
the parties hereto expressly agree that the Arranger shall enjoy the benefits
of the provisions of Sections 11.6, 11.10 and 12.11 to the extent specifically
set forth therein and shall have the right to enforce such provisions on its
own behalf and in its own name to the same extent as if it were a party to this
Agreement.


 


11.6.        Expenses; Indemnification.  (i) The Borrowers shall reimburse the Administrative
Agent, the LC Issuer and the Arranger for any costs, and out-of-pocket expenses
(including attorneys’ fees and time charges of attorneys for the Administrative
Agent paid or incurred by the Administrative Agent, the LC Issuer or the
Arranger in connection with the investigation, preparation, negotiation,
execution, delivery, syndication, distribution (including, without limitation,
via the internet), review, amendment, modification, and administration of the
Loan Documents.  The Borrowers also agree
to reimburse the Administrative Agent, the Arranger, the LC Issuer and the
Lenders for any costs, and out-of-pocket expenses (including attorneys’ fees
and time charges of attorneys for the Administrative Agent, the


 


61

















 


Arranger, the LC Issuer and the
Lenders, the Arranger, the LC Issuer or the Lenders) paid or incurred by the
Administrative Agent, the Arranger, the LC Issuer or any Lender in connection
with the collection and enforcement of the Loan Documents or in connection with any refinancing or
restructuring of the credit arrangements provided hereunder in the nature of a
“work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.  Expenses being reimbursed by the Borrowers
under this Section include, without limitation, costs and expenses incurred in
connection with the Reports described in the following sentence.  The Borrowers acknowledge that from time to
time Bank One may prepare and may distribute to the Lenders (but shall have no
obligation or duty to prepare or to distribute to the Lenders) certain audit
reports or Reserve Reports (the “Reports”) pertaining to the Credit Parties’
assets for internal use by Bank One from information furnished to it by or on
behalf of the Borrowers.


 


(ii)           EACH
BORROWER HEREBY FURTHER, JOINTLY AND SEVERALLY, AGREES TO INDEMNIFY THE
ADMINISTRATIVE AGENT, THE ARRANGER, THE LC ISSUER, EACH LENDER, THEIR
RESPECTIVE AFFILIATES, AND EACH OF THEIR
DIRECTORS, OFFICERS AND EMPLOYEES AGAINST ALL LOSSES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE
ADMINISTRATIVE AGENT, THE ARRANGER, THE LC ISSUER, ANY LENDER OR ANY AFFILIATE
IS A PARTY THERETO) WHICH ANY OF THEM MAY PAY OR INCUR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE DIRECT OR INDIRECT APPLICATION OR PROPOSED
APPLICATION OF THE PROCEEDS OF ANY LOAN HEREUNDER EXCEPT TO THE EXTENT THAT
THEY ARE DETERMINED IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT
JURISDICTION TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF THE PARTY SEEKING INDEMNIFICATION.  
THE OBLIGATIONS OF EACH BORROWER UNDER THIS SECTION 11.6 SHALL
SURVIVE THE TERMINATION OF THIS AGREEMENT.


 


11.7.        Numbers of Documents.  All statements, notices, closing documents,
and requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to
each of the Lenders.


 


11.8.        Accounting. 
Except as provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder shall
be made in accordance with Agreement Accounting Principles.


 


11.9.        Severability of
Provisions.  Any provision in any Loan Document that is held to be
inoperative, unenforceable, or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation, enforceability, or
validity of that provision in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.


 


11.10.      Nonliability of
Lenders.  The relationship between the Borrowers on the one hand and the
Lenders, the LC Issuer and the Administrative Agent on the other hand shall be
solely that of borrower and lender. 
Neither the Administrative Agent, the Arranger, the LC Issuer nor any
Lender shall have any fiduciary responsibilities to any Borrower.  Neither the Administrative Agent, the
Arranger, the LC Issuer nor any Lender undertakes any responsibility to any
Borrower to review or inform any Borrower of any matter in connection with any
phase of any Borrower’s business or operations.  Each Borrower agrees that neither the Administrative Agent, the
Arranger, the LC Issuer nor any Lender shall have liability to


 


62

















 


any Borrower (whether sounding
in tort, contract or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any
act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought.  Neither the Administrative Agent, the
Arranger, the LC Issuer nor any Lender shall have any liability with respect
to, and each Borrower hereby waives, releases and agrees not to sue for, any
special, indirect, consequential or punitive damages suffered by any Borrower
in connection with, arising out of, or in any way related to the Loan Documents
or the transactions contemplated thereby.


 


11.11.      Confidentiality.  Each Lender agrees to hold any confidential
information which it may receive from any Borrower pursuant to this Agreement
in confidence, except for disclosure (i) to its Affiliates and to other Lenders
and their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which such Lender is a party, (vi) to such Lender’s direct or
indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties, (vii)
permitted by Section 14.4 and (viii) to rating agencies if requested or
required by such agencies in connection with a rating relating to the Advances
hereunder. Notwithstanding anything herein to the contrary, confidential
information shall not include, and each Lender (and each employee,
representative or other agent of any Lender) may disclose to any and all
Persons, without limitation of any kind, the “tax treatment” and “tax
structure” (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the transactions contemplated hereby and all materials of any kind
(including opinions or other tax analyses) that are or have been provided to
such Lender relating to such tax treatment or tax structure; provided that with respect to any document
or similar item that in either case contains information concerning such tax
treatment or tax structure of the transactions contemplated hereby as well as
other information, this sentence shall only apply to such portions of the
document or similar item that relate to such tax treatment or tax structure.


 


11.12.      Nonreliance.  Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the
Credit Extension provided for herein.


 


11.13.      Disclosure.  Each Borrower and each Lender hereby
acknowledges and agrees that Bank One and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships with
any one or more of the Borrowers and their Affiliates.


 


11.14.      USA PATRIOT ACT
NOTIFICATION.  The following notification is provided to
each Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:


 


IMPORTANT INFORMATION ABOUT PROCEDURES FOR
OPENING A NEW ACCOUNT.  To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product.  What this means for the Borrowers: When any
Borrower opens an account, if such Borrower is an individual, the
Administrative Agent and the Lenders will ask for such Borrower’s name,
residential address, tax identification number, date of birth, and other
information that will allow the Administrative Agent and the Lenders to
identify such Borrower, and, if such Borrower is not an individual, the
Administrative Agent and the Lenders will ask for such Borrower’s name, tax
identification number, business address, and other information that will allow
the Administrative Agent


 


63

















 


and the Lenders to identify such
Borrower.  The Administrative Agent and
the Lenders may also ask if such Borrower is an individual, to see such
Borrower’s driver’s license or other identifying documents, and, if such
Borrower is not an individual, to see such Borrower’s Organizational Documents
or other identifying documents.


 


ARTICLE
XII


 


THE ADMINISTRATIVE AGENT


 


12.1.        Appointment;
Nature of Relationship.  Bank One, NA is hereby appointed by each of the Lenders as its
contractual representative (herein referred to as the “Administrative Agent”)
hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. 
The Administrative Agent agrees to act as such contractual
representative upon the express conditions contained in this Article XII.  Notwithstanding the use of the defined term
“Administrative Agent,” it is expressly understood and agreed that the
Administrative Agent shall not have any fiduciary responsibilities to any
Lender by reason of this Agreement or any other Loan Document and that the
Administrative Agent is merely acting as the contractual representative of the
Lenders with only those duties as are expressly set forth in this Agreement and
the other Loan Documents.  In its
capacity as the Lenders’ contractual representative, the Administrative Agent
(i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is
a “representative” of the Lenders within the meaning of the term “Secured
Party” as defined in the Texas Uniform Commercial Code, and (iii) is
acting as an independent contractor, the rights and duties of which are limited
to those expressly set forth in this Agreement and the other Loan Documents.  Each of the Lenders 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 each
Lender hereby waives.


 


12.2.        Powers.  The Administrative Agent shall have and may
exercise such powers under the Loan Documents as are specifically delegated to
the Administrative Agent by the terms of each thereof, together with such
powers as are reasonably incidental thereto. 
The Administrative Agent shall have no implied duties to the Lenders, or
any obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the Administrative
Agent.  None of the Syndication Agent,
the Co-Agent, the Arranger nor the Sole Bookrunner shall have any
responsibilities as an agent hereunder.


 


12.3.        General Immunity.  Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be liable to any Credit
Party, the Lenders or any Lender for any action taken or omitted to be taken by
it or them hereunder or under any other Loan Document or in connection herewith
or therewith except to the extent such action or inaction is determined in a
final non-appealable judgment by a court of competent jurisdiction to have
arisen from the gross negligence or willful misconduct of such Person.


 


12.4.        No Responsibility for Loans, Recitals, etc.  Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article V, except
receipt of items required to be delivered solely to the Administrative Agent;
(d) the existence or possible existence of any Default or Unmatured Default;
(e) the validity, enforceability, effectiveness,


 


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sufficiency or genuineness of
any Loan Document or any other instrument or writing furnished in connection
therewith; (f) the value, sufficiency, creation, perfection or priority of any
Lien in any collateral security; or (g) the financial condition of any Borrower
or any Guarantor of any of the Obligations or of any of such Borrower’s or any
such Guarantor’s respective Subsidiaries. 
The Administrative Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by a Borrower to the Administrative
Agent at such time, but is voluntarily furnished by any Borrower to the
Administrative Agent (either in its capacity as the Administrative Agent or in
its individual capacity).


 


12.5.        Action on Instructions of Lenders.  The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.  The Lenders hereby acknowledge that the
Administrative Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders.  The Administrative
Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Loan Document unless it shall first be indemnified
to its satisfaction by the Lenders pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any
such action.


 


12.6.        Employment of Agents and Counsel.  The Administrative Agent may execute any of
its duties as the Administrative Agent hereunder and under any other Loan
Document by or through employees, agents, and attorneys-in-fact and shall not
be answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Administrative Agent shall be entitled
to advice of counsel concerning the contractual arrangement between the
Administrative Agent and the Lenders and all matters pertaining to the
Administrative Agent’s duties hereunder and under any other Loan Document.  EACH
LENDER ACKNOWLEDGES THAT GARDERE WYNNE SEWELL LLP IS COUNSEL FOR BANK ONE, AS
IN ITS CAPACITY AS THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT AND AS A
LENDER, AND THAT SUCH FIRM DOES NOT REPRESENT ANY OF THE OTHER LENDERS IN
CONNECTION WITH THIS TRANSACTION.


 


12.7.        Reliance on Documents; Counsel.  The Administrative Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Administrative
Agent, which counsel may be employees of the Administrative Agent.


 


12.8.        ADMINISTRATIVE AGENT’S REIMBURSEMENT AND INDEMNIFICATION.  THE LENDERS AGREE TO REIMBURSE AND INDEMNIFY
THE ADMINISTRATIVE AGENT RATABLY IN PROPORTION TO THEIR RESPECTIVE COMMITMENTS
(OR, IF THE COMMITMENTS HAVE BEEN TERMINATED, IN PROPORTION TO THEIR
COMMITMENTS IMMEDIATELY PRIOR TO SUCH TERMINATION) (I) FOR ANY AMOUNTS NOT
REIMBURSED BY THE BORROWERS FOR WHICH THE ADMINISTRATIVE AGENT IS ENTITLED TO
REIMBURSEMENT BY THE BORROWERS UNDER THE LOAN DOCUMENTS, (II) FOR ANY OTHER
EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT ON BEHALF OF THE LENDERS, IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION AND
ENFORCEMENT OF THE LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, FOR ANY
EXPENSES


 


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INCURRED
BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH ANY DISPUTE BETWEEN THE
ADMINISTRATIVE AGENT AND ANY LENDER OR BETWEEN TWO OR MORE OF THE LENDERS) AND
(III) FOR ANY LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE
ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN
DOCUMENTS OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION THEREWITH OR THE
TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, FOR ANY SUCH
AMOUNTS INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN CONNECTION
WITH ANY DISPUTE BETWEEN THE ADMINISTRATIVE AGENT AND ANY LENDER OR BETWEEN TWO
OR MORE OF THE LENDERS), OR THE ENFORCEMENT OF ANY OF THE TERMS OF THE LOAN
DOCUMENTS OR OF ANY SUCH OTHER DOCUMENTS, PROVIDED THAT NO LENDER SHALL BE LIABLE
FOR ANY OF THE FOREGOING TO THE EXTENT ANY OF THE FOREGOING IS FOUND IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ADMINISTRATIVE
AGENT.  THE OBLIGATIONS OF THE LENDERS
UNDER THIS SECTION 12.8 SHALL SURVIVE PAYMENT OF THE OBLIGATIONS AND
TERMINATION OF THIS AGREEMENT.


 


12.9.        Notice of
Default.  The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Unmatured
Default hereunder unless the Administrative Agent has received written notice
from a Lender or the Borrowers referring to this Agreement describing such
Default or Unmatured Default and stating that such notice is a “notice of
default”.  In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to the Lenders.


 


12.10.      Rights as a
Lender.  In the event the Administrative Agent is a
Lender, the Administrative Agent shall have the same rights and powers
hereunder and under any other Loan Document with respect to its Commitment and
its Loans as any Lender and may exercise the same as though it were not the
Administrative Agent, and the term “Lender” or “Lenders” shall, at any time
when the Administrative Agent is a Lender, unless the context otherwise
indicates, include the Administrative Agent in its individual capacity.  The Administrative Agent and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with any Borrower, the Guarantors or
any of their respective Subsidiaries in which such Borrower, such Guarantor or
such Subsidiary is not restricted hereby from engaging with any other Person.  The Administrative Agent, in its individual
capacity, is not obligated to remain a Lender.


 


12.11.      Lender Credit
Decision.  Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, the Arranger or any other Lender and
based on the financial statements prepared by the Borrowers and the Guarantors
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and the other
Loan Documents.  Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.


 


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12.12.      Successor
Administrative Agent.  The Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrowers, such resignation to be
effective upon the appointment of a successor Administrative Agent or, if no
successor Administrative Agent has been appointed, forty-five days after the
retiring Administrative Agent gives notice of its intention to resign.  The Administrative Agent may be removed at
any time with or without cause by written notice received by the Administrative
Agent from the Required Lenders, such removal to be effective on the date
specified by the Required Lenders.  Upon
any such resignation or removal, the Required Lenders shall have the right to
appoint, on behalf of the Borrowers and the Lenders, a successor Administrative
Agent subject to the approval of the Borrowers, such approval not to be
unreasonably withheld; provided
that no Borrower shall have the right to approve any successor Administrative
Agent appointed during the continuance of any Default.  If no successor Administrative Agent shall
have been so appointed by the Required Lenders within thirty days after the
resigning Administrative Agent’s giving notice of its intention to resign, then
the resigning Administrative Agent may appoint, on behalf of the Borrowers and
the Lenders, a successor Administrative Agent. 
Notwithstanding the previous sentence, the Administrative Agent may at
any time without the consent of any Borrower or any Lender, appoint any of its
Affiliates which is a commercial bank as a successor Administrative Agent
hereunder.  If the Administrative Agent
has resigned or been removed and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of the Administrative Agent
hereunder and the Borrowers shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders.  No successor
Administrative Agent shall be deemed to be appointed hereunder until such
successor Administrative Agent has accepted the appointment.  Any such successor Administrative Agent shall
be a commercial bank having capital and retained earnings of at least
$100,000,000.  Upon the acceptance of
any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning or removed Administrative Agent.  Upon the effectiveness of the resignation or
removal of the Administrative Agent, the resigning or removed Administrative
Agent shall be discharged from its duties and obligations hereunder and under
the Loan Documents.  After the
effectiveness of the resignation or removal of an Administrative Agent, the
provisions of this Article XII shall continue in effect for the benefit of such
Administrative Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Administrative Agent hereunder and under the
other Loan Documents.  In the event that
there is a successor to the Administrative Agent by merger, or the
Administrative Agent assigns its duties and obligations to an Affiliate
pursuant to this Section 12.12, then the term “Prime Rate” as used in this
Agreement shall mean the prime rate, base rate or other analogous rate of the
new Administrative Agent.


 


12.13.      Administrative
Agent and Arranger Fees.  Each Borrower, jointly and severally, agrees to pay to the
Administrative Agent and the Arranger, for their respective accounts, the fees
agreed to by the Borrowers, the Administrative Agent and the Arranger pursuant
to that certain letter agreement dated on or about April 30, 2004, or as
otherwise agreed from time to time.


 


12.14.      Delegation to Affiliates.  The Borrowers and the Lenders agree that the Administrative Agent
may delegate any of its duties under this Agreement to any of its
Affiliates.  Any such Affiliate (and
such Affiliate’s directors, officers, agents and employees) which performs
duties in connection with this Agreement shall be entitled to the same benefits
of the indemnification, waiver and other protective provisions to which the
Administrative Agent is entitled under Articles XI and XII.


 


12.15.      Execution of Collateral Documents.  The Lenders hereby empower and authorize the
Administrative Agent and the Collateral Agent to execute and deliver to the
Borrowers on their behalf the Collateral Documents and all related financing
statements and any financing statements, agreements,


 


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documents or instruments as
shall be necessary or appropriate to effect the purposes of the Collateral
Documents.


 


12.16.      Collateral
Releases.  The Lenders hereby empower and authorize the
Administrative Agent and the Collateral Agent to execute and deliver to the
Credit Parties on their behalf any agreements, documents or instruments as
shall be necessary or appropriate to effect any releases of Collateral which
shall be permitted by the terms hereof or of any other Loan Document, including
releases required pursuant to sales of Collateral permitted under Section 8.14,
or which shall otherwise have been approved by the Required Lenders in writing.


 


ARTICLE
XIII


 


SETOFF; RATABLE PAYMENTS


 


13.1.        Setoff.  In addition to, and without limitation of,
any rights of the Lenders under applicable law, if any Credit Party becomes
insolvent, however evidenced, or any Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender or any Affiliate of any Lender to or for the credit or
account of any Credit Party may be offset and applied toward the payment of the
Obligations owing to such Lender, whether or not the Obligations, or any part
thereof, shall then be due.


 


13.2.        Ratable Payments.  If any Lender, whether by setoff or
otherwise, has payment made to it upon its Outstanding Credit Exposure (other
than payments received pursuant to Section 3.1, 3.2, or 3.4) in a greater
proportion than that received by any other Lender, such Lender agrees, promptly
upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure
held by the other Lenders so that after such purchase each Lender will hold its
Pro Rata Share of the Aggregate Outstanding Credit Exposure.  If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to their respective Pro Rata Shares of the Aggregate
Outstanding Credit Exposure.  In case
any such payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made.


 


ARTICLE
XIV


 


BENEFIT
OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS


 


14.1.        Successors and Assigns.  The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers, the
Guarantors, the Agents and the Lenders and their respective successors and
assigns permitted hereby, except that (i) the Borrowers and the Guarantors
shall not have the right to assign any of their rights or obligations under the
Loan Documents without the prior written consent of each Lender, (ii) any
assignment by any Lender must be made in compliance with Section 14.3, and
(iii) any transfer by Participation must be made in compliance with
Section 14.2.  Any attempted
assignment or transfer by any party not made in compliance with this
Section 14.1 shall be null and void, unless such attempted assignment or
transfer is treated as a participation in accordance with
Section 14.3.2.  The parties to
this Agreement acknowledge that clause (ii) of this Section 14.1 relates
only to absolute assignments and this Section 14.1 does not prohibit
assignments creating security interests, including, without limitation, (x) any
pledge or assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender


 


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which is a Fund, any pledge or
assignment of all or any portion of its rights under this Agreement and any
Note to its trustee in support of its obligations to its trustee; provided,
however, that no such pledge or assignment creating a security
interest shall release the transferor Lender from its obligations hereunder
unless and until the parties thereto have complied with the provisions of
Section 14.3.  The Administrative
Agent may treat the Person which made any Loan or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person complies
with Section 14.3; provided, however, that the Administrative
Agent may in its discretion (but shall not be required to) follow instructions
from the Person which made any Loan or which holds any Note to direct payments
relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or any Note agrees by
acceptance of such assignment to be bound by all the terms and provisions of
the Loan Documents.  Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the owner of the rights to any Loan
(whether or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the rights to
such Loan.


 


14.2.        Participations.


 


14.2.1.     Permitted Participants; Effect.  Any Lender may at any time sell to one or
more banks or other entities (“Participants”) participating interests in any
Outstanding Credit Exposure of such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender under the Loan
Documents.  In the event of any such
sale by a Lender of participating interests to a Participant, such Lender’s
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the owner of its Outstanding Credit
Exposure and the holder of any Note issued to it in evidence thereof for all
purposes under the Loan Documents, all amounts payable by the Borrowers under this
Agreement shall be determined as if such Lender had not sold such participating
interests, and the Borrowers and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under the Loan Documents.


 


14.2.2.     Voting Rights.  Each Lender shall retain the sole right to approve, without the
consent of any Participant, any amendment, modification or waiver of any
provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Credit Extension or Commitment in which such
Participant has an interest which would require consent of all of the Lenders
pursuant to the terms of Section 10.2 or of any other Loan Document.


 


14.2.3.     Benefit of Certain Provisions.  The Borrowers agree that each Participant
shall be deemed to have the right of setoff provided in Section 13.1 in
respect of its participating interest in amounts owing under the Loan Documents
to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under the Loan Documents, provided that each Lender
shall retain the right of setoff provided in Section 13.1 with respect to
the amount of participating interests sold to each Participant.  The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 13.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 13.2 as if each Participant were a Lender.  Each Borrower further agrees that each
Participant shall be entitled to the benefits of Sections 3.1, 3.2, 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 14.3, provided that (i) a Participant shall not
be entitled to receive any greater payment under Section 3.1 or 3.2 than the
Lender who sold the participating interest to such Participant would have
received had it retained such interest for its own account, unless the sale


 


69

















 


of such interest to such Participant is made with the prior written
consent of the Borrowers, and (ii) any Participant not incorporated under
the laws of the United States of America or any State  thereof, agrees to comply with the provisions of Section 3.5
to the same extent as if it were a Lender.


 


14.3.        Assignments.


 


14.3.1.  Permitted
Assignments.  Any Lender may at any
time assign to one or more banks or other entities (“Purchasers”) all or any
part of its rights and obligations under the Loan Documents.  Such assignment shall be substantially in
the form of Exhibit C or in such other form as may be agreed to by the parties
thereto.  Each such assignment with
respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an
Approved Fund shall either be in an amount equal to the entire applicable
Commitment and Loans of the assigning Lender or (unless each of the Borrowers
and the Administrative Agent otherwise consents) be in an aggregate amount not
less than $5,000,000.  The amount of the
assignment shall be based on the Commitment or outstanding Loans (if the
Commitment has been terminated) subject to the assignment, determined as of the
date of such assignment or as of the “Trade Date,” if the “Trade Date” is
specified in the assignment.


 


14.3.2.     Consents. 
The consent of the Borrowers shall be required prior to an assignment
becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender
or an Approved Fund; provided that the consent of the Borrowers
shall not be required if a Default has occurred and is continuing.  The consent of the Administrative Agent and
the LC Issuer shall be required prior to an assignment becoming effective
unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved
Fund.  Any consent required under this
Section 14.3.2 shall not be unreasonably withheld or delayed.


 


14.3.3.     Effect; Effective Date.  Upon (i) delivery to the Administrative
Agent of an assignment, together with any consents required by
Sections 14.3.1 and 14.3.2, and (ii) payment of a $3,500 fee by the
assigning Lender or Purchaser to the Administrative Agent for processing such
assignment (unless such fee is waived by the Administrative Agent), such
assignment shall become effective on the effective date specified in such
assignment.  The assignment shall
contain a representation by the Purchaser to the effect that none of the consideration
used to make the purchase of the Commitment and Outstanding Credit Exposure
under the applicable assignment agreement constitutes “plan assets” as defined
under ERISA and that the rights and interests of the Purchaser in and under the
Loan Documents will not be “plan assets” under ERISA.  On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by or on behalf of the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party thereto, and the transferor Lender shall
be released with respect to the Commitment and Outstanding Credit Exposure
assigned to such Purchaser without any further consent or action by the
Borrowers, the Lenders or the Administrative Agent.  In the case of an assignment covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease
to be a Lender hereunder but shall continue to be entitled to the benefits of,
and subject to, those provisions of this Agreement and the other Loan Documents
which survive payment of the Obligations and termination of the applicable
agreement.  Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 14.3 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 14.2.  Upon
the consummation of any assignment to a Purchaser


 


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pursuant to this Section 14.3.3, the transferor Lender, the
Administrative Agent and the Borrowers shall, if the transferor Lender or the
Purchaser desires that its Loans be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement Notes are issued
to such transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts reflecting
their respective Commitments, as adjusted pursuant to such assignment.


 


14.3.4.     Register. 
The Administrative Agent, acting solely for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in Chicago, Illinois, a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). 
The entries in the Register shall be conclusive, and the Borrowers, 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 Borrowers at any reasonable time and from time to time upon
reasonable prior notice.


 


14.4.        Dissemination of Information.  The Borrowers authorize each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a “Transferee”) and
any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Borrowers and their Subsidiaries,
including without limitation any information contained in any Report; provided that each Transferee and
prospective Transferee agrees to be bound by Section 11.11 of this
Agreement.


 


ARTICLE
XV


 


NOTICES


 


15.1.        Notices.  Except as otherwise permitted by Section
2.14 with respect to borrowing notices, all notices, requests and other
communications to any party hereunder shall be in writing (including electronic
transmission, facsimile transmission or similar writing) and shall be given to
such party: (a) in the case of the Borrowers, to the Borrower Representative,
at its address or facsimile number set forth on the signature pages hereof, (b)
in the case of the Guarantors, at its address or facsimile number set forth on
the signature pages hereof, (c) in the case of the Administrative Agent, at its
address or facsimile number set forth on the signature pages hereof, (d) in the
case of any Lender, at its address or facsimile number set forth on Annex A
attached hereto, or (e) in the case of any other party, at such other address
or facsimile number as such party may hereafter specify for the purpose by
notice to the Administrative Agent and the Borrowers in accordance with the
provisions of this Section 15.1. 
Each such notice, request or other communication shall be effective (i)
if given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered (or, in the case of electronic transmission,
received) at the address specified in this Section; provided that notices to the Administrative Agent under
Article II shall not be effective until received.


 


15.2.        Change of Address.  The Borrower Representative, the
Administrative Agent and any Lender may each change the address for service of
notice upon it by a notice in writing to the other parties hereto.


 


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ARTICLE
XVI


 


COUNTERPARTS


 


16.1.        Counterparts.  This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement,
and any of the parties hereto may execute this Agreement by signing any such
counterpart; signature pages may be detached from multiple separate counterparts
and attached to a single counterpart so that all signature pages are physically
attached to the same document.  This Agreement shall be effective when it has been executed by
the Borrowers, the Guarantors, the Administrative Agent, the LC Issuer and the
Lenders and each party has notified the Administrative Agent by facsimile
transmission or telephone that it has taken such action.


 


ARTICLE
XVII


 


CHOICE
OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL


 


17.1.        CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, BUT OTHERWISE
WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF TEXAS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.


 


17.2.        CONSENT TO JURISDICTION.  EACH BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF ANY UNITED STATES FEDERAL OR
TEXAS STATE COURT SITTING IN DALLAS, TEXAS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING AN
EXPRESS CONSENT TO ANOTHER JURISDICTION) AND EACH BORROWER AND EACH GUARANTOR
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, THE LC ISSUER OR ANY LENDER
TO BRING PROCEEDINGS AGAINST ANY BORROWER OR ANY GUARANTOR IN THE COURTS OF ANY
OTHER JURISDICTION.  ANY JUDICIAL
PROCEEDING BY ANY BORROWER OR ANY GUARANTOR AGAINST THE ADMINISTRATIVE AGENT,
THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT, THE
LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.


 


17.3.        WAIVER
OF JURY TRIAL.  EACH BORROWER, EACH GUARANTOR, THE
ADMINISTRATIVE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.


 


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ARTICLE
XVIII


 


AMENDMENT AND RESTATEMENT


 


Effective upon
the satisfaction of each of the conditions set forth in Section 5.1, this
Agreement shall supersede in its entirety the Original Credit Agreement;
provided, however, that all loans, letters of credit, and other indebtedness,
obligations and liabilities outstanding under the Original Credit Agreement on
such date shall continue to constitute Loans, Facility LCs and other
indebtedness, obligations and liabilities under this Agreement and the
execution and delivery of this Agreement or any of the Loan Documents hereunder
shall not constitute a novation, refinancing or any other fundamental change in
the relationship among the parties and the Loans, Facility LCs, and other
indebtedness, obligations and liabilities outstanding hereunder, to the extent
outstanding under the Original Credit Agreements immediately prior to the date
hereof, shall constitute the same loans, letters of credit, and other
indebtedness, obligations and liabilities as outstanding under the Original
Credit Agreements.


 


73

















 


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


 


 


	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G.
  Riggs, Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CWEI-SWR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs, Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower
  Representative:

  
	
   

  	
  Clayton
  Williams Energy, Inc.

  
	
   

  	
  Six Desta
  Drive, Suite 6500

  
	
   

  	
  Midland,
  Texas  79705

  
	
   

  	
  Attention:  Mel G. Riggs

  
	
   

  	
  Telephone:  (915) 688-3431

  
	
   

  	
  Facsimile:  (915) 688-3247

  



 

















 


	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  WARRIOR GAS CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G.
  Riggs, Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ACQUISITIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G.
  Riggs, Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROMERE PASS ACQUISITION L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G.
  Riggs, Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ROMERE PASS
  ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mel G. Riggs, Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  c/o Clayton
  Williams Energy, Inc.

  
	
   

  	
  Six Desta
  Drive, Suite 6500

  
	
   

  	
  Midland,
  Texas  79705

  
	
   

  	
  Attention:  Mel G. Riggs

  
	
   

  	
  Telephone:  (915) 688-3431

  
	
   

  	
  Facsimile:  (915) 688-3247

  



 

















 


	
   

  	
  BANK ONE, NA,

  
	
   

  	
  Individually and as the Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Wm. Mark Cranmer

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bank
  One, NA

  
	
   

  	
  Mail
  Code IL1-0634

  
	
   

  	
  1
  Bank One Plaza

  
	
   

  	
  Chicago,
  Illinois 60670-0634

  
	
   

  	
  Attention:

  	
  Jim
  Moore

  
	
   

  	
  Telephone:
  (312) 385-7057

  
	
   

  	
  Facsimile:
  (312) 732-4840

  
	
   

  	
   

  
	
   

  	
  with
  a copy to:

  
	
   

  	
  Bank
  One, NA

  
	
   

  	
  1717
  Main Street

  
	
   

  	
  Fourth
  Floor

  
	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
  Attention:

  	
  Wm.
  Mark Cranmer, Director

  
	
   

  	
   

  	
  Capital
  Markets

  
	
   

  	
  Telephone:
  (214) 290-2212

  
	
   

  	
  Facsimile:
  (214) 290-2332

  
				



 

















 


	
   

  	
  UNION BANK OF
  CALIFORNIA, N.A.,

  
	
   

  	
  a national banking association

  
	
   

  	
  as a Lender and as the Syndication Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Kimberly
  Coil

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Randall Osterberg

  
	
   

  	
  Title:

  	
  Senior Vice President

  
				



 

















 


	
   

  	
  BANK OF SCOTLAND

  
	
   

  	
  as a Lender and as the Co-Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
  Name:

  	
  Karen
  Workman

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
				



 



















 


ANNEX
A


 


COMMITMENT
PERCENTAGES


 


	
  LENDER

  	
   

  	
  COMMITMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bank One, NA

  	
   

  	
  $

  	
  133,333,333.32

  	
   

  
	
  1 Bank One
  Plaza

  	
   

  	
   

  	
   

  
	
  Mail Code
  IL1-0634

  	
   

  	
   

  	
   

  
	
  Chicago,
  Illinois 60670-0634

  	
   

  	
   

  	
   

  
	
  Attention:

  	
  Jim Moore

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  312.385.7057

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
  312.385.7096

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Union Bank
  of California, N.A.

  	
   

  	
  $

  	
  83,333,333.34

  	
   

  
	
  500 North
  Akard Street, Suite 4200

  	
   

  	
   

  	
   

  
	
  Dallas,
  Texas  75201

  	
   

  	
   

  	
   

  
	
  Attention:  John Clark

  	
   

  	
   

  	
   

  
	
  Telephone:  214.922.4203

  	
   

  	
   

  	
   

  
	
  Facsimile:  214.922.4209

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bank of
  Scotland

  	
   

  	
  $

  	
  83,333,333.34

  	
   

  
	
  565 Fifth
  Avenue

  	
   

  	
   

  	
   

  
	
  New York,
  New York

  	
   

  	
   

  	
   

  
	
  Attention:  Ms. Shirley Vargas

  	
   

  	
   

  	
   

  
	
  Telephone:  (212) 450-0875

  	
   

  	
   

  	
   

  
	
  Facsimile:  (212) 479-2807

  	
   

  	
   

  	
   

  



 

















 


PRICING SCHEDULE

APPLICABLE MARGIN


 


	
  Borrowing Base Usage

  	
   

  	
  Applicable
  Margin

  for Floating Rate

  Loans

  	
   

  	
  Applicable
  Margin for

  Eurodollar Loans

  	
   

  	
  Applicable
  Margin

  for 

  Commitment Fee

  	
   

  
	
  Greater than
  or equal to 90% and less than or equal to 100%

  	
   

  	
  1.00

  	
  %

  	
  2.25

  	
  %

  	
  .50

  	
  %

  
	
  Greater than
  or equal to 75% and less than 90%

  	
   

  	
  .75

  	
  %

  	
  2.00

  	
  %

  	
  .50

  	
  %

  
	
  Greater than
  or equal to 50% and less than 75%

  	
   

  	
  .50

  	
  %

  	
  1.75

  	
  %

  	
  .375

  	
  %

  
	
  Less than
  50%

  	
   

  	
  .25

  	
  %

  	
  1.50

  	
  %

  	
  .375

  	
  %

  



 

















 


EXHIBIT
A-1

FORM OF BORROWER’S COUNSEL OPINION


 

















 


EXHIBIT
A-2

FORM OF COLLATERAL AGENT’S OPINION


 

















 


EXHIBIT
B



COMPLIANCE CERTIFICATE


 


To:          The Lenders parties to the

Credit Agreement Described Below


 


This Compliance Certificate is furnished pursuant to that certain
Amended and Restated Credit Agreement dated as of
[                               ],
2004 (as amended, modified, renewed or extended from time to time, the
“Agreement”) among Clayton Williams Energy, Inc., a Delaware corporation and
CWEI-SWR, Inc., a Delaware corporation (collectively, the “Borrowers” and each
a “Borrower”), Warrior Gas Co., a Texas corporation, CWEI Acquisitions, Inc., a
Delaware corporation, Romere Pass Acquisition L.L.C., a Delaware limited
liability company and CWEI Romere Pass Acquisition Corp., a Delaware
corporation (“Guarantors”) and each a “Guarantor”), the lenders party thereto,
the LC Issuer, Bank One, NA, as Administrative Agent for the Lenders, Union
Bank of California, N.A., as the Syndication Agent and Bank of Scotland, as the
Co-Agent.  Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.


 


THE UNDERSIGNED HEREBY CERTIFIES THAT:


 


1.             I am the duly
elected
                      
of CWEI;


 


2.             I have reviewed the
terms of the Agreement and I have made, or have caused to be made under my
supervision, a detailed review of the transactions and conditions of CWEI and
its Subsidiaries during the accounting period covered by the attached financial
statements;


 


3.             The examinations
described in paragraph 2 did not disclose, and I have no knowledge of, the
existence of any condition or event which constitutes a Default or Unmatured
Default during or at the end of the accounting period covered by the attached
financial statements or as of the date of this Certificate, except as set forth
below; and


 


4.             Schedule I attached
hereto sets forth financial data and computations evidencing Borrower’s
compliance with certain covenants of the Agreement, all of which data and
computations are true, complete and correct.


 


5.             Schedule II
attached hereto sets forth the various reports and deliveries which are
required at this time under the Agreement and the other Loan Documents and the
status of compliance.


 


Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which CWEI and its Subsidiaries have taken, is taking,
or proposes to take with respect to each such condition or event:


 


 


 


 


 

















 


The foregoing certifications, together with
the computations set forth in Schedule I hereto and the financial statements
delivered with this Certificate in support hereof, are made and delivered this
      day of
                  
,           .


 


	
   

  	
   

  



 

















 


SCHEDULE
I TO COMPLIANCE CERTIFICATE


 


Compliance as of
               
,        with

Provisions of 8.22.1 and 8.22.2 of

the Agreement


 

















 


SCHEDULE II TO COMPLIANCE CERTIFICATE


 


Reports and Deliveries Currently Due


 

















 


EXHIBIT C



ASSIGNMENT AND ASSUMPTION AGREEMENT


 


This Assignment and Assumption (the “Assignment and Assumption”)
is dated as of the Effective Date set forth below and is entered into by and
between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee]
(the “Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Amended and Restated Credit Agreement identified below (as amended, the “Credit
Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Terms and Conditions set
forth in Annex 1 attached hereto are hereby agreed to and incorporated herein
by reference and made a part of this Assignment and Assumption as if set forth
herein in full.


 


For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below, the interest in and to all of the
Assignor’s rights and obligations in its capacity as a Lender under the Credit
Agreement and any other documents or instruments delivered pursuant thereto
that represents the amount and percentage interest identified below of all of
the Assignor’s outstanding rights and obligations under the respective
facilities identified below (including, without limitation and to the extent
permitted to be assigned under applicable law, all claims (including without
limitation contract claims, tort claims, malpractice claims, statutory claims
and all other claims at law or in equity), suits, causes of action and any
other right of the Assignor against any Person whether known or unknown arising
under or in connection with the Credit Agreement, any other documents or
instruments delivered pursuant thereto or the loan transactions governed
thereby) (the “Assigned Interest”). 
Such sale and assignment is without recourse to the Assignor and, except
as expressly provided in this Assignment and Assumption, without representation
or warranty by the Assignor.


 


	
  1.

  	
  Assignor:

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
                                                                        [and
  is an Affiliate/Approved Fund of [identify Lender]](1)

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower(s):

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Administrative Agent:

  	
                                                            ,
  as the agent under the Credit Agreement.

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Credit Agreement:

  	
  The $300,000,000  Amended and Restated Credit Agreement
  dated as of
                          
  among Clayton Williams Energy, Inc. and CWEI-SWR, Inc. (“Borrowers”), Warrior
  Gas Co., CWEI Acquisition Corp., Romere Pass Acquisition L.L.C. and CWEI
  Romere Pass Acquisition Corp. (“Guarantors”), the Lenders party thereto, Bank
  One, NA, as the Administrative Agent, and the other agents party thereto.

  
					



 












(1) Select as applicable.


 

















 


6.             Assigned
Interest:


 


	
  Facility Assigned

  	
   

  	
  Aggregate Amount
  of

  Loans for all Lenders*

  	
   

  	
  Amount of

  Loans Assigned*

  	
   

  	
  Percentage
  Assigned of

  Commitment/Outstanding

  Credit Exposure(2)

  	
   

  
	
   

  	
  (3)

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  



 


7.             Trade
Date:
                                                               (4)


 


Effective Date:
                                ,
20      [TO BE INSERTED BY THE ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE
ADMINISTRATIVE AGENT.]


 


The terms set forth in this Assignment and Assumption are hereby agreed
to:


 


 


	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
					



 

















 


	
  [Consented to and](5)  Accepted:

  
	
   

  
	
  BANK ONE, NA,

  
	
  as the Administrative Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  
	
   

  
	
   

  
	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Mel G. Riggs, Senior Vice President-Finance

  
	
   

  
	
   

  
	
  CWEI-SWR,
  INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
							



 


 












*Amount to be adjusted by the counterparties to take into account any
payments or prepayments made between the Trade Date and the Effective Date.


(2) Set forth, to at least 9 decimals, as a percentage of the
Commitment/Loans of all Lenders thereunder.


(3) Fill in the appropriate terminology for the types of facilities
under the Credit Agreement that are being assigned under this Assignment (e.g.
“Commitment,”, etc.)


(4) Insert if satisfaction of minimum amounts is to be determined as of
the Trade Date.


(5)  To be added only
if the consent of the Administrative Agent is required by the terms of the
Credit Agreement.


 

















 


ANNEX
I

TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION


 


1.             Representations
and Warranties.


 


1.1           Assignor.  The Assignor represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby.  Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) any statements,
warranties or representations made in or in connection with the Credit
Agreement or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency, perfection, priority, collectibility,
or value of the Loan Documents or any collateral thereunder, (iii) the
financial condition of the Guarantors, the Borrowers, any of their Subsidiaries
or Affiliates or any other Person obligated in respect of any Loan Document,
(iv) the performance or observance by the Guarantors, the Borrowers, any of
their Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Documents, (v) inspecting any of the property, books
or records of any Borrower, or any Guarantor, or (vi) any mistake, error of
judgment, or action taken or omitted to be taken in connection with the Loans
or the Loan Documents.


 


1.2.          Assignee.  The Assignee (a) represents and warrants
that (i) it has full power and authority, and has taken all action necessary,
to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, (iii)
agrees that its payment instructions and notice instructions are as set forth
in Schedule 1 to this Assignment and Assumption, (iv) confirms that none of the
funds, monies, assets or other consideration being used to make the purchase
and assumption hereunder are “plan assets” as defined under ERISA and that its
rights, benefits and interests in and under the Loan Documents will not be
“plan assets” under ERISA, (v) agrees to indemnify and hold the Assignor
harmless against all losses, costs and expenses (including, without limitation,
reasonable attorneys’ fees) and liabilities incurred by the Assignor in
connection with or arising in any manner from the Assignee’s non-performance of
the obligations assumed under this Assignment and Assumption, (vi) it has
received a copy of the Credit Agreement, together with copies of financial
statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (vii) attached as Schedule
1 to this Assignment and Assumption is any documentation required to be delivered
by the Assignee with respect to its tax status pursuant to the terms of the
Credit Agreement, duly completed and executed by the Assignee and (b) agrees
that (i) it will, independently and without reliance on the Administrative
Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations
which by the terms of the Loan Documents are required to be performed by it as
a Lender.


 


2.             Payments.  The Assignee shall pay the
Assignor, on the Effective Date, the amount agreed to by the Assignor and the
Assignee.  From and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees


 

















 


and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.


 


3.             General
Provisions. This Assignment and Assumption shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument.  Delivery of an executed
counterpart of a signature page of this Assignment and Assumption by telecopy
shall be effective as delivery of a manually executed counterpart of this
Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of Texas.


 

















 


ADMINISTRATIVE
QUESTIONNAIRE


 


(Schedule to be supplied by Closing Unit or Trading Documentation Unit)


 


(For Forms for Primary Syndication call Peterine Svoboda at
312-732-8844)

(For Forms after Primary Syndication call Jim Bartz at 312-732-1242)


 

















 


US AND NON-US TAX
INFORMATION REPORTING REQUIREMENTS


 


(Schedule to be supplied by Closing Unit or Trading Documentation Unit)


 


(For Forms for Primary Syndication call Peterine Svoboda at
312-732-8844)

(For Forms after Primary Syndication call Jim Bartz at 312-732-1242)


 

















 


EXHIBIT D



LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION


 


To Bank One, NA,

as the Administrative Agent (the “Administrative Agent”) under the Credit
Agreement

Described Below.


 


Re:          Amended
and Restated Credit Agreement, dated as of May 21, 2004 (as the same may be
amended or modified, the “Credit Agreement”), among Clayton Williams Energy,
Inc. and CWEI-SWR, Inc. (the “Borrowers”), Warrior Gas Co., CWEI Acquisitions,
Inc., Romere Pass Acquisition L.L.C. and CWEI Romere Pass Acquisition Corp.
(“Guarantors”), the Lenders named therein, the LC Issuer, Bank One, NA, as the
Administrative Agent, Union Bank of California, N.A., as the Syndication Agent
and Bank of Scotland, as the Co-Agent. 
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned thereto in the Credit Agreement.


 


The Administrative Agent is specifically authorized and directed to act
upon the following money transfer instructions with respect to the proceeds of
the initial Advance.


 


	
  Facility Identification Number(s)

  
	
   

  
	
  Customer/Account Name

  
	
   

  
	
  Transfer Funds To

  
	
   

  
	
   

  
	
   

  
	
  For Account No.

  
	
   

  
	
  Reference/Attention To

  



 


	
  Authorized Officer (Customer Representative)

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Please Print)

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Bank Officer Name

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Please Print)

  	
   

  	
  Signature

  



 


(Deliver Completed Form to Credit Support
Staff For Immediate Processing)


 

















 


EXHIBIT E



NOTE


 


[Date]


 


Each of Clayton Williams Energy, Inc., a Delaware corporation and
CWEI-SWR, Inc., a Delaware corporation (collectively, the “Borrowers”), jointly
and severally, promise to pay to the order of
                                                      
(the “Lender”) the aggregate unpaid principal amount of all Loans made by the
Lender to the Borrowers pursuant to Article II of the Agreement (as hereinafter
defined), in immediately available U.S. Dollars at the main office of Bank One,
NA, in Chicago, Illinois, as the Administrative Agent, together with interest
on the unpaid principal amount hereof at the rates and on the dates set forth
in the Agreement.  The Borrowers shall
pay the principal of and accrued and unpaid interest on the Loans in full on
the Facility Termination Date and shall make such mandatory payments as are
required to be made under the terms of Article II of the Agreement.


 


The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.


 


This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Amended and Restated Credit Agreement dated as of May 21,
2004 (which, as it may be amended or modified and in effect from time to time,
is herein called the “Agreement”), among the Borrowers, certain guarantors a
party thereto, the lenders party thereto, including the Lender, the LC Issuer
and Bank One, NA, as the Administrative Agent, Union Bank of California, N.A.,
as the Syndication Agent, and Bank of Scotland, as the Co-Agent, to which
Agreement reference is hereby made for a statement of the terms and conditions
governing this Note, including the terms and conditions under which this Note
may be prepaid or its maturity date accelerated.  This Note is secured pursuant to the Collateral Documents and is
guaranteed pursuant to the Guaranty as more specifically described in the
Agreement, and reference is made thereto for a statement of the terms and
provisions thereof.  Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.


 


 


	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI-SWR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						



 

















 


SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF
                  ,

DATED
             ,


 


	
  Date

  	
   

  	
  Principal

  Amount of

  Loan

  	
   

  	
  Maturity

  of Interest

  Period

  	
   

  	
  Principal

  Amount

  Paid

  	
   

  	
  Unpaid

  Balance

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


EXHIBIT
F



CERTIFICATE OF EFFECTIVENESS


 


This Certificate of Effectiveness (this “Certificate”)
is executed as of the [        ] day of
May, 2004, by and between Clayton Williams Energy, Inc., a Delaware corporation
and CWEI-SWR, Inc., a Delaware corporation, (collectively, the “Borrowers”),
Warrior Gas Co., a Texas corporation, CWEI Acquisitions, Inc., a Delaware
corporation, Romere Pass Acquisition L.L.C., a Delaware limited liability
company and CWEI Romere Pass Acquisition Corp., a Delaware corporation
(collectively, the “Guarantors”), the LC Issuer, Union
Bank of California, N.A., as the Syndication Agent and Bank of Scotland, as the
Co-Agent, and Bank One, NA, with its
main office in Chicago, Illinois, as the Administrative Agent (“Administrative
Agent”) for the Lenders under and as defined in that certain Credit
Agreement (the “Agreement”) dated as of
[                 ],
2004 by and among the Borrowers, Guarantors, the Administrative Agent and the
Lenders named therein.  This Certificate
is executed pursuant to Section 5.2 of the Agreement and is the “Certificate of
Effectiveness” therein referenced. 
Unless otherwise defined herein, all terms used herein with their
initial letter capitalized shall have the meaning given such terms in the
Agreement.  The Borrowers and the
Administrative Agent on behalf of itself and the Lenders hereby acknowledge and
agree as follows:


 


1.             The
Borrowers have satisfied each condition precedent to the effectiveness of the
Agreement contained in Sections 5.1 and 5.2 of the Agreement.


 


2.             This Agreement is effective as of
the date hereof:


 


 


	
   

  	
  BANK ONE, NA, as the
  Administrative Agent for the Lenders

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Director, Capital Markets

  
	
   

  	
   

  
	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI-SWR, INC., a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
								



 

















 


EXHIBIT
G



FORM OF PLEDGE AGREEMENTS


 

















 


EXHIBIT
H



FORM OF SWR HEDGE ASSUMPTION AGREEMENT


 


ASSIGNMENT AGREEMENT


 


This Assignment Agreement
(“Assignment Agreement”) is made as of the 16th day of May, 2004 between:


 


(1)           SOUTHWEST ROYALTIES, INC. (the “Retiring Counterparty”);


 


(2)           BANK ONE, NA (CHICAGO, ILLINOIS) (the “New Counterparty”)
and


 


(3)           MACQUARIE BANK LIMITED (“MACQUARIE”)


 


BACKGROUND:


 


(A)          MACQUARIE and the Retiring Counterparty entered into
certain commodity swap transactions the confirmations for which are included in
Schedule 1 hereto (the ‘Transferred Swaps pursuant to an ISDA Master Agreement
dated as of September 15, 2003 (as amended, supplemented and otherwise modified
and in effect from time to time, the” Existing Master Agreement”).


 


(B)           MACQUARIE and the New Counterparty entered into an ISDA
Master Agreement dated as of August 26, 1992 (as amended, supplemented and
otherwise modified and in effect from time to time, the “New Master
Agreement’).


 


(C)           The parties hereto have agreed that with effect from and
including the effective date detailed in Schedule 1 hereto (the “Effective
Date”) all the rights and obligations of the Retiring Counterparty in respect
of the transferred Swaps should be transferred to the New Counterparty on the
basis hereinafter described and shall be deemed to be subject to the New Master
Agreement.


 


NOW IT IS HEREBY AGREED AS
FOLLOWS:


 


1.             Assignment and
Assumption


 


Effective as
of the Effective Date, the Retiring Counterparty hereby assigns, transfers and
sets over to the New Counterparty all the right, title and interest, powers,
privileges and remedies of the Retiring Counterparty under the Transferred
Swaps, and the Retiring Counterparty hereby delegates and the New Counterparty
hereby assumes all duties, liabilities and obligations of the Retiring Counterparty
under the Transferred Swaps. MACQUAIRE and the New Counterparty shall execute
confirmations in the form attached as Schedule I hereto setting forth the terms
of the assigned transactions between them, subject to the New Master Agreement.


 

















 


2.             Consent
and Release


 


MACQUARIE
hereby consents to the foregoing assignment and delegation. As of the Effective
Date Retiring Counterparty and MACQUARIE release one another from all
obligations with respect to the Transferred Swaps, provided that such release
shall not affect any rights or obligations arising before such Effective Date.
Other than obligations arising under the Transferred Swaps prior to the
Effective Date the Retiring Counterparty shall not be required to make any
payments to MACQUARIE or the New Counterparty in respect of the Transferred
Swaps or the assignment contemplated by this Assignment Agreement.


 


3.             Representations


 


Each party
hereby represents that (i) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization or
incorporation, (ii) it has the power to execute and deliver this Assignment
Agreement and to perform its obligations under this Assignment Agreement and
has taken all necessary action to authorize such execution and delivery and
performance of such obligations, (iii) its execution and delivery of this
Assignment Agreement does not violate or conflict with any law, rule or
regulation applicable to it, any provision of its charter or by-laws (or
comparable constituent documents), any order or judgment of any court or other
agency of government applicable to it or any of its assets, (iv) all
authorizations of and exemptions, actions or approvals by, and all notices to
or filings with any governmental or other authority that are required to have
been obtained or made by the party at any time this representation is made with
respect to this Assignment Agreement have been obtained or made and are in full
force and effect and all conditions of any such authorizations, exemptions,
actions or approvals have been complied with, and (v) this Assignment Agreement
constitutes the party’s legal, valid and binding obligation, enforceable
against the party in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors’ rights generally and subject, as to enforceability, to equitable
principles of general application (regardless of whether enforcement is sought
in a proceeding in equity or at law). The Retiring Counterparty and MACQUARIE
each represent that no event or condition has occurred that constitutes or
would with the giving of notice or the passage of time or both constitute) an
Event of Default (as such term is defined in the 1992 ISDA Master Agreement (Multicurrency
Cross Border) (the “ISDA Master Agreement”)) or, to the party’s knowledge, a
Termination Event (as such term is defined in the ISDA Master Agreement), with
respect to the party, and no such event would occur as a result of the party’s
entering into or performing its obligations under this Assignment Agreement.


 


4.             Governing Law


 


This
Assignment Agreement shall be governed by and construed in accordance, with the
laws of the State of New York without reference to choice of law doctrine.


 


5.             Counterparts


 


This
Assignment Agreement may be executed in any number of counterparts, each of
which will be deemed an original.


 


IN WITNESS
WHEREOF the parties have executed this Assignment Agreement with effect from
the Effective Date.


 

















 


SOUTHWEST ROYALTIES, INC.


 


 


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  BANK ONE, NA
  (CHICAGO, ILLINOIS)

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  MACQUAIRE
  BANK LIMITED

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						



 

















 


SCHEDULE I


 


EFFECTIVE DATE  - 
MAY 21, 2004


 


TRANSFERRED COMMODITY SWAPS -
SEE ATTACHED CONFIRMATIONS

REFS# - HH_0501701/2 AND HH_0501703/4


 

















 


EXHIBIT I



FORM OF GUARANTY


 

















 


EXHIBIT
J



FORM OF JOINDER AGREEMENT


 

















 


SCHEDULE  1.1(a)



EXISTING LETTERS OF CREDIT


 


Irrevocable Standby Letter of Credit No. 3065235384, dated January 8,
2004, issued by Union Bank of California, N.A. for the benefit of Oneok Energy
Marketing and Trading Company in the amount of $40,000.


 

















 


SCHEDULE
1.1(b)



SWR RATE MANAGEMENT TRANSACTIONS


 


ISDA Master Agreement dated September 15, 2003, by and between
Macquarie Americas Corp. and Southwest Royalties, Inc.


 


Energy Option Transaction between Southwest Royalties, Inc. and
Macquarie Americas Corp., Deal Reference No. HH_0501701/2, trade date –
September 16, 2003.


 


Energy Option Transaction between Southwest Royalties, Inc. and
Macquarie Americas Corp., Deal Reference No. HH_0501703/4, trade date –
September 16, 2003.


 

















 


SCHEDULE
1.1(c)



SWR INTEREST RATE AGREEMENTS


 


ISDA Master Agreement dated as of August 22, 2003 between Union Bank of
California, N.A. and Southwest Royalties, Inc.


 


First Amendment to ISDA Master Agreement dated as of February 17, 2004
between Union Bank of California, N.A. and Southwest Royalties.


 


Five Swap Transaction Confirmations between Union Bank of California,
N.A. and the Company:


 


•              For
the period November 1, 2003 through November 1, 2004, principal - $65 million,
rate 1.680%


 


•              For the period November 1, 2004
through November 1, 2005, principal - $60 million, rate 2.970%


 


•              For the period November 1, 2005
through November 1, 2006, principal - $55 million, rate 4.290%


 


•              For the period November 1, 2006
through November 1, 2007, principal - $60 million, rate 5.190%


 


•              For the period November 1, 2007
through November 1, 2008, principal - $45 million, rate 5.730%


 

















 


SCHEDULE 1.1(d)



PERMITTED LIENS


 


None.


 

















 


SCHEDULE 6.8



SUBSIDIARIES


 


 


CWEI has the following corporate or limited liability company
subsidiaries:


 


	
  SUBSIDIARY

  	
   

  	
  JURISDICTION

  	
   

  	
  OWNED

  BY

  	
   

  	
  PERCENT

  OWNERSHIP

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Warrior
  Gas Company

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Clajon
  Industrial Gas, Inc.

  	
   

  	
  Texas

  	
   

  	
  Warrior
  Gas Company

  	
   

  	
  100

  	
  %

  
	
  Clayton
  Williams Trading Company

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Clayton
  Williams Venezuela, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  CWEI
  Acquisitions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Clayton
  Williams Pipeline, Inc.

  	
   

  	
  Texas

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  CWEI
  Romere Pass Acquisition Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Romere
  Pass Acquisition L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  CWEI
  Romere Pass Acquisition Corp.

  	
   

  	
  100

  	
  %

  
	
  Warrior
  Mississippi Corp.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Southwest
  Royalties, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  
	
  Blue
  Heel Company

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100

  	
  %

  
	
  Southwest
  Consolidated Partnerships, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100

  	
  %

  
	
  Southwest
  Managed Assets, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100

  	
  %

  
	
  SWR
  Property Company

  	
   

  	
  Delaware

  	
   

  	
  Southwest
  Royalties, Inc.

  	
   

  	
  100

  	
  %

  
	
  Tex-Hal
  Partners, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Clayton
  Williams Energy, Inc.

  	
   

  	
  100

  	
  %

  



 

















 


SCHEDULE
6.13



OWNERSHIP OF PROPERTIES


 


None.


 

















 


SCHEDULE 8.11



INDEBTEDNESS


 


None.


 

















 


SCHEDULE
8.15(vi)



RELATED PARTNERSHIPS


 


	
  INVESTMENT

  IN

  	
   

  	
  FORMATION

  	
   

  	
  GENERAL

  PARTNER%

  	
   

  	
  LIMITED

  PARTNER%(a)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Southwest
  Royalties, Inc. Income Fund V, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  10.00

  	
  %

  	
  34.99

  	
  %

  
	
  Southwest
  Royalties, Inc. Income Fund VI, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  10.00

  	
  %

  	
  32.09

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund VII-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  28.24

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund VII-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  26.78

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund VIII-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  22.95

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund VIII-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  10.00

  	
  %

  	
  19.83

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund IX-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  4.34

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund IX-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.86

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund X-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  1.80

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund X-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.13

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund X-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  2.39

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund X-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  8.89

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund X-C, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.42

  	
  %

  
	
  Southwest
  Royalties Institutional Income Fund X-C, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  3.20

  	
  %

  
	
  Southwest
  Developmental Drilling Fund 91-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  5.60

  	
  %

  
	
  Southwest
  Developmental Drilling Fund 92-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.95

  	
  %

  
	
  Southwest
  Partners, L.P.

  	
   

  	
  Delaware

  	
   

  	
  15.00

  	
  %

  	
  4.40

  	
  %

  
	
  Southwest
  Combination Income/Drilling Program 1988, L.P.

  	
   

  	
  Delaware

  	
   

  	
  14.00

  	
  %

  	
  3.92

  	
  %

  
	
  Southwest
  Developmental Drilling Fund 1990, L.P.

  	
   

  	
  Delaware

  	
   

  	
  15.00

  	
  %

  	
  2.45

  	
  %

  
	
  Southwest
  Developmental Drilling Fund 1993, L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.13

  	
  %

  
	
  Southwest
  Developmental Drilling Fund 1994, L.P.

  	
   

  	
  Delaware

  	
   

  	
  11.00

  	
  %

  	
  0.00

  	
  %

  
	
  H.H.
  Wommack Income Fund 1983-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  15.15

  	
  %

  
	
  Southwest
  Royalties, Inc. Income Fund 1983-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  25.94

  	
  %

  
	
  Southwest
  Royalties, Inc. Income Fund 1984-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  22.20

  	
  %

  
	
  Southwest
  Combination Income/Drilling Program 1987-I, L.P.

  	
   

  	
  Delaware

  	
   

  	
  14.00

  	
  %

  	
  3.60

  	
  %

  
	
  Southwest
  Royalties, Inc. Income Fund 1985-I, L.P.

  	
   

  	
  Tennessee

  	
   

  	
  9.00

  	
  %

  	
  9.20

  	
  %

  
	
  Southwest
  Oil & Gas Income Fund XI-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  1.28

  	
  %

  
	
  Southwest
  Royalties Inc. Institutional Income Fund XI-A, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  8.37

  	
  %

  
	
  Southwest
  Royalties Inc. Institutional Income Fund XI-B, L.P.

  	
   

  	
  Delaware

  	
   

  	
  9.00

  	
  %

  	
  0.37

  	
  %

  



 












(a)  LP interest shown in SWR’s share of total
partnership capital held through its ownership of limited partnership units.


 

















 


SCHEDULE
8.24



TITLE CURATIVE REQUIREMENTS


 


 


1.     Clayton
Williams/Driscoll-Duwell Unit No. 1


Duval County, Texas


 


Comments:            Title
Materials credit working interest in unit Lease No. 1 to Clayton Williams
Energy, Inc., Winn Exploration Co., Inc. and LMP Petroleum, Inc. and in unit
Lease No. 2 to Clayton Williams Energy, Inc. and Winn Exploration Co.,
Inc.  Clayton Williams Energy, Inc.
claims 100% of the unit working interest.


 


Requirement:         Furnish
copies of recorded assignments of unit working interest of Winn Exploration
Co., Inc. and LMP Petroleum, Inc. to Clayton Williams Energy, Inc.


 


2.     Cotropia
Gas Unit No. 1


Robertson County,
Texas


 


Comments:            Requirements
below reference Division Order Title Opinion dated May 27, 2003 from Cox
& Smith, San Antonio, Texas, covering the Cotropia Gas Unit No. 1, 640.0
acres, G.A. Nixon Survey, A-31, Robertson County, Texas, certified to
January 31, 2003 at 5:00 p.m.


 


Requirement:         Furnish
materials in satisfaction of Requirement 22.


 


Requirement:         Furnish
materials in satisfaction of Requirement 27.


 


3.     Pabst
Unit


Robertson County,
Texas


 


Comment:              Various
title opinions by Lanier Yeates and Jim Burgin & Associates credit UPR with
100% working interest in each unit tract. 
Clayton Williams Energy, Inc. claims 50% working interest.


 


Requirement:         Furnish copy
of recorded assignment from UPR to Clayton Williams Energy, Inc. covering
undivided 50% working interest in Pabst Unit tracts.


 


4.     Phillips
17 Lease & Phillips 19 Lease


Eddy County, New Mexico


 


Comment:              Requirement
references DOTO from Lynch, Chappell & Allsup (11/28/00).


 


Requirement:         Satisfy
Requirement B regarding recorded assignment from Phillips Petroleum Company to
Clayton Williams Energy, Inc.


 


5.     Broughton-Perrone
No. 1 Unit


Robertson County,
Texas


 


Comment:              Requirement
references DOTO from Stubbeman, McRae (8/20/98).


 

















 


Requirement:         Satisfy
Requirement No. 33 regarding copy of recorded assignment from UPR to Clayton
Williams Energy, Inc.


 


6.     C.A.
Encalade #1, 0-6 RB SUA


Plaquemines Parish,
Louisiana


 


Requirement:         Furnish copy
of final approved Unit Plat and copy of unit Division Order Title Opinion.