exv10w3






Exhibit 10.3




      




$150,000,000




AMENDED AND RESTATED

CREDIT AGREEMENT




among




DHS HOLDING COMPANY,

DHS DRILLING COMPANY,




as Borrower,




The Several Lenders




from Time to Time Parties Hereto,




LEHMAN BROTHERS INC.,




as Sole Arranger,




and




LEHMAN COMMERCIAL PAPER INC.,




as Syndication Agent and Administrative Agent




Dated as of August 15, 2008




 





 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Other Definitional Provisions
	 	 	21	 
	1.3 Computation of Time Periods
	 	 	22	 
	 
	 	 	 	 
	ARTICLE II AMOUNT AND TERMS OF COMMITMENTS
	 	 	22	 
	2.1 Loan Commitments
	 	 	22	 
	2.2 Procedures for Borrowing
	 	 	22	 
	2.3 Maturity Date
	 	 	23	 
	2.4 Repayment of Loans; Evidence of Debt
	 	 	23	 
	2.5 Fees
	 	 	24	 
	2.6 Optional Prepayments
	 	 	24	 
	2.7 Mandatory Prepayments
	 	 	25	 
	2.8 Interest Rates, Payment Dates and Computation of Interest and Fees
	 	 	26	 
	2.9 Application of Payments
	 	 	27	 
	2.10 Requirements of Law
	 	 	28	 
	2.11 Taxes
	 	 	30	 
	2.12 Indemnity
	 	 	31	 
	2.13 Change of Lending Office
	 	 	32	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES
	 	 	32	 
	3.1 Financial Condition
	 	 	32	 
	3.2 No Change
	 	 	32	 
	3.3 Corporate Existence; Compliance with Law
	 	 	32	 
	3.4 Entity Power; Authorization; Enforceable Obligations
	 	 	33	 
	3.5 No Legal Bar
	 	 	33	 
	3.6 No Indebtedness; No Material Litigation
	 	 	33	 
	3.7 No Default
	 	 	34	 
	3.8 Ownership of Property; Liens
	 	 	34	 
	3.9 Insurance
	 	 	34	 
	3.10 Intellectual Property
	 	 	34	 
	3.11 Taxes
	 	 	34	 
	3.12 Federal Regulations
	 	 	35	 
	3.13 Labor Matters
	 	 	35	 
	3.14 ERISA
	 	 	35	 
	3.15 Regulations
	 	 	35	 
	3.16 Capital Stock; Subsidiaries
	 	 	36	 
	3.17 Use of Proceeds
	 	 	36	 
	3.18 Customers and Suppliers
	 	 	36	 
	3.19 Environmental Matters
	 	 	37	 
	3.20 Accuracy of Information, Etc
	 	 	37	 
	3.21 Security Documents
	 	 	38	 
	3.22 Solvency
	 	 	39	 
	3.23 Drilling Rig Assets
	 	 	39	 
	3.24 Contingent Obligations
	 	 	39	 
	3.25 Bank Accounts
	 	 	39	 






i









 






	 	 	 	 	 
	 	 	Page	 
	3.26 Access Agreements
	 	 	39	 
	3.27 Customers and Suppliers
	 	 	39	 
	 
	 	 	 	 
	ARTICLE IV CONDITIONS PRECEDENT
	 	 	39	 
	4.1 Conditions to Initial Loan
	 	 	39	 
	4.2 Conditions Precedent to the Extension of Term B Loans
	 	 	43	 
	4.3 Deemed Fulfilled Conditions
	 	 	44	 
	 
	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	44	 
	5.1 Financial Statements
	 	 	44	 
	5.2 Collateral Reporting
	 	 	45	 
	5.3 Certificates; Other Information
	 	 	46	 
	5.4 Payment of Obligations
	 	 	47	 
	5.5 Conduct of Business and Maintenance of Existence, etc
	 	 	47	 
	5.6 Operation and Maintenance of Property; Insurance
	 	 	47	 
	5.7 Inspection of Property; Books and Records; Discussions
	 	 	48	 
	5.8 Notices
	 	 	49	 
	5.9 Environmental Laws
	 	 	49	 
	5.10 Additional Collateral, etc
	 	 	50	 
	5.11 Use of Proceeds
	 	 	51	 
	5.12 ERISA Documents
	 	 	51	 
	5.13 Further Assurances
	 	 	52	 
	5.14 Patriot Act Compliance
	 	 	52	 
	5.15 Required Equity Contribution
	 	 	52	 
	5.16 Post Closing Deliveries
	 	 	53	 
	 
	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	53	 
	6.1 Financial Condition Covenants
	 	 	53	 
	6.2 Indebtedness
	 	 	54	 
	6.3 Liens
	 	 	55	 
	6.4 Fundamental Changes
	 	 	56	 
	6.5 Disposition of Property
	 	 	56	 
	6.6 Restricted Payments
	 	 	56	 
	6.7 Capital Expenditures
	 	 	57	 
	6.8 Investments
	 	 	57	 
	6.9 Transactions with Affiliates
	 	 	58	 
	6.10 Sales and Leasebacks
	 	 	58	 
	6.11 Changes in Fiscal Periods
	 	 	58	 
	6.12 Negative Pledge Clauses
	 	 	58	 
	6.13 Restrictions on Subsidiary Distributions
	 	 	58	 
	6.14 Lines of Business
	 	 	58	 
	6.15 Amendments of Certain Documents
	 	 	58	 
	6.16 Activities of Holdings
	 	 	59	 
	6.17 New Subsidiaries
	 	 	59	 
	6.18 Use of Proceeds
	 	 	59	 
	6.19 New Bank Accounts
	 	 	59	 
	6.20 Storage of Drilling Rig Assets
	 	 	59	 
	6.21 Hedging Agreements
	 	 	59	 
	 
	 	 	 	 
	ARTICLE VII EVENTS OF DEFAULT
	 	 	59	 
	7.1 Events of Default
	 	 	59	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	7.2 Remedies
	 	 	62	 
	 
	 	 	 	 
	ARTICLE VIII THE AGENTS
	 	 	62	 
	8.1 Appointment
	 	 	62	 
	8.2 Delegation of Duties
	 	 	62	 
	8.3 Exculpatory Provisions
	 	 	62	 
	8.4 Reliance by Agents
	 	 	62	 
	8.5 Notice of Default
	 	 	63	 
	8.6 Non Reliance on the Agents and Other Lenders
	 	 	63	 
	8.7 Indemnification
	 	 	63	 
	8.8 Agents in their Individual Capacities
	 	 	64	 
	8.9 Successor Administrative Agent
	 	 	64	 
	8.10 Authorization to Release Liens and Guarantees
	 	 	64	 
	8.11 Arranger; Syndication Agent
	 	 	64	 
	8.12 Withholding Tax
	 	 	64	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	65	 
	9.1 Amendments and Waivers
	 	 	65	 
	9.2 Notices
	 	 	66	 
	9.3 No Waiver; Cumulative Remedies
	 	 	67	 
	9.4 Survival of Representations and Warranties
	 	 	67	 
	9.5 Payment of Expenses
	 	 	68	 
	9.6 Successors and Assigns; Participations and Assignments
	 	 	68	 
	9.7 Adjustments; Set off
	 	 	71	 
	9.8 Counterparts
	 	 	71	 
	9.9 Severability
	 	 	72	 
	9.10 Integration; Construction
	 	 	72	 
	9.11 GOVERNING LAW
	 	 	72	 
	9.12 Submission To Jurisdiction; Waivers
	 	 	72	 
	9.13 Acknowledgments
	 	 	73	 
	9.14 Confidentiality
	 	 	73	 
	9.15 Release of Collateral and Guarantee Obligations
	 	 	73	 
	9.16 Accounting Changes
	 	 	74	 
	9.17 WAIVERS OF JURY TRIAL
	 	 	74	 
	9.18 Customer Identification – USA PATRIOT Act Notice
	 	 	74	 
	9.19 Amendment and Restatement.
	 	 	74	 






iii









 





SCHEDULES:




	 	 	 
	1.1

	 	Commitments
	1.2

	 	Real Property
	1.3

	 	Specified Drilling Assets
	3.1(b)

	 	Dispositions
	3.4

	 	Consents, Authorizations, Filings and Notices
	3.16

	 	Capital Stock Ownership
	3.21(a)-1

	 	Security Agreement UCC Filing Jurisdictions
	3.21(a)-2

	 	UCC Financing Statements to Remain on File
	3.21(a)-3

	 	UCC Financing Statements to be Terminated
	3.21(b)

	 	Mortgage Filing Offices
	3.23

	 	Drilling Rig Assets
	3.25

	 	Bank Accounts
	 
	 	 
	EXHIBITS:
	 	 
	 
	 	 
	A

	 	Form of Access Agreement
	B

	 	Form of Borrowing Notice
	C

	 	Form of Compliance Certificate
	D

	 	Form of Deposit Account Control Agreement
	E

	 	Form of Guarantee and Security Agreement
	F

	 	Form of Solvency Certificate
	G-1

	 	Form of Term A Note
	G-2

	 	Form of Term B Note
	H

	 	Form of Exemption Certificate
	I

	 	Form of Closing Certificate
	J

	 	Form of Assignment and Acceptance






iv









 





     This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 15, 2008, is by and among DHS
HOLDING COMPANY, a Delaware corporation (“Holdings”), DHS DRILLING COMPANY, a Colorado corporation
(“Borrower”), the several banks and other financial institutions or entities from time to time
parties to this Agreement (the “Lenders”), LEHMAN BROTHERS INC., as sole arranger and sole
bookrunner (in such capacity, the “Arranger”), and LEHMAN COMMERCIAL PAPER INC., as syndication
agent and as administrative agent (in such capacity, the “Administrative Agent”).



W I T N E S S E T H:




     WHEREAS, Borrower has requested that the Lenders make term loans to Borrower in the aggregate
principal amount of up to $150,000,000;



     WHEREAS, Borrower, Holdings, Lehman Commercial Paper Inc., as the administrative agent (in
such capacity, the “Existing Agent”), and the other lenders party thereto are parties to that
certain Credit Agreement dated as of December 20, 2007 (as amended to the date hereof, the
“Existing Credit Agreement”);



     WHEREAS, Borrower, the Administrative Agent and the Lenders are willing to amend and restate
the Existing Credit Agreement in order to provide for certain amendments thereto and to provide for
the making of the term loans referred to above, all on the terms set forth in this Agreement, which
Agreement shall be effective upon satisfaction of certain conditions precedent set forth in this
Agreement; and



     WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation
of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment
of all or any of such obligations and liabilities; that this Agreement amend and restate in its
entirety the Existing Credit Agreement and renew and extend the extensions of credit under the
Existing Credit Agreement, as so amended and restated; and that from and after the Closing Date the
Existing Credit Agreement be of no further force or effect except as to evidence the incurrence of
the obligations of Borrower and its Subsidiaries thereunder and the representations and warranties
made and the actions or omissions performed or required to be performed thereunder, in each case
prior to the Closing Date;



     NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the
parties hereto hereby agree as follows:



ARTICLE I

DEFINITIONS




     1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the
respective meanings set forth in this Section 1.1.



     Access Agreement: each access agreement to be executed and delivered by each Person on whose
premises any Loan Party maintains a material portion of any Collateral, including any Drilling Rig
Assets and any books and records of the Loan Parties, such Loan Party and the Administrative Agent,
substantially in the form of Exhibit A.



     Accounting Change: as defined in Section 9.16.



     Acquisition: the acquisition of Additional Rigs by Borrower pursuant to the Acquisition
Documents.



1









 





     Acquisition Agreements: (i) that certain Purchase and Sale Agreement for Rig 34, dated July
21, 2008, between Borrower and Rowan Drilling Company, Inc., as the same may be amended,
supplemented, replaced or otherwise modified from time to time in accordance with this Agreement
together, (ii) that certain Purchase and Sale Agreement for Rig 41, dated July 21, 2008, between
Borrower and Rowan Drilling Company, Inc., as the same may be amended, supplemented, replaced or
otherwise modified from time to time in accordance with this Agreement and (iii) such other
purchase and sale agreements that Borrower may enter into from time to time for the acquisition of
up to an additional five land-based drilling rigs, which agreements contain terms, are on
conditions and otherwise in form and scope satisfactory to the Administrative Agent.



     Acquisition Documents: collectively, the Acquisition Agreements and all schedules, exhibits,
annexes and amendments thereto and all side letters and agreements affecting the terms thereof or
entered into in connection therewith, together with all bills of sale, assignments, agreements,
instruments and other documents executed, made or delivered by any Person in connection with the
Acquisition, in each case in form and substance reasonably acceptable to the Administrative Agent,
in each case, as amended, supplemented, or otherwise modified from time to time in accordance with
this Agreement.



     Additional Rigs: up to seven land-based drilling rigs to be identified and acquired by
Borrower pursuant to the Acquisition Documents.



     Administrative Agent: as defined in the preamble hereto.



     Affiliate: as to any Person, any other Person that, directly or indirectly, is in control of,
is controlled by, or is under common control with, such Person. For purposes of this definition,
“control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise. Notwithstanding the foregoing, no Lender
shall be deemed to be an Affiliate of the Loan Parties.



     Agents: the collective reference to the Arranger, the Syndication Agent and the
Administrative Agent.



     Aggregate Exposure: with respect to any Lender at any time, an amount equal to (a) until the
funding of the Loans on the Closing Date, such Lender’s Commitment at such time; (b) thereafter,
the aggregate then unpaid principal amount of such Lender’s Loans.



     Aggregate Exposure Percentage: with respect to any Lender at any time, the ratio (expressed
as a percentage) of such Lender’s Aggregate Exposure at such time to the sum of the Aggregate
Exposures of all Lenders at such time.



     Agreement: this Credit Agreement, as amended, restated, replaced, supplemented or otherwise
modified from time to time.



     Applicable Interest Margin: (a) with respect to the Term A Loans, 5.50% and (b) with respect
to the Term B Loans, 9.00%.



     Applicable Premium: as defined in Section 2.6(e).



     Approved Appraiser: Superior Asset Management or such other independent appraiser reasonably
acceptable to the Administrative Agent having issued an appraisal report after March 1, 2006.



2









 





     Arranger: as defined in the preamble hereto.



     Asset Sale: any Disposition of Property or series of related Dispositions of Property
(excluding any such Disposition permitted by Sections 6.5(b) and (e)) which yields aggregate gross
proceeds to any Loan Party or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at
fair market value in the case of other non-cash proceeds) in excess of $500,000.



     Assignee: as defined in Section 9.6(c).



     Assignment and Acceptance: as defined in Section 9.6(c).



     Assignor: as defined in Section 9.6(c).



     Benefit Plan: at a particular time, any employee benefit plan that is covered by ERISA and in
respect of which any Loan Party or a Commonly Controlled Entity is (or, if such Benefit Plan were
terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.



     Benefitted Lender: as defined in Section 9.7(a).



     Board: the Board of Governors of the Federal Reserve System of the United States (or any
successor).



     Borrower: as defined in the preamble hereto.



     Borrower’s knowledge: the best knowledge (after due and diligent investigation) of Borrower
or Holdings, as applicable.



     Borrowing Date: any Business Day specified by Borrower as a date on which Borrower requests
the relevant Lenders to make Loans hereunder.



     Borrowing Notice: with respect to any request for borrowing of Term B Loans hereunder, a
notice from Borrower, substantially in the form of, and containing the information prescribed by,
Exhibit B, delivered to the Administrative Agent.



     Business Day: a day other than a Saturday, Sunday or other day on which commercial banks in
New York City, New York, or Houston, Texas are authorized or required by law to close.



     Capital Expenditures: for any period, with respect to any Person, the aggregate of all
expenditures by such Person and its Subsidiaries for the direct or indirect acquisition or leasing
(pursuant to a Capital Lease) fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements) during such period which are required to be
capitalized under GAAP on a balance sheet of such Person; provided that Capital Expenditures shall
exclude expenditures made with any portion of any Reinvestment Deferred Amount relating to any
Reinvestment Event in compliance with Sections 2.7(b) and Section 6.7(c).



     Capital Lease: any lease (or other arrangement conveying the right to use) of a Person with
respect to any Property or a combination thereof, the obligations under which are required to be
classified and accounted for as a capital lease on a balance sheet of such Person under GAAP.



3









 





     Capital Lease Obligations: with respect to any Person, the obligations of such Person to pay
rent or other amounts under any Capital Lease and, for the purposes of this Agreement, the amount
of such obligations at any time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.



     Capital Stock: any and all shares, interests, participations or other equivalents (however
designated) of capital stock of a corporation, any and all equivalent membership, partnership or
other ownership interests in a Person (other than a corporation) and any and all warrants, rights
or options to purchase any of the foregoing.



     Cash Equivalents: (a) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time deposits or overnight bank deposits
having maturities of six months or less from the date of acquisition issued by any Lender or by any
commercial bank organized under the laws of the United States of America or any state thereof
having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by S&P or P-2 by Moody’s, or carrying an equivalent rating by a
“nationally recognized statistical rating organization” (within the meaning of proposed Rule 3b-10
promulgated by the SEC under the Exchange Act), if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally, and maturing within six months from the
date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the United States government; (e)
securities with maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory, the securities of
which state, commonwealth, territory, political subdivision or taxing authority (as the case may
be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or
less from the date of acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition; and (g) shares of
money market mutual or similar funds which invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition.



     Change of Control: the occurrence of any of the following events: (a) Delta Petroleum
Corporation and the Management Investors shall cease to have the power to vote or direct the voting
of securities having a majority of the ordinary voting power for the election of directors of
Holdings (determined on a fully diluted basis); (b) Delta Petroleum Corporation and the Management
Investors shall cease to own of record and beneficially a majority of the outstanding common stock
of Holdings; (c) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding Delta Petroleum Corporation and CHK Holdings, L.L.C., shall become, or
obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
more than 20% on a fully diluted basis, of the outstanding Capital Stock of Holdings entitled to
vote for the members of the board of directors of Holdings; (d) any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall become, or obtain rights
(whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined
in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% on a
fully diluted basis, of the outstanding Capital Stock of Delta Petroleum Corporation other than
Tracinda Corporation but provided, in such case, and only for so long as, no amendment, waiver,
restatement or other modification, directly or indirectly, of Article VI of the DHS Shareholders
Agreement is effected without the prior written consent of the Required Lenders; (e) the board of
directors of Borrower or Delta Petroleum Corporation shall cease to consist of a majority of
Continuing Directors; (f) Holdings shall cease to own and control, of record and beneficially,
directly,



4









 




100% of each class of outstanding Capital Stock of Borrower or Borrower shall cease to own and
control, of record and beneficially, directly or indirectly, 100% of each class of outstanding
Capital Stock of each Subsidiary Guarantor or other Subsidiary of Borrower, in each case free and
clear of all Liens (except Liens created by the Guarantee and Security Agreement); or (g) Article
VI of the DHS Shareholders Agreement is amended, restated, supplemented or otherwise modified,
directly or indirectly, in any respects, or any term or provision thereof is waived, without the
prior written consent of the Required Lenders.




     Closing Date: the date on which the conditions precedent set forth in Section 4.1 shall have
been satisfied, which date shall be not later than August 31, 2008.



     Code: the Internal Revenue Code of 1986, as amended from time to time, the regulations
thereunder and publicly available interpretations thereof.



     Collateral: all Property of the Loan Parties, now owned or hereafter acquired, upon which a
Lien is purported to be created by any Security Document.



     Collateral Value Deficiency: at any point in time, the amount, if any, by which the aggregate
Obligations exceed the aggregate Rig Asset Value.



     Commitment: the Term A Commitment and the Term B Commitment, or any combination of the
foregoing, as the context may require.



     Commitment Expiration Date: December 31, 2009.



     Commitment Letter: that certain Letter Agreement, dated as of August 5, 2008, among Borrower,
Lehman Brothers Inc. and Lehman Commercial Paper Inc.



     Commonly Controlled Entity: an entity, whether or not incorporated, that is under common
control with Borrower within the meaning of Section 4001 of ERISA or is part of a group that
includes Borrower and that is treated as a single employer under Section 414 of the Code.



     Comparable Treasury Issue: the U.S. Treasury security selected by Lehman Brothers Inc. as
having a maturity most nearly equal to the period from the Prepayment Date to the date that is one
year after the Closing Date, at the time of selection and in accordance with customary financial
practice in pricing new issues of corporate debt securities.



     Comparable Treasury Price: with respect to any Prepayment Date occurring prior to one year
after the Closing Date, the average of three Reference Treasury Dealer Quotations for such
Prepayment Date.



     Compliance Certificate: a certificate duly executed by a Responsible Officer, substantially in
the form of Exhibit C.



     Consolidated Current Assets: at any date, the total consolidated current assets of Borrower
and its Subsidiaries at such date, adjusted for non-cash assets, determined in conformity with
GAAP.



     Consolidated Current Liabilities: at any date, all liabilities of Borrower and its
Subsidiaries at such date which should, in conformity with GAAP, be classified as current
liabilities, adjusted for non-cash liabilities, on a consolidated balance sheet of Borrower and its
Subsidiaries prepared in conformity with GAAP.



5









 





     Consolidated EBITDA: of any Person for any period, Consolidated Net Income of such Person and
its Subsidiaries for such period plus, without duplication and to the extent reflected as a charge
in the statement of such Consolidated Net Income for such period, the sum of (a) income tax
expense, (b) Consolidated Interest Expense of such Person and its Subsidiaries, amortization or
write-off of debt discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness, (c) depreciation and amortization expense, (d) amortization
of intangibles (including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income for such period,
losses on sales of assets outside of the ordinary course of business) provided that the amounts
referred to in this clause (e) shall not, in the aggregate, exceed for any fiscal year of Borrower
$5,000,000 and (f) any other non-cash charges, including (in case of clauses (e) and (f), charges
representing (i) accruals of or reserves for cash expenditures in a future period and (ii)
amortization of prepaid items paid in cash in a prior period; minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (A) interest income (except
to the extent deducted in determining Consolidated Interest Expense), (B) any extraordinary,
unusual or non-recurring income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period, gains on the sales
of assets outside of the ordinary course of business), (C) income tax credits (to the extent not
netted from income tax expense) and (D) any other non-cash income, all as determined on a
consolidated basis and (E) whether or not included in the statement of such Consolidated Net Income
for such period, all cash expenditures in such period for previously accrued or reserved for
charges or prepaid items to be amortized in future periods; provided that for purposes of
calculating Consolidated EBITDA of Borrower for any period, (i) the Consolidated EBITDA of any
Person or business acquired by Borrower or its Subsidiaries during such period shall be included on
a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence
or assumption of any Indebtedness in connection therewith occurred on the first day of such period)
if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at
the end of the period preceding the acquisition of such Person and the related consolidated
statements of income and stockholders’ equity and of cash flows for the period in respect of which
Consolidated EBITDA is to be calculated (1) have been previously provided to the Administrative
Agent and the Lenders and (2) either (x) have been reported on without a qualification arising out
of the scope of the audit by independent certified public accountants of nationally recognized
standing or (y) have been found acceptable by the Administrative Agent and (ii) the Consolidated
EBITDA of any Person or business Disposed of by Borrower or its Subsidiaries during such period
shall be excluded for such period (assuming the consummation of such Disposition and the repayment
of any Indebtedness in connection therewith occurred on the first day of such period).



     Consolidated Interest Coverage Ratio: for any period, the ratio of (a) Consolidated EBITDA of
Borrower and its Subsidiaries for such period to (b) Consolidated Interest Expense of Borrower and
its Subsidiaries for such period.



     Consolidated Interest Expense: of any Person for any period, total cash interest expense
(including that attributable to Capital Lease Obligations) of such Person and its Subsidiaries for
such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries
(including all commissions, discounts and other fees and charges owed by such Person with respect
to letters of credit and bankers’ acceptance financing); provided that for purposes of calculating
Consolidated Interest of Borrower for any period, (i) the Consolidated Interest of any Person or
business acquired by Borrower or its Subsidiaries during such period shall be included on a pro
forma basis for such period (assuming the consummation of such acquisition and the incurrence or
assumption of any Indebtedness in connection therewith occurred on the first day of such period) if
the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the
end of the period preceding the acquisition of such Person and the related consolidated statements
of income and stockholders’ equity and of cash flows for



6









 







the period in respect of which Consolidated Interest is to be calculated (x) have been
previously provided to the Administrative Agent and the Lenders and (y) either (1) have been
reported on without a qualification arising out of the scope of the audit by independent certified
public accountants of nationally recognized standing or (2) have been found acceptable by the
Administrative Agent and (ii) the Consolidated Interest of any Person or business Disposed of by
Borrower or its Subsidiaries during such period shall be excluded for such period (assuming the
consummation of such Disposition and the repayment of any Indebtedness in connection therewith
occurred on the first day of such period).



     Consolidated Leverage Ratio: as at the last day of any period of four consecutive fiscal
quarters of Borrower, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated
EBITDA of Borrower and its Subsidiaries for such period.



     Consolidated Net Income: of any Person for any period, the consolidated net income (or loss)
of such Person and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided that in calculating Consolidated Net Income of Borrower and its
consolidated Subsidiaries for any period, there shall be excluded (a) the income (or deficit) of
any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or
consolidated with Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of Borrower) in which Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by Borrower or such
Subsidiary in the form of dividends or similar distributions, (c) the undistributed earnings of any
Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable to such
Subsidiary, and (d) any one-time increase or decrease to such consolidated net income (or loss)
which is required to be recorded because of the adoption of new accounting policies, practices or
standards required by GAAP.



     Consolidated Total Debt: at any date, the aggregate principal amount of all Indebtedness of
Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with
GAAP, less (i) the aggregate amount of all Cash and Cash Equivalents in excess of $1,000,000 and
(ii) until the earlier of (A) the Initial Service Date of any Additional Rig(s) and (B) the quarter
ending June 30, 2010, the aggregate portion of the principal amount of Term B Loans used to acquire
such Additional Rig(s).



     Consolidated Working Capital: at any date, the difference of (a) Consolidated Current Assets
of Borrower on such date less (b) Consolidated Current Liabilities of Borrower on such date.



     Constituent Documents: with respect to any Person, (a) the articles or certificate of
incorporation, certificate of formation or partnership, articles of organization, limited liability
company agreement or agreement of limited partnership (or the equivalent organizational documents)
of such Person, (b) the by-laws (or the equivalent governing documents) of such Person and (c) any
document setting forth the manner of election and duties of the directors or managing members of
such Person (if any) and the designation, amount or relative rights, limitations and preferences of
any class or series of such Person’s Capital Stock.



     Contingent Obligation: of a Person, 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
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.



7









 





     Continuing Directors: the directors of Borrower or Delta Petroleum Corporation, as
applicable, on the Closing Date, and each other director if, in each case, such other director’s
nomination for election to the board of directors of Borrower or Delta Petroleum Corporation, as
applicable, is recommended by at least 66-2/3% of the then Continuing Directors or, in the case of
Borrower, such other director receives the vote of the Permitted Investors in his or her election
by the shareholders of Borrower or Delta Petroleum Corporation, as applicable.



     Contractual Obligation: with respect to any Person, any term, condition or provision of any
security issued by such Person or of any agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its Property is bound.



     Control Investment Affiliate: with respect to any Person, any other Person that (a) directly
or indirectly, is in control of, is controlled by, or is under common control with, such Person and
(b) is organized by such Person primarily for the purpose of making equity or debt investments in
one or more companies. For purposes of this definition, “control” of a Person means the power,
directly or indirectly, to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.



     Current Ratio: as of any date of determination, the ratio of (a) Consolidated Current Assets
at such date to (b) Consolidated Current Liabilities at such date.



     Daywork Drilling Contracts: collectively, those certain operating contracts for utilization
of the Rigs entered into by Borrower which have a primary term of greater than six months, together
with any amendments thereto, shall be in form and substance acceptable to the Lenders.



     Default: any of the events specified in Article VII, whether or not any requirement for the
giving of notice, the lapse of time, or both, has been satisfied.



     Default Rate: as defined in Section 2.8(a).



     Defensible Title: good and indefeasible title, free and clear of all Liens other than
Permitted Liens.



     Deposit Account Control Agreement: a Deposit Account Control Agreement to be executed and
delivered among any Loan Party, the Administrative Agent and each bank at which such Loan Party
maintains any bank account, in each case, substantially in the form of Exhibit D or such
other form as may be acceptable to the Administrative Agent in its sole discretion, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to time.



     Derivatives Counterparty: as defined in Section 6.6.



     DHS Shareholders Agreement: that certain DHS Holding Company Shareholders Agreement, dated as
of May 16, 2006, by and among Holdings, Delta Petroleum Corporation, Chesapeake Energy Corporation,
Bill Sauer and Tubbs LLLP, as amended by First Amendment to DHS Holding Company Shareholders
Agreement, dated September 13, 2007.



     Disposition: with respect to any Property, any sale, lease, Sale and Leaseback Transaction,
assignment, conveyance, transfer or other disposition (including by way of a merger or
consolidation) of such Property or any interest therein (excluding the creation of any Permitted
Lien on such Property but including the sale or factoring at maturity or collection of any accounts
or permitting or suffering any other Person to acquire any interest (other than a Permitted Lien)
in such Property) or the entering into



8









 







any agreement to do any of the foregoing; and the terms “Dispose” and “Disposed of” shall have
correlative meanings.



     Dollars and $: lawful currency of the United States of America.



     Drilling Rig Assets: as defined in Section 3.23.



     Environmental Laws: any and all applicable laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or other legally enforceable requirements (including common law) of any
Governmental Authority regulating, relating to or imposing liability or standards of conduct
concerning pollution, protection of the environment, natural resources or of human health, or
employee health and safety, as has been, is now, or may at any time hereafter be, in effect,
including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §
9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Clean Water Act, 33 U.S.C. § 1251 et
seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §
2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq., the
Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29
U.S.C. § 651 et seq., and the regulations promulgated pursuant thereto, and all analogous state or
local statutes and regulations.



     Environmental Permits: any and all permits, licenses, approvals, registrations,
notifications, exemptions and other authorizations required or obtained under any Environmental
Law.



     ERISA: the Employee Retirement Income Security Act of 1974, as amended from time to time and
the rules and regulations promulgated thereunder.



     Event of Default: any of the events specified in Article VII; provided that any requirement
for the giving of notice, the lapse of time, or both, has been satisfied.



     Excess Cash Flow: with respect to Borrower for any period, the Consolidated EBITDA of
Borrower for such period plus (a) the excess, if any, of the Consolidated Working Capital at the
beginning of such period over the Consolidated Working Capital at the end of such period minus (b)
the sum of (without duplication) (i) scheduled and mandatory cash principal payments on the Loans
during such period and optional cash principal payments on the Loans during such period, (ii)
scheduled cash principal payments made by Borrower or any of its Subsidiaries during such period on
other Indebtedness to the extent such other Indebtedness and payments are permitted by this
Agreement, (iii) scheduled payments made by Borrower or any of its Subsidiaries on Capital Lease
Obligations to the extent such Capital Lease Obligations and payments are permitted by this
Agreement, (iv) Capital Expenditures made by Borrower or any of its Subsidiaries during such period
to the extent permitted by this Agreement, (v) the excess, if any, of the Consolidated Working
Capital at the end of such period over the Consolidated Working Capital at the beginning of such
period, (vi) expenditures made with any portion of the Reinvestment Deferred Amount and (vii)
Consolidated Interest Expense for such period.



     Exchange Act: the Securities Exchange Act of 1934, as amended.



     Existing Access Agreement: that certain Access Agreement between Stone Properties, LLC and the
Administrative Agent, February 1, 2008.



     Existing Credit Agreement: as defined in the recitals hereto.



9









 





     Existing Deposit Account Control Agreement: collectively, those certain three Deposit Account
Control Agreements among the Administrative Agent and each of (i) Chapman Trucking Company, Inc.
and First Interstate Bank, dated February 12, 2008, (ii) DHS Drilling Company and First Interstate
Bank, dated January 8, 2008, (iii) DHS Drilling Company and First Interstate Bank, dated December
20, 2007.



     Existing Credit Documents: the Existing Credit Agreement, together with all other agreements,
instruments, financing statements or other documents executed or delivered thereunder.



     Existing Indebtedness: (i) all Indebtedness outstanding under the Existing Credit Documents
together with (ii) the Subordinated Indebtedness.



     Existing Loans: as defined in Section 2.1(a).



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



     Fee Letter: that certain Letter Agreement, dated as of August 5, 2008, among Borrower, Lehman
Brothers Inc. and Lehman Commercial Paper Inc.



     Funding Office: the office specified from time to time by the Administrative Agent as its
funding office by notice to Borrower and the Lenders.



     GAAP: generally accepted accounting principles in the United States of America as in effect
from time to time, applied in a manner consistent with that used in preparation of the Pro Forma
Balance Sheet.



     Governmental Authority: any nation or government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any province, commonwealth, territory,
possession, county, parish, town, township, village or municipality, whether now existing or
hereafter constituted or existing.



     Granting Lender: as defined in Section 9.6(g).



     Guarantee and Security Agreement: the Amended and Restated Guarantee and Security Agreement to
be executed and delivered by Holdings, Borrower and each Subsidiary of Borrower and the
Administrative Agent, substantially in the form of Exhibit E, as the same may be further
amended, restated, replaced, supplemented or otherwise modified from time to time.



     Guarantee Obligation: as to any Person (the “guaranteeing person”), any obligation of (a) the
guaranteeing person or (b) another Person (including any bank under any letter of credit), if to
induce the creation of such obligation of such other Person, the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”)
of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent, (w) to purchase any
such primary obligation or any Property constituting direct or indirect security therefor, (x) to
advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital



10









 







of the primary obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (y) to purchase Property, securities or services, in each case, primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (z) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof; provided that the term Guarantee
Obligation shall not include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (I) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (II) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability
in respect thereof as determined by Borrower in good faith.



     Guarantor: each Person who is a party as a “Guarantor” and “Grantor” to a Guarantee and
Security Agreement.



     Hedging Agreement: with respect to any Person, any agreement or arrangement, or any
combination thereof, consisting of interest rate or currency swaps, caps or collar agreements,
foreign exchange agreements, commodity contracts or similar arrangements entered into by such
Person providing for protection against fluctuations in interest rates, currency exchange rates or
the exchange of nominal interest obligations, either generally or under specific contingencies.



     Indebtedness: of any Person at any date, without duplication (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of
Property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such
Person, (f) all obligations of such Person, contingent or otherwise, as an account party or
applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above; and (i) all obligations of
the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property
(including accounts and contract rights) owned by such Person, whether or not such Person has
assumed or become liable for the payment of such obligation. The Indebtedness of a Person shall
include the Indebtedness of any other Person (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable therefor.



     Indemnified Liabilities: as defined in Section 9.5.



     Indemnitee: as defined in Section 9.5.



     Independent Accountant: KPMG LLP or such other independent certified public accountants
reasonably acceptable to the Administrative Agent.



11









 





     Initial Service Date: (a) with respect to any new build Rig(s), the earlier of (i) such date
as Borrower and the Administrative Agent shall agree and (ii) the date one year after the date of
any borrowings utilized to acquire such Rig(s), including any borrowings used as a deposit therefor
and (b) with respect to any other Rig(s), the earlier of (i) the date such Rig(s) is acquired by
Borrower or any Subsidiary Guarantor and (ii) the date three months after the date of any
borrowings utilized to acquire such Rig(s), including any borrowings used as a deposit therefor or,
in the case of borrowings for purposes of acquiring Rig 34, four months after the closing date.



     Insolvency: with respect to any Multiemployer Plan, the condition that such Benefit Plan is
insolvent within the meaning of Section 4245 of ERISA.



     Insolvent: pertaining to a condition of Insolvency.



     Intellectual Property: the collective reference to all rights, priorities and privileges
relating to intellectual property, whether arising under United States, state, multinational or
foreign laws or otherwise, including, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, service-marks, technology, know-how and processes, licenses or
rights to use databases, geological data, geophysical data, engineering data, seismic data, maps,
interpretations and other technical information, recipes, formulas, trade secrets and all rights to
sue at law or in equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.



     Interest Payment Date: (a) the first Business Day immediately following the end of each
calendar quarter, commencing with September 30, 2008 (so that the first Interest Payment Date is
October 1, 2008), and the Maturity Date and (b) the date of any repayment or prepayment made with
respect to any Loan.



     Interest Rate: subject to Section 2.10, for each LIBOR Period, a rate per annum equal to the
LIBOR Rate plus the Applicable Interest Margin.



     Investment: for any Person (a) the acquisition (whether for cash, Property of such Person,
services or securities or otherwise) of Capital Stock, bonds, notes, debentures, debt securities,
partnership or other ownership interests or other securities of, or any Property constituting an
ongoing business of, or the making of any capital contribution to, any other Person or any
agreement to make any such acquisition or capital contribution, (b) the making of any deposit with,
or advance, loan or other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding any such advance, loan or extension of credit
having a term not exceeding 90 days representing the purchase price of inventory or supplies sold
in the ordinary course of business), (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person, and (d) any other
investment that would be classified as such on a balance sheet of such Person in accordance with
GAAP.



     Lenders: as defined in the preamble hereto.



     LIBOR Business Day: a Business Day on which banks in the city of London, England are generally
open for dealings in Dollar deposits in the London interbank market.



     LIBOR Period: each period commencing on a LIBOR Business Day and ending on the first LIBOR
Business Day of the month beginning three months thereafter; provided that the first LIBOR



12









 







Period shall begin on the Closing Date and end on September 30, 2008, and each successive
LIBOR Period shall begin on the last LIBOR Business Day of the immediately preceding LIBOR Period.



     LIBOR Rate: for each LIBOR Period, a rate of interest determined by the Administrative Agent
equal to the greater of:




(a) 2.75%; and




(b) (i) the offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Reuters Screen LIBOR01 (or any successor thereto) as of 11:00 a.m.
(London time) on the second full LIBOR Business Day preceding the first day of each LIBOR
Period (unless such date is not a Business Day, in which event the next succeeding Business
Day will be used); divided by




     (ii) a number equal to 1.0 minus the aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on the day that is two
LIBOR Business Days prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board) that are required to be maintained by a member
bank of the Federal Reserve System.



     If such interest rates shall cease to be available from Reuters News Service, the LIBOR Rate
shall be determined from such comparable publicly available financial reporting service for
displaying any Eurodollar rates as shall be reasonably selected by the Administrative Agent.



     Lien: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever intended to assure
payment or performance of any Indebtedness or other obligation (including any conditional sale or
other title retention agreement, the interest of a lessor under a Capital Lease, any financing
lease having substantially the same economic effect as any of the foregoing and the filing of any
financing statement under the UCC or comparable law of any jurisdiction naming the owner of the
asset to which such Lien relates as debtor).



     Loans: as defined in Section 2.1(b).



     Loan Documents: this Agreement, the Commitment Letter, the Fee Letter, the Security
Documents, the Notes and each certificate, agreement, waiver, consent or document executed by a
Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant
to any of the foregoing.



     Loan Parties: Holdings, Borrower and each Subsidiary of Borrower.



     Loan Percentage: the Term A Loan Percentage or the Term B Loan Percentage, or any combination
of the foregoing, as the context may require.



     Management Investors: collectively, Bill Sauer, Jr. and Gregg Tubbs.



     Make-Whole Price: an amount equal to the greater of:



13









 






	 	(1)	 	100% of the principal amount of the Loans to be prepaid; and
	 
	 	(2)	 	the sum of the present values of (A) the principal amount of the Loans to be
prepaid plus the Applicable Premium on August 30, 2009 and (B) the remaining scheduled
payments of interest from the Prepayment Date to August 30, 2009 (not including any
portion of such payments of interest accrued as of the Prepayment Date) discounted back
to the Prepayment Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 50 basis points.





     Material Adverse Effect: a material adverse effect on any of (a) the results of operations,
business, assets, liabilities, property, condition (financial or otherwise), management, value or
prospects of the Loan Parties taken as a whole, (b) the value of the Collateral (except when such
value is affected by then-current market conditions), (c) the legality, validity or enforceability
of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the
Lenders hereunder or thereunder, (d) the perfection or priority of the Liens granted pursuant to
the Security Documents or (e) the ability of Borrower to repay the Obligations or of the Loan
Parties to perform their obligations under the Loan Documents.



     Material Environmental Amount: an amount or amounts payable or reasonably likely to become
payable by any Loan Party or any of its Subsidiaries, in the aggregate in excess of $100,000, for
costs to comply with or any liability under any Environmental Law, failure to obtain or comply with
any Environmental Permit, costs of any investigation, and any remediation, of any Material of
Environmental Concern, and any other cost or liability, including compensatory damages (including
damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental
Law.



     Materials of Environmental Concern: any gasoline or petroleum (including crude oil or any
fraction thereof) or petroleum products, polychlorinated biphenyls, natural gas or natural gas
products, mercury, hydrogen sulfide, drilling fluids, produced water, asbestos, pollutants,
contaminants, radioactivity, and any other substances or forces of any kind, whether or not any
such substance or force is defined as hazardous or toxic under any Environmental Law, that is
regulated pursuant to or could give rise to liability under any Environmental Law.



     Maturity Date: as defined in Section 2.3.



     Moody’s: Moody’s Investors Service, Inc.



     Mortgaged Properties: the Real Property listed on Schedule 1.2, together with any
additional Real Properties which Borrower or any Subsidiary may hereafter acquire, in each case as
to which the Administrative Agent for the benefit of the Secured Parties shall be granted a Lien
pursuant to one or more Mortgages.



     Mortgages: each of the mortgages and deeds of trust, if any, made by any Loan Party in favor
of, or for the benefit of, the Administrative Agent for the benefit of the Secured Parties, in each
case, in form and substance acceptable to the Administrative Agent, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.



     Multiemployer Plan: a Benefit Plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.



     Net Cash Proceeds: (a) in connection with any Asset Sale or any Recovery Event, the proceeds
thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of



14









 







deferred payment of principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery
Event, net of (i) amounts required to be applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event
(other than any Lien pursuant to a Security Document), (ii) in the case of an Asset Sale,
attorneys’ fees, accountants’ fees, investment bank fees and other reasonable and customary fees
and expenses actually incurred in connection therewith and (iii) taxes paid or reasonably estimated
to be payable as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements); provided that the evidence of each of (i), (ii) and
(iii) is provided to the Administrative Agent in form and substance reasonably satisfactory to it,
and (b) in connection with any issuance or sale of Capital Stock or debt securities or instruments
or the incurrence of Indebtedness for borrowed money, the cash proceeds received from such
issuance, sale or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees,
underwriting discounts and commissions and other reasonable and customary fees and expenses
actually incurred in connection therewith; provided, that in the case of this clause (b), evidence
of such costs is provided to the Administrative Agent in form and substance reasonably satisfactory
to it.



     Non-Excluded Taxes: as defined in Section 2.11(a).



     Non-U.S. Lender: as defined in Section 2.11(d).



     Note: as defined in Section 2.4(e).



     Obligations: the unpaid principal of and interest on (including, interest accruing after the
maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party,
whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the
Loans and all other obligations and liabilities of any Loan Party to the Administrative Agent or to
any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest, fees, reimbursement obligations,
indemnities, costs, expenses (including, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by any Loan Party pursuant
hereto) or otherwise.



     Other Taxes: any and all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.



     Participant: as defined in Section 9.6(b).



     Patriot Act: as defined in Section 9.18.



     Payment Office: the office specified from time to time by the Administrative Agent as its
payment office by notice to Borrower and the Lenders.



     PBGC: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV
of ERISA (or any successor).



     Permits: the collective reference to (i) Environmental Permits, and (ii) any and all other
franchises, licenses, leases, permits, approvals, consents, notifications, certifications,
registrations,



15









 







authorizations, exemptions, variances, qualifications, easements and rights of way of any
Governmental Authority or third party.



     Permitted Capital Expenditures: as defined in Section 6.7(d).



     Permitted Capex Amount: as defined in Section 6.7.



     Permitted Equity Financing: any sale or issuance of the Capital Stock of Holdings for cash not
resulting in a Change of Control and any cash contribution to the capital of Holdings by a
Permitted Investor, in each case, (i) the sole purposes of which is to fund Capital Expenditures by
Borrower or any Subsidiary Guarantor within the fiscal quarter in which such sale, issuance or
contribution is made and (ii) the net proceeds of which Holdings contributes in full to Borrower
concurrently with the consummation of such sale, issuance of contribution.



     Permitted Indebtedness: as defined in Section 6.2.



     Permitted Investors: the collective reference to Delta Petroleum Corporation, CHK Holdings,
L.L.C. and the Management Investors.



     Permitted Liens: the collective reference to (i) in the case of Collateral other than Pledged
Stock, Liens permitted by Section 6.3 and (ii) in the case of Collateral consisting of Pledged
Stock, non-consensual Liens permitted by Section 6.3 to the extent arising by operation of law.



     Person: an individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.



     Pledged Stock: as defined in the Guarantee and Security Agreement.



     Prepayment Date: (a) with respect to any mandatory prepayment pursuant to Section 2.7, the
date of such mandatory prepayment and (b) with respect to any optional prepayment pursuant to
Section 2.6, the date of such optional prepayment.



     Pro Forma Balance Sheet: as defined in Section 3.1(a).



     Projections: as defined in Section 5.3(c).



     Property: any right or interest in or to property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible.



     Purchase Price Refund: any amount received by any Loan Party after the Closing Date as a
result of a purchase price adjustment or similar event in connection with any acquisition of
Property by such Loan Party.



     Qualified Investment: expenditures incurred (i) to acquire or repair similar assets owned (or
to be owned) by Borrower or any Wholly Owned Subsidiary Guarantor of the same type as those subject
to such Reinvestment Event or equipment (or to be owned) by and useful in the business of Borrower
or any Wholly Owned Subsidiary Guarantor or (ii) to reimburse Borrower or such Wholly Owned
Subsidiary Guarantor for amounts paid from the operating cash flow of such Person in advance of the
receipt of Net Cash Proceeds with respect to any Recovery Event in order to repair or replace the
assets of Borrower or any Wholly Owned Subsidiary Guarantor that have been damaged, destroyed or
lost as a result of any



16









 







casualty event or condemnation; provided that Borrower or such Wholly Owned Subsidiary
Guarantor shall not be reimbursed in an amount exceeding the Net Cash Proceeds actually received in
connection with such Recovery Event.



     Real Property: the surface, subsurface and mineral rights, buildings and interests and any
appurtenances thereto owned, leased or otherwise held by any Loan Party or its Subsidiaries.



     Recovery Event: any settlement of or payment in respect of any property or casualty insurance
claim or any condemnation proceeding (or proceeding in lieu thereof) relating to any asset of any
Loan Party.



     Reference Treasury Dealer Quotations: the average, as determined by the Administrative Agent,
of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) at 5:00 p.m., New York City time, on the third Business Day
preceding the Prepayment Date.



     Register: as defined in Section 9.6(d).



     Regulation U: Regulation U of the Board as in effect from time to time.



     Reinvestment Deferred Amount: with respect to any Reinvestment Event, the aggregate Net Cash
Proceeds received by any Loan Party in connection therewith that are duly specified in a
Reinvestment Notice as not being required to be initially applied to prepay the Loans pursuant to
Section 2.7(b) as a result of the delivery of a Reinvestment Notice.



     Reinvestment Event: any Asset Sale, Purchase Price Refund or Recovery Event in respect of
which Borrower has delivered a Reinvestment Notice.



     Reinvestment Notice: a written notice executed by a Responsible Officer stating that no
Default or Event of Default has occurred and is continuing and stating that Borrower (directly or
indirectly through a Wholly Owned Subsidiary Guarantor) intends and expects to use all or a
specified portion of the Net Cash Proceeds of a Reinvestment Event specified in such notice to make
a Qualified Investment.



     Reinvestment Prepayment Amount: with respect to any Reinvestment Event, the Reinvestment
Deferred Amount relating thereto less the portion, if any, thereof expended prior to the relevant
Reinvestment Prepayment Date to make a Qualified Investment.



     Reinvestment Prepayment Date: with respect to any Reinvestment Event, the earlier of (a) the
date occurring six months after such Reinvestment Event and (b) the date on which Borrower shall
have determined not to, or shall have otherwise ceased to, make a Qualified Investment with all or
any portion of the relevant Reinvestment Deferred Amount.



     Related Fund: with respect to any Lender, any fund that (a) invests in commercial loans and
(b) is managed or advised by the same investment advisor as such Lender, by such Lender or an
Affiliate of such Lender.



     Reorganization: with respect to any Multiemployer Plan, the condition that such Benefit Plan
is in reorganization within the meaning of Section 4241 of ERISA.



17









 





     Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other than those
events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.



     Required Equity Contribution: as defined in Section 5.15.



     Required Lenders: at any time, Lenders having Aggregate Exposure Percentages of more than 66
2/3%.



     Requirement of Law: as to any Person, the Constituent Documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.



     Responsible Officer: as to any Loan Party, the chief executive officer, president or chief
financial officer of such Loan Party, but in any event, with respect to financial matters, the
chief financial officer of such Loan Party. Unless otherwise qualified, all references to a
“Responsible Officer” shall refer to a Responsible Officer of Borrower.



     Restricted Payments: as defined in Section 6.6.



     Rig: any of the land-based drilling and workover rigs owned by any Loan Party, including the
Additional Rigs.



     Rig Appraisal: a written appraisal in form, content and detail reasonably satisfactory to the
Administrative Agent prepared by an Approved Appraiser.



     Rig Accessories: all pumps, drilling equipment, machinery, equipment and parts.



     Rig Asset Value: the “as is, where is” six month, orderly liquidation value of the Drilling
Rig Assets.



     Specified Drilling Assets: the Rigs and certain equipment described on Schedule 1.3.



     S&P: Standard & Poor’s Ratings Services, a division of McGraw-Hill Companies, Inc.



     Sale and Leaseback Transaction: any sale or other transfer of Property by any Person with the
intent of such Person or an Affiliate thereof to lease such Property as lessee.



     SEC: the Securities and Exchange Commission (or successor thereto or an analogous
Governmental Authority).



     Secured Parties: collectively, the Administrative Agent and any Lender.



     Security Documents: the collective reference to the Guarantee and Security Agreement, the
Mortgages, each Deposit Account Control Agreement, each Access Agreement and all other security
documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any
Person to secure any of the Obligations, in each case, as the same may be amended, restated or
otherwise modified from time to time in accordance herewith and therewith.



     Single Employer Plan: any Benefit Plan that is covered by Title IV of ERISA, but which is not
a Multiemployer Plan.



18









 





     Solvency Certificate: a solvency certificate and analysis by the chief financial officer of
Borrower substantially in the form of Exhibit F.



     Solvent: with respect to any Person, as of any date of determination, (a) the amount of the
“present fair saleable value” of the assets of such Person will, as of such date, exceed the amount
of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms
are determined in accordance with applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of
such date, be greater than the amount that will be required to pay the liability of such Person on
its debts as such debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its business, (d) such Person
will be able to pay its debts as they mature and (e) such Person is not insolvent within the
meaning of any applicable Requirement of Law. For purposes of this definition, (i) “debt” means
liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.



     SPC: as defined in Section 9.6(g).



     Specified Vehicles: is defined in the Guarantee and Security Agreement.



     Subordinated Indebtedness: (i) that certain Indebtedness owed by Borrower to Delta Petroleum
Corporation for cash in the amount of $6,000,000 together with (ii) that certain Indebtedness owed
by Borrower to CHK Holdings, L.L.C. for cash in the amount of $6,000,000, both as further evidenced
by Subordinated Promissory Notes dated March 27, 2008.



     Subsidiary: as to any Person, a corporation, partnership, limited liability company or other
entity of which shares of Capital Stock having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such corporation, partnership,
limited liability company or other entity are at the time owned, or the management of which is
otherwise controlled, in each case, directly or indirectly through one or more intermediaries, or
both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrower.



     Subsidiary Guarantor: each Subsidiary of Borrower that is a Guarantor.



     Tax Affiliate: with respect to any Person, (a) any Subsidiary of such Person, and (b) any
Affiliate of such Person with which such Person files or is eligible to file consolidated, combined
or unitary tax returns.



     Tax Returns: as defined in Section 3.11.



     Term A Commitment: as to any Lender, the obligation of such Lender, if any, to make a Term A
Loan to Borrower hereunder in a principal amount not to exceed the amount set forth under the
heading “Term A Commitment” opposite such Lender’s name on Schedule 1.1 hereto, or, as the
case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto,
as the same may be reduced pursuant to Section 2.1. The original aggregate amount of the Term A
Commitments is



19









 





$75,000,000, and after giving effect to the conversion and continuation on the date hereof of
the Existing Loans is $0.



     Term A Lender: each Lender that has a Term A Commitment or is the holder of a Term A Loan.



     Term A Loan Percentage: as to any Term A Lender at any time, the percentage which the
aggregate principal amount of such Lender’s Term A Loans then outstanding constitutes of the
aggregate principal amount of all Term A Loans then outstanding.



     Term A Loans: as defined in Section 2.1(a).



     Term B Commitment: as to any Lender, the obligation of such Lender, if any, to make a Term B
Loan to Borrower hereunder in a principal amount not to exceed the amount set forth under the
heading “Term B Commitment” opposite such Lender’s name on Schedule 1.1 hereto, or, as the
case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto,
as the same may be reduced from time to time pursuant to Section 2.1. The original aggregate
amount of the Term B Commitments is $75,000,000.



     Term B Lender: each Lender that has a Term B Commitment or is the holder of a Term B Loan.



     Term B Loan Percentage: as to any Term B Lender at any time, the percentage which the
aggregate principal amount of such Lender’s Term B Loans then outstanding constitutes of the
aggregate principal amount of all Term B Loans then outstanding.



     Term B Loans: as defined in Section 2.1(b).



     Transferee: as defined in Section 9.14.



     Treasury Rate: with respect to any Prepayment Date prior to one year after the Closing Date,
(1) the yield, under the heading which represents the average for the immediately preceding week,
appearing in the most recently published statistical release designated “H. 15(159)” or any
successor publication that is published weekly by the Board and that establishes yields on actively
traded U.S. Treasury securities adjusted to constant maturity under the caption “Treasury Constant
Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Maturity Date, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (2) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price
for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Prepayment Date. The Treasury Rate shall be calculated on the
third Business Day preceding the applicable Prepayment Date.



     UCC: the Uniform Commercial Code, as in effect from time to time in the State of New York or
other applicable jurisdiction.



     Wholly Owned Subsidiary: as to any Person, any other Person all of the Capital Stock of which
(other than directors’ qualifying shares required by law) is owned by such Person directly and/or
through other Wholly Owned Subsidiaries.



20









 





     Wholly Owned Subsidiary Guarantor: any Subsidiary Guarantor that is a Wholly Owned Subsidiary
of Borrower.



     1.2 Other Definitional Provisions.



     (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the
defined meanings when used in the other Loan Documents or any certificate or other document made or
delivered pursuant hereto or thereto.



     (b) As used herein and in the other Loan Documents, and any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms relating to Borrower and its Subsidiaries
not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP; provided that for purposes of
Section 6.1, any non-cash items arising under FAS 133, 142, 143 or 144 shall be excluded from the
relevant calculation.



     (c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.



     (d) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.



     (e) All calculations of financial ratios set forth in Section 6.1 shall be calculated to the
same number of decimal places as the relevant ratios are expressed in and shall be rounded upward
if the number in the decimal place immediately following the last calculated decimal place is five
or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place
and the calculation of the ratio is 5.126, the ratio will be rounded up to 5.13.



     (f) Each agreement defined in this Agreement shall include all appendices, exhibits and
schedules thereto, and references thereto shall be to such agreement as amended, restated,
replaced, supplemented or otherwise modified; provided that if the prior written consent of the
Required Lenders is required hereunder for an amendment, restatement, replacement, supplement or
other modification to any such agreement and such consent is obtained, references in this Agreement
to such agreement shall be to such agreement as so amended, restated, replaced, supplemented or
modified.



     (g) References in this Agreement to any statute shall be to such statute as amended or
modified and in effect at the time any such reference is operative.



     (h) The term “including” when used in any Loan Document means “including without limitation”
except when used in the computation of time periods.



     (i) The term “or” has, except where otherwise indicated, the inclusive meaning represented by
the phrase “and/or”.



     (j) The terms “Lender” and “Administrative Agent” include their respective successors.



     (k) The words “asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties, including cash, Capital
Stock,



21









 







securities (as such term is defined in the Securities Act), revenues, accounts, leasehold
interests and contract rights.



     (l) Each reference to “Loan Party” in Article III shall include any Subsidiary of Borrower
that is or, pursuant to Section 5.10 or Section 6.17, is required to be a Guarantor.



     1.3 Computation of Time Periods. In this Agreement, in the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding” and the word “through” means “to and including.”



ARTICLE II

AMOUNT AND TERMS OF COMMITMENTS




     2.1 Loan Commitments.



     (a) The Credit Parties acknowledge and agree that as of immediately prior to the Closing Date
the aggregate principal amount of all loans outstanding under the Existing Credit Agreement equals
$75,000,000 (the “Existing Loans”) and that, subject to Section 4.1, the entire principal balance
of such loans are hereby converted into and continued as term loans (such loans, “Term A Loans”).
Notwithstanding anything set forth herein to the contrary, in order to effect the continuation of
the Existing Loans as Term A Loans as contemplated by the preceding sentence, the amount to be
funded on the first Borrowing Date by each Lender hereunder in respect of its Term A Commitment
shall be reduced by the principal amount of such Lender’s Existing Loans converted into and
continued as Term A Loans.



     (b) Subject to the terms and conditions hereof, each Term B Lender severally agrees to make
additional term loans to Borrower, from time to time prior to the Commitment Expiration Date, on
any Borrowing Date requested by Borrower, subject to Section 4.2, in an aggregate principal amount
not to exceed such Lender’s Term B Commitment as of such Borrowing Date (each such term loan, a
“Term B Loan” and, together with the Term A Loans, the “Loans”).



     (c) The Commitment of any Lender shall be reduced on the date of funding of any Loan, subject
to Section 4.2, by the principal amount of the Loan funded. The remaining Commitments shall
automatically and without notice be reduced to zero at the close of business on the day preceding
the Commitment Expiration Date. Once repaid, Loans may not be reborrowed and the Commitments, once
terminated or reduced, may not be reinstated. Upon 30 days’ written notice to the Administrative
Agent, Borrower may terminate and permanently reduce any unused portion of the aggregate
Commitments.



     2.2 Procedures for Borrowing. For all Term B Loans Borrower shall deliver to the Administrative
Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior
to 10:00 A.M., New York City time, one Business Day prior to the anticipated borrowing date)
requesting that the Lenders make the Term B Loans on the requested Borrowing Date for such Term B
Loans and specifying the amount to be borrowed. Upon receipt of such Borrowing Notice, the
Administrative Agent shall promptly notify each Lender thereof. Not later than 12:00 Noon, New
York City time, on the Borrowing Date specified for Term B Loans hereunder, each Lender shall make
available to the Administrative Agent at the Funding Office an amount in immediately available
funds equal to the Term B Loan or Term B Loans to be made by such Lender; provided that Borrower
shall not deliver a Borrowing Notice, and no Lender is under any obligation to make available any
funds, for Term B Loans in an aggregate amount for all Lenders less than $1,000,000, and all such
Term B Loans shall be made in integers of $100,000 except, in each case, if such amount is the
remaining unborrowed amount of the Commitments. The Administrative Agent shall make available to
Borrower the aggregate of the



22









 







amounts made available to the Administrative Agent by the Lenders, in like funds as received by the
Administrative Agent.



     2.3 Maturity Date. The Loans of each Lender shall mature on August 31, 2011 (the “Maturity Date”).



     2.4 Repayment of Loans; Evidence of Debt.




     (a) Borrower hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Lender the entire unpaid principal amount of each Loan of such
Lender on such date on which the Loans become due and payable pursuant to this Section
2.4(a), Sections 2.6 or 2.7 or Article VII. Borrower hereby further agrees to pay interest
on the unpaid principal amount of the Loans from time to time outstanding from the date
hereof until payment in full thereof at the rates per annum, and on the dates, set forth in
Section 2.8.




     (i) The aggregate principal amount of the Term A Loans of each Term A Lender
shall be payable in consecutive quarterly installments on the first Business Day
immediately following the end of each calendar quarter, beginning April 1, 2010,
each of which shall be in an amount equal to such Lender’s Term A Loan Percentage
multiplied by the amount set forth below opposite the installment amount for the
applicable year (with the installments in each such year being equal in amount):



	 	 	 	 	 
	 	 	Principal
	Installment	 	Amount
	2008
	 	$	0	 
	2009
	 	$	0	 
	2010
	 	$	37,500,000	 
	2011
	 	$	37,500,000	 







     (ii) The Term B Loans of each Term B Loan Lender shall be due and payable in
full in immediately available funds on August 31, 2011.



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



     (c) The Administrative Agent, on behalf of Borrower, shall maintain the Register pursuant to
Section 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount
of each Loan made hereunder and any Note evidencing such Loan, (ii) the amount of any principal or
interest due and payable or to become due and payable from Borrower to each Lender hereunder and
(iii) both the amount of any sum received by the Administrative Agent hereunder from Borrower and
each Lender’s share thereof.



     (d) The entries made in the Register and the accounts of each Lender maintained pursuant to
this Section 2.4 shall, to the extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations of Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or any such account, or
any error therein, shall not in any manner affect the obligation of Borrower to repay (with
applicable interest) the Loans made to Borrower by such Lender in accordance with the terms of this
Agreement.



23









 





     (e) Borrower agrees that, upon the request to the Administrative Agent by any Lender, Borrower
will promptly execute and deliver to such Lender a promissory note of Borrower evidencing any Loans
of such Lender, substantially in the form of Exhibit G-1, in the case of Term A Loans, and
Exhibit G-2, in the case of any Term B Loans (in each case, a “Note”), with appropriate
insertions as to date and principal amount; provided that delivery of Notes shall not be a
condition precedent to the occurrence of the Closing Date or the making of the Loans on any
Borrowing Date.



     2.5 Fees.



     (a) On the Closing Date, Borrower shall pay the Administrative Agent for the account of each
Lender a fee equal to 1.25% of the amount by which the Commitments exceed the aggregate outstanding
principal balance under the Existing Credit Agreement as at the time immediately prior to the
Closing Date.



     (b) On December 20, 2008, Borrower shall pay the Administrative Agent for the account of the
Lenders as of such first anniversary a fee equal to $375,000, which fee shall be fully earned on
the Closing Date.



     (c) Borrower agrees to pay to the Administrative Agent for the account of each Lender a fee
for the period from and including the Closing Date to the Commitment Expiration Date, computed at a
rate equal to 1/2 of 1% per annum on the average daily amount of the Commitment of such Lender during
the period for which payment is made, payable quarterly in arrears on each Interest Payment Date
and on the Commitment Expiration Date, commencing on the first of such dates to occur after the
Closing Date. Borrower may terminate the availability of any unused portion of the Commitment upon
thirty (30) days prior notice to the Administrative Agent.



     (d) Borrower shall pay to the Administrative Agent for its own account an annual nonrefundable
administration fee equal to $50,000, such fee to be paid in advance on the Closing Date and
thereafter on each anniversary of the Closing Date (other than the Maturity Date) or, if any such
date is not a Business Day, on the first Business Day thereafter.



     (e) Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the
dates from time to time agreed to in writing by Borrower and the Administrative Agent.



     2.6 Optional Prepayments.



     (a) At any time after August 31, 2009, Borrower may, upon at least three Business Days’ prior
notice to the Administrative Agent stating the Prepayment Date and aggregate principal amount of
the prepayment, prepay on any date the outstanding principal amount of the Term A Loans, in whole
or in part, at Borrower’s option, at 100% of the principal amount thereof, together with accrued
interest through the Prepayment Date on the principal amount prepaid, in accordance with the
provisions of this Agreement.



     (b) Subject the concurrent payment of the Applicable Premium, if required, Borrower may, upon
at least three Business Days’ prior notice to the Administrative Agent stating the Prepayment Date
and aggregate principal amount of the prepayment, prepay on any date the outstanding principal
amount of the Term B Loans, in whole or in part, at Borrower’s option, at 100% of the principal
amount thereof, together with accrued interest through the Prepayment Date on the principal amount
prepaid, in accordance with the provisions of this Agreement.



24









 





     (c) On any date prior to the first anniversary of the Closing Date, Borrower may, upon at
least three Business Days’ prior notice to the Administrative Agent stating the Prepayment Date and
aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Term B
Loans in whole or in part, at Borrower’s option, at the Make-Whole Price, together with accrued
interest through the Prepayment Date on the principal amount prepaid, in accordance with the
provisions of this Agreement.



     (d) On any date after the first anniversary of the Closing Date, subject to the concurrent
payment of the Applicable Premium, Borrower may, upon at least three Business Days’ prior notice to
the Administrative Agent stating the Prepayment Date and aggregate principal amount of the
prepayment, prepay on any date the outstanding principal amount of the Term B Loans, in whole or in
part, at Borrower’s option, together with accrued interest through the Prepayment Date on the
principal amount prepaid



     (e) For purposes hereof, the “Applicable Premium” shall be a cash amount equal to the
percentages of principal amount of the Loans being prepaid set forth below:



	 	 	 	 	 
	If prepaid on or prior to August 15, 2010 
	 	 	2.0	%
	If prepaid at any time after August 15, 2010 
	 	 	0.0	%






     (f) Each partial prepayment shall be in an aggregate amount not less than $1,000,000 or
integral multiples of $100,000 in excess thereof, and any such prepayment must be accompanied by
payment of Agent’s and each Lender’s reasonable out-of-pocket expenses and payment of any LIBOR
funding breakage costs in accordance with Section 2.12. Upon the giving of such notice of
prepayment, the principal amount of the Loans specified to be prepaid and at the applicable price
specified therefor, together with the accrued interest through the Prepayment Date and, if
applicable, the Applicable Premium, shall become due and payable on the Prepayment Date.



     (g) Upon the giving of any such notice of prepayment, the principal amount of the Loans
specified to be prepaid, together with the accrued interest thereon through the Prepayment Date
shall become due and payable on the Prepayment Date.



     (h) Any optional prepayment under this Section 2.6 shall be applied to the Loans as set forth
in Section 2.9 below.



     2.7 Mandatory Prepayments.



     (a) Unless the Required Lenders shall otherwise agree, if any Capital Stock shall be issued
(excluding any Permitted Equity Financing and the Required Equity Contribution), or any
Indebtedness (excluding any Permitted Indebtedness) incurred, by any Loan Party or any Person shall
make any contribution to the capital of any Loan Party (excluding any Permitted Equity Financing,
the Required Equity Contribution and contributions by Holdings to the capital of Borrower, or by
Borrower to the capital of any Wholly Owned Subsidiary Guarantor), then on the date of such
issuance, incurrence or capital contribution, Borrower shall prepay the principal amount of the
Loans in an amount equal to the amount of the Net Cash Proceeds of such issuance, incurrence or
capital contribution. The provisions of this Section 2.7(a) do not constitute a consent to the
issuance of any Capital Stock by any Person whose Capital Stock is pledged pursuant to any Security
Document, or a consent to the incurrence of any Indebtedness or the making of any capital
contribution by any Loan Party.



25









 





     (b) Unless the Required Lenders shall otherwise agree, if on any date any Loan Party shall
receive a Purchase Price Refund or Net Cash Proceeds from any Asset Sale or Recovery Event then, on
the date of receipt by such Person of such Net Cash Proceeds or such Purchase Price Refund,
Borrower shall prepay the principal amount of the Loans in an amount equal to the amount of such
Net Cash Proceeds or such Purchase Price Refund; provided, however, that in the case of any Net
Cash Proceeds constituting the Reinvestment Deferred Amount with respect to a Reinvestment Event,
Borrower shall prepay the Loans in an amount equal to the Reinvestment Prepayment Amount applicable
to such Reinvestment Event, if any, on the Reinvestment Prepayment Date with respect to such
Reinvestment Event; provided further that the aggregate Net Cash Proceeds of Reinvestment Events
that may be specified as Reinvestment Deferred Amounts in one or more Reinvestment Notices shall
not exceed $250,000 in the case of any Reinvestment Event and $500,000 in the aggregate in the case
of all Reinvestment Events. The provisions of this Section do not constitute a consent to the
consummation of any Disposition not permitted by Section 6.5.



     (c) If on any date, a Collateral Value Deficiency exists, Borrower shall immediately (and in
any event no later than the date five Business Days after such date), and without the necessity of
demand by the Administrative Agent, prepay the principal amount of the Loans by an amount equal to
the amount of such Collateral Value Deficiency.



     (d) Not later than the first business day following the end of the first quarter following
each fiscal year (beginning on April 1, 2010 with respect to fiscal year 2009), Borrower shall
prepay the principal amount of the Loans in an amount equal to 75% of Excess Cash Flow for such
fiscal year;



     (e) Upon the occurrence of a Change of Control, the Required Lenders, at their sole
discretion, may require Borrower to immediately prepay the outstanding principal amount of the
Loans (after considering any prepayments by Borrower pursuant to Section 2.6), together with all
other amounts owing under this Agreement or any Loan Document including any fees and expenses
earned or then due and payable under any Loan Document.



     (f) Each prepayment of the Loans pursuant to this Section 2.7 shall be applied in accordance
with Section 2.9 below and shall be accompanied by payment of accrued interest to the Prepayment
Date on the principal amount prepaid. Each prepayment of the Term B Loans pursuant to Sections
2.7(a), (b) (other than resulting from a sale of the Specified Drilling Assets), (c) or (e) shall
include a concurrent payment of the Applicable Premium or, in the case of prepayments prior to the
first anniversary of the Closing Date, shall be accompanied by a premium equal to the excess, if
any, of the Make-Whole Price over the principal amount of Loans being prepaid.



     2.8 Interest Rates, Payment Dates and Computation of Interest and Fees.



     Each Loan shall bear interest for each day on which it is outstanding at the Interest Rate.



     (a) (i) If all or a portion of the principal amount of any Loan shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise) or there shall occur and be
continuing any other Event of Default, all outstanding Loans (whether or not overdue) (to the
extent legally permitted) shall bear interest at a rate per annum that is equal to the Interest
Rate plus 2.0% the (“Default Rate”), from the date of such nonpayment of principal or occurrence of
such Event of Default, respectively, until such amount of principal is paid in full (after as well
as before judgment) or until such Event of Default is no longer continuing, respectively, and (ii)
if all or a portion of any interest payable on any Loan or any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to the



26









 







Default Rate, in each case, with respect to clauses (i) and (ii) above, from the date of such
non payment until such amount is paid in full (after as well as before judgment).



     (b) Subject to Section 2.7(f) and Section 2.9(h), interest on the Loans shall be payable in
arrears on each Interest Payment Date, provided that interest accruing pursuant to Section 2.8(a)
shall be payable from time to time on demand.



     (c) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of
a year of 360 days.



     2.9 Application of Payments.



     (a) The borrowing by Borrower of Loans from the Lenders hereunder, any reduction of the
Commitments of the Lenders and, subject to Section 2.9(c), each payment by Borrower on account of
any fee, shall be made pro rata according to the respective Term A Loan Percentages or Term B Loan
Percentages, as the case may be, of the relevant Lenders. Each payment (including prepayments) in
respect of principal or interest in respect of any Loans and each payment in respect of fees or
expenses payable hereunder shall be applied to the amounts of such obligations owing to the Lenders
pro rata according to the respective amounts then due and owing to the Lenders. The foregoing
notwithstanding, optional prepayments and mandatory prepayments of principal pursuant to Sections
2.6 and 2.7 shall be applied to Term A Loans and Term B Loans pro rata according to the respective
aggregate amounts of such Loans then outstanding. Amounts prepaid on account of the Loans may not
be reborrowed.



     (b) So long as no Event of Default shall have occurred and be continuing all payments and any
other amounts received by the Administrative Agent from or for the benefit of Borrower shall be
applied: (i) first, to pay all Obligations then due and payable and (ii) second, as Borrower so
designates.



     (c) After the occurrence and during the continuance of any Event of Default, Borrower hereby
irrevocably waives the right to direct the application of any and all payments in respect of the
Obligations and any proceeds of Collateral, and agrees that the Administrative Agent may, and shall
upon either (A) the written direction of the Required Lenders or (B) the acceleration of the
Obligations pursuant to Section 7.1, apply all payments in respect of any Obligations and all
proceeds of Collateral in the following order:




     (i) first, to the payment or reimbursement of the Administrative Agent for all costs,
expenses, disbursements and losses incurred by the Administrative Agent and which any Loan
Party is required to pay or reimburse pursuant to the Loan Documents;




     (ii) second, to the payment or reimbursement of the Lenders for all costs, expenses,
disbursements and losses incurred by such Persons and which any Loan Party is required to
pay or reimburse pursuant to the Loan Documents;




     (iii) third, to the payment of interest on the Loans which is then due;




     (iv) fourth, to the payment of principal of the Loans which is then due (applied on a
pro rata basis among Term A Loans and Term B Loans);




     (v) fifth, to the payment or prepayment to the Lenders of all other Obligations; and




     (vi) sixth, to whomsoever shall be legally entitled thereto.



27









 





     (d) If any Lender owes payments to the Administrative Agent hereunder, any amounts otherwise
distributable under this Section 2.9 to such Lender shall be deemed to belong to the Administrative
Agent to the extent of such unpaid payments, and the Administrative Agent shall apply such amounts
to make such unpaid payments rather than distribute such amounts to such Lender. All distributions
of amounts described in paragraphs second and fifth above shall be made by the Administrative Agent
to each Lender on a pro rata basis determined by the amount such Obligations owed to such Lender
represents of the aggregate amount of all such Obligations.



     (e) All payments (including prepayments) to be made by Borrower hereunder, whether on account
of principal, interest, premium, fees or otherwise, shall be made without setoff or counterclaim
and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars
and in immediately available funds. Any payment made by Borrower after 12:00 Noon, New York City
time, on any Business Day shall be deemed to have been made on the next following Business Day.
The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding sentence, interest thereon
shall be payable at the then-applicable rate during such extension.



     (f) Unless the Administrative Agent shall have been notified in writing by any Lender prior to
the borrowing that such Lender will not make the amount that would constitute its share of such
borrowing available to the Administrative Agent, the Administrative Agent may assume that such
Lender is making such amount available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to Borrower a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on any Borrowing
Date, such Lender shall pay to the Administrative Agent, on demand, such amount with interest
thereon at a rate equal to the average Federal Funds Effective Rate for the period until such
Lender makes such amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing under this Section
2.9(f) shall be conclusive in the absence of manifest error. If such Lender’s share of such
borrowing is not made available to the Administrative Agent by such Lender within three Business
Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the Interest Rate, on demand, from Borrower.



     (g) Unless the Administrative Agent shall have been notified in writing by Borrower prior to
the date of any payment due to be made by Borrower hereunder that Borrower will not make such
payment to the Administrative Agent, the Administrative Agent may assume that Borrower is making
such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such
assumption, make available to the Lenders their respective pro rata shares of a corresponding
amount. If such payment is not made to the Administrative Agent by Borrower within three Business
Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from
each Lender to which any amount which was made available pursuant to the preceding sentence, such
amount with interest thereon at the rate per annum equal to the daily average Federal Funds
Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or
any Lender against Borrower.



     (h) Each payment of the Loans shall be accompanied by accrued interest to the date of such
payment on the amount paid.



     2.10 Requirements of Law.



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     (a) If the adoption of or any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request or directive (whether or not
having the force of law) from any central bank or other Governmental Authority made subsequent to
the date hereof:




     (i) shall subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Application or any LIBOR Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.11 and changes in the rate of tax on the overall net income of such Lender);




     (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory
loan or similar requirement against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any other acquisition
of funds by, any office of such Lender that is not otherwise included in the determination
of the LIBOR Rate hereunder; or




     (iii) shall impose on such Lender any other condition;



and the result of any of the foregoing is to increase the cost to such Lender, by an amount which
such Lender deems to be material, of making, continuing or maintaining Loans bearing interest by
reference to the LIBOR Rate, or to reduce any amount receivable hereunder in respect thereof, then,
in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender on an after-tax basis for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 2.10, it shall promptly notify Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled.



     (b) If any Lender shall have determined that the adoption of or any change in any Requirement
of Law regarding capital adequacy, reserve requirements or similar requirements generally
acceptable to lending institutions or in the interpretation or application thereof or compliance by
such Lender or any corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not having the force of
law) from any Governmental Authority made subsequent to the Closing Date shall have the effect of
reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration such Lender’s or
such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to Borrower (with a copy to
the Administrative Agent) of a written request therefor, Borrower shall promptly pay to such Lender
such additional amount or amounts as will compensate such Lender or such corporation for such
reduction on an after-tax basis.



     (c) A certificate as to any additional amounts payable pursuant to this Section submitted by
any Lender to Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence
of manifest error. The obligations of Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.



     (d) Notwithstanding anything to the contrary contained herein, if the introduction of or any
change in any law or regulation (or any change in the interpretation thereof) after the Closing
Date shall make it unlawful, or any central bank or other Governmental Authority shall assert after
the Closing Date that it is unlawful, for any Lender to agree to make or to make or to continue to
fund or maintain any Loan bearing interest by reference to the LIBOR Rate, then, unless that Lender
is able to make or to continue to fund or to maintain such Loan at another branch or office of that
Lender without, in that



29









 







Lender’s opinion, adversely affecting it or its Loans or the income obtained therefrom, on
notice thereof and demand therefor by such Lender to Borrower through the Administrative Agent, (i)
the obligation of such Lender to agree to make or to make or to continue to fund or maintain Loans
bearing interest by reference to the LIBOR Rate shall terminate, and (ii) all of such Lender’s
Loans shall automatically convert at the end of the then-current LIBOR Period with respect thereto
or sooner, if required by such law, regulation or interpretation, into Loans bearing interest with
respect to such Lender from and after the date of such conversion at a rate per annum equal to the
sum of (x) the Federal Funds Effective Rate in effect from time to time plus 0.50% and (y) the
Applicable Interest Margin.



     2.11 Taxes.



     (a) All payments made by any Loan Party under this Agreement or any other Loan Documents shall
be made free and clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on any Agent or any Lender as a result of a present or former connection between such Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any such connection
arising solely from such Agent’s or such Lender’s having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any other Loan Document).
If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings
(“Non-Excluded Taxes”) or any Other Taxes are required to be withheld from any amounts payable to
any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement; provided, however, that Borrower or any
Guarantor shall not be required to increase any such amounts payable to any Agent or any Lender
with respect to any Non-Excluded Taxes (i) that are attributable to such Agent’s or such Lender’s
failure to comply with the requirements of Sections 2.11(d) or (e) or (ii) that are United States
withholding taxes imposed on amounts payable to such Agent or such Lender at the time such Agent or
such Lender becomes a party to this Agreement, except to the extent that such Agent’s or such
Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts
from Borrower with respect to such Non-Excluded Taxes pursuant to this Section 2.11(a). Borrower
or the applicable Guarantor shall make any required withholding and pay the full amount withheld to
the relevant tax authority or other Governmental Authority in accordance with applicable
Requirements of Law.



     (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.



     (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by Borrower, as promptly as
possible thereafter Borrower shall send to the Administrative Agent for the account of the relevant
Agent or Lender, as the case may be, a certified copy of an original official receipt received by
Borrower showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes or Other Taxes
when due to the appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, Borrower shall indemnify the Agents and
the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent
or any Lender as a result of any such failure. The agreements in this Section 2.11 shall survive
the termination of this Agreement and the payment of the Loans and all other amounts payable
hereunder.



     (d) Each Lender (or Transferee) that is not a citizen or resident of the United States of
America, a corporation, partnership or other entity created or organized in or under the laws of
the United



30









 







States of America (or any jurisdiction thereof), or any estate or trust that is subject to
federal income taxation regardless of the source of its income (a “Non-U.S. Lender”) shall deliver
to Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from
which the related participation shall have been purchased) two copies of either U.S. Internal
Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest” a statement substantially in the form of Exhibit H to the
effect that such Lender is eligible for a complete exemption from withholding of U.S. taxes under
Section 871(h) or 881(c) of the Code and a Form W-8BEN, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by Borrower
under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall
promptly notify Borrower at any time it determines that it is no longer in a position to provide
any previously delivered certificate to Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose). Notwithstanding any other provision of this Section
2.11(d), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section
2.11(d) that such Non-U.S. Lender is not legally able to deliver.



     (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax
under the law of the jurisdiction in which Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by Borrower, 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,
provided that such Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender’s reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.



     2.12 Indemnity. Borrower agrees promptly to indemnify each Lender for, and to hold each Lender
harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a)
the failure to make any prepayment of a Loan after Borrower has given a notice thereof in
accordance with the provisions of this Agreement; (b) the repayment of any Loans that are repaid in
whole or in part prior to the last day of a LIBOR Period (whether such repayment is made pursuant
to any provision of this Agreement or any other Loan Document or occurs as a result of
acceleration, mandatory prepayment, by operation of law or otherwise); or (c) a default in payment
when due of the principal amount of or interest on any Loan; or (d) a default in making any
borrowing of Loans after Borrower has given notice requesting the same in accordance herewith.
Such indemnification shall include any loss (excluding loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate deposits from which such
funds were obtained. For the purpose of calculating amounts payable to a Lender under this Section
2.12, each Lender shall be deemed to have actually funded its relevant Loan through the purchase of
a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that Loan and
having a maturity comparable to the LIBOR Period; provided that each Lender may fund each of its
Loans in any manner it deems appropriate, and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this Section 2.12. A certificate as to any amounts
payable pursuant to this Section submitted to Borrower by any Lender shall be conclusive in the
absence of manifest error. This covenant shall survive the termination of this Agreement and the
repayment of the Loans and all other amounts payable hereunder.



31









 





     2.13 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving
rise to the operation of Section 2.10 or 2.11(a) with respect to such Lender, it will, if requested
by Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the object of avoiding
the consequences of such event; provided that such designation is made on terms that, in the sole
judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal
or regulatory disadvantage, and provided, further, that nothing in this Section 2.13 shall affect
or postpone any of the obligations of Borrower or the rights of any Lender pursuant to Section 2.10
or 2.11(a).



ARTICLE III

REPRESENTATIONS AND WARRANTIES




     To induce the Agents and the Lenders to enter into this Agreement and to make the Loans, each
of Holdings and Borrower hereby represents and warrants, jointly and severally, to each Agent and
each Lender that on the date hereof and on the Closing Date:



     3.1 Financial Condition.



     (a) The unaudited pro forma consolidated balance sheet of Holdings and its consolidated
Subsidiaries as at June 30, 2008 (including the notes thereto) (the “Pro Forma Balance Sheet”),
copies of which have heretofore been furnished to the Administrative Agent, has been prepared
giving effect (as if such events had occurred on such date) to the Loans to be made on the Closing
Date, the Acquisition and the other uses of proceeds of the Loans and the payment of fees and
expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on
the best information available to Holdings as of the date of delivery thereof, and presents fairly
on a pro forma basis the estimated financial position of Holdings and its consolidated Subsidiaries
as at June 30, 2008, assuming that the events specified in the preceding sentence had actually
occurred at such date.



     (b) The audited consolidated balance sheet of Holdings as at December 31, 2007, and the
related consolidated statements of income and of cash flows for the fiscal years ended on such
dates, reported on by and accompanied by an unqualified report from the Independent Accountant,
present fairly the consolidated financial condition of Holdings as at such date, and the
consolidated results of its operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of Holdings as at June 30, 2008, and
the related unaudited consolidated statements of income and cash flows for the nine-month period
ended on such date, present fairly the consolidated financial condition of Holdings as at such
date, and the consolidated results of its operations and its consolidated cash flows for the
nine-month period then ended (subject to normal year end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been prepared in accordance
with GAAP applied consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). No Loan Party has any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long term leases or
unusual forward or long term commitments, including, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, that are not reflected in the
most recent financial statements referred to in this paragraph. During the period from July 1,
2008 to and including the date hereof there has been no Disposition by any Loan Party of any
material part of its business or Property except as described on Schedule 3.1(b).



     3.2 No Change. Since December 31, 2007, there has been no development or event that has had or
could reasonably be expected to have a Material Adverse Effect.



     3.3 Corporate Existence; Compliance with Law.



32









 





     (a) Each of the Loan Parties (i) is duly incorporated, organized or formed, as applicable,
validly existing and (if relevant) in good standing under the laws of the jurisdiction of its
incorporation, organization or formation, as the case may be, (ii) has the corporate, company or
partnership power and authority, as applicable, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the business in which it is
currently engaged, (iii) is duly qualified as a foreign corporation, company or partnership, as
applicable, and (if relevant) in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business requires such
qualification except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, (iv) is in compliance with its
Constituent Documents and (v) is in compliance with all Requirements of Law (other than its
Constituent Documents) except to the extent that the failure to comply therewith could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.



     (b) Each Loan Party has all Permits necessary for the ownership and, if any Loan Party is the
operator, operation of its Properties and the conduct of its businesses except for those Permits
the failure of which to have could not reasonably be expected to have a Material Adverse Effect,
and is in compliance in all material respects with the terms and conditions of all such Permits.



     3.4 Entity Power; Authorization; Enforceable Obligations. Each Loan Party has the power and
authority (corporate or otherwise), and the legal right, to make, deliver and perform the Loan
Documents to which it is a party and, in the case of Borrower, to borrow hereunder. Each Loan
Party has taken all necessary corporate or other action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and, in the case of Borrower, to authorize
the borrowings on the terms and conditions of this Agreement. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental Authority or any other
Person is required in connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other Loan Documents except
(i) consents, authorizations, filings and notices described in Schedule 3.4, which
consents, authorizations, filings and notices have been obtained or made and are in full force and
effect and (ii) the filings referred to in Section 3.21. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and binding obligation
of each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally
and by general equitable principles (whether enforcement is sought by proceedings in equity or at
law).



     3.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of any Loan Party and will not result in, or
require, the creation or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created
by the Security Documents). No Requirement of Law or Contractual Obligation applicable to any Loan
Party could reasonably be expected to have a Material Adverse Effect. No performance of a
Contractual Obligation by any Loan Party, either unconditionally or upon the happening of an event,
would result in the creation of a Lien (other than a Permitted Lien) on the Property of any Loan
Party.



     3.6 No Indebtedness; No Material Litigation.



     (a) After giving effect to the making of the Loans and application of the proceeds thereof on
the Closing Date, no Loan Party shall have outstanding any Indebtedness other than the Loans.



33









 





     (b) No litigation, investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to Borrower’s knowledge, threatened by or against any Loan Party or
against any of their respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably
be expected to have a Material Adverse Effect.



     3.7 No Default. No Loan Party is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.



     3.8 Ownership of Property; Liens.



     (a) No Loan Party holds any Real Property in fee simple. Schedule 1.2 describes all
Real Property in which any Loan Party holds a leasehold interest. The Loan Parties have valid
leasehold interests in all such Real Property and Defensible Title to, or a valid leasehold
interest in, all other Property material to its business, and none of such Property is subject to
any Lien other than Permitted Liens.



     (b) The Rigs are (i) mobile equipment which are not designed to be permanently used in any one
location; (ii) not property subject to Revised Colorado Statue §§ 42-6-120 or 42-6-121 or any
comparable statute, law, regulation or rule of any state in which any of the Rigs is located and
not certificated as motor vehicles under the laws of any jurisdiction; and (iii) not fixtures under
the laws of any jurisdiction in which any of the Rigs is located.



     3.9 Insurance. All policies of insurance of any kind or nature of any Loan Party, including
policies of fire, theft, product liability, public liability, property damage, other casualty,
employee fidelity, workers’ compensation and employee health and welfare insurance, are in full
force and effect and are of a nature and provide such coverage as is customarily carried by
businesses of the size and character such Loan Party. No Loan Party has been refused insurance for
any material coverage for which it had applied or had any policy of insurance terminated (other
than at its request).



     3.10 Intellectual Property. Each Loan Party owns, or is licensed to use, all Intellectual Property
necessary for the conduct of its business as currently conducted. No material claim has been
asserted and is pending by any Person challenging or questioning the use by any Loan Party of any
Intellectual Property or the validity or effectiveness of any Intellectual Property, nor, to
Borrower’s knowledge, is there any valid basis for any such claim. The use of Intellectual
Property by any Loan Party does not infringe on the rights of any Person in any material respect.



     3.11 Taxes. Each Loan Party has filed or caused to be filed all federal, state and other material
tax returns, reports and statements (collectively, “Tax Returns”) that are required to be filed by
such Loan Party or any of its Tax Affiliates with the appropriate Governmental Authorities in all
jurisdictions in which such Tax Returns are required to be filed; all such Tax Returns are true and
correct in all material respects and correctly reflect the facts regarding the income, business,
assets, operations, activities, status or other matters of such Loan Party and any other
information required to be shown thereon; each Loan Party has paid, prior to the date on which any
fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof, all
taxes shown to be due and payable on said returns or on any assessments made against it or any of
its Property and all other taxes, fees or other charges imposed on it or any of its Property by or
otherwise due and payable to any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of such Loan Party); and no
tax Lien has been filed against the Property of any Loan Party, and, to



34









 







Borrower’s knowledge, no claim is being asserted, with respect to any such tax, fee or other
charge. No Tax Return is under audit or examination by any Governmental Authority and no notice of
such an audit or examination or any assertion of any claim for taxes has been given or made by any
Governmental Authority. Proper and accurate amounts have been withheld by each Loan Party and each
of its Tax Affiliates from their respective employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions of applicable
Requirements of Law and such withholdings have been timely paid to the respective Governmental
Authorities. No Loan Party (i) intends to treat the Loans or any other transaction contemplated
hereby as being a “reportable transaction” (within the meaning of Treasury Regulation 1.6011-4) or
(ii) is aware of any facts or events that would result in such treatment.



     3.12 Federal Regulations. No part of the proceeds of any Loans will be used for “buying” or
“carrying” any “margin stock” within the respective meanings of each of the quoted terms under
Regulation U as now and from time to time hereafter in effect or for any purpose that violates the
provisions of the regulations of the Board.



     3.13 Labor Matters. There are no strikes, stoppages or slowdowns or other labor disputes against
any Loan Party pending or, to Borrower’s knowledge, threatened that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of any Loan Party have not been in violation of the Fair Labor Standards
Act of 1938, as amended, or any other applicable Requirement of Law dealing with such matters that
(individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect.
All payments due from any Loan Party on account of employee health and welfare insurance that
(individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect
if not paid have been paid or accrued as a liability on the books of such Loan Party.



     3.14 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning
of Section 412 of the Code or Section 302 of ERISA) has occurred during the five year period prior
to the date on which this representation is made or deemed made with respect to any Benefit Plan,
and each Benefit Plan has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the
PBGC or a Benefit Plan has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to fund such Benefit
Plans) did not, as of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither any Loan Party nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be
expected to result in a material liability under ERISA, and neither any Loan Party nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if such Loan Party or
any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation is made or deemed
made. No such Multiemployer Plan is in Reorganization or Insolvent.



     3.15 Regulations.



     (a) No Loan Party is an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.



     (b) No Loan Party is subject to regulation under any Requirement of Law (other than Regulation
X of the Board) which limits its ability to incur Indebtedness.



35









 





     (c) No Loan Party 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.



     (d) No Mortgage encumbers improved Real Property that is located in an area that has been
identified by the Secretary of Housing and Urban Development as an area having special flood
hazards and in which flood insurance has been made available under the National Flood Insurance Act
of 1968.



     3.16 Capital Stock; Subsidiaries.



     (a) All of the outstanding Capital Stock of each Loan Party has been duly authorized and
validly issued and is fully paid and non-assessable and, in the case of each Loan Party other than
Holdings, has been duly pledged as Collateral under the Guarantee and Security Agreement and is
free and clear of all Liens (except Liens pursuant to the Security Documents).



     (b) The Subsidiaries listed on Schedule 3.16 constitute all the Subsidiaries of each
Loan Party as of the Closing Date. Schedule 3.16 sets forth as of the Closing Date the
exact legal name (as reflected on the certificate of incorporation (or formation) and jurisdiction
of incorporation (or formation) of each Subsidiary of any Loan Party and, as to each such
Subsidiary, the percentage and number of each class of Capital Stock owned by each Loan Party.



     (c) There are no outstanding subscriptions, options, warrants, calls, rights or other
agreements or commitments (other than stock options with respect to Capital Stock of Holdings
granted to employees or directors and directors’ qualifying shares) of any nature relating to any
Capital Stock of any Loan Party, except as disclosed on Schedule 3.16.



     (d) Holdings owns directly all of the outstanding Capital Stock of Borrower. No Loan Party
owns or holds, directly or indirectly, any Capital Stock of any Person other than any Subsidiary.
Borrower owns, directly or indirectly through other Subsidiaries, all of the outstanding Capital
Stock of its Subsidiaries. Each Loan Party is a party to the Guarantee and Security Agreement.



     (e) There are no agreements or understandings (other than the Loan Documents): (i) to which
any Loan Party is a party with respect to the voting, sale or transfer of any shares of Capital
Stock of Holdings or any Loan Party or restricting the transfer or hypothecation of any such shares
or (ii) with respect to the voting, sale or transfer of any shares of Capital Stock of any Loan
Party (other than Holdings) or restricting the transfer or hypothecation of any such shares.



     3.17 Use of Proceeds. The proceeds of the Loans shall be used to repay or refinance the Existing
Indebtedness, finance the purchase, refurbishment and/or construction of the Additional Rigs and to
pay related fees and expenses and for general corporate purposes.



     3.18 Customers and Suppliers. There exists no actual or threatened termination, cancellation
or limitation of, or modification to or change in (a) any Daywork Drilling Contract, or (b)  the
business relationship between (i) either Loan Party, on the one hand, and any customer or any group
thereof, on the other hand, whose agreements with either Loan Party is individually or in the
aggregate material to the business or operations of Borrower, or (ii) either Loan Party, on the one
hand, and any material supplier thereof, on the other hand; and there exists no present state of
facts or circumstances that could give rise to or result in any such termination, cancellation,
limitation, modification or change. No Person providing any materials or services to either Loan
Party has filed, or threatened to file, a mechanics’, materialmen’s, repairmen’s or other like Lien
on any Drilling Rig Assets.



36









 





     3.19 Environmental Matters. Other than exceptions to any of the following that could not,
individually or in the aggregate, reasonably be expected to result in the payment of a Material
Environmental Amount:



     (a) Each Loan Party: (i) is, and within the period of all applicable statutes of limitation
has been, in compliance with all applicable Environmental Laws; (ii) holds all Environmental
Permits (each of which is in full force and effect) required for any of their current or intended
operations or for any property owned, leased, or otherwise operated by any of them; (iii) is, and
within the period of all applicable statutes of limitation has been, in compliance with all of
their Environmental Permits; and (iv) reasonably believes that: each of their Environmental
Permits will be timely renewed and complied with, without material expense; any additional
Environmental Permits that may be required of any of them will be timely obtained and complied
with, without material expense; and compliance with any Environmental Law that is or is expected to
become applicable to any of them will be timely attained and maintained, without material expense.



     (b) Materials of Environmental Concern are not present at, on, under, in, or about any Real
Property now or formerly owned, leased or operated by any Loan Party, or at any other location
(including, any location to which Materials of Environmental Concern have been sent for re-use or
recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give
rise to liability of any Loan Party under any applicable Environmental Law or otherwise result in
costs to any Loan Party, or (ii) interfere with the continued operations of any Loan Party, or
(iii) impair the fair saleable value of any Property owned or leased by any Loan Party



     (c) There is no judicial, administrative, or arbitral proceeding (including any notice of
violation or alleged violation) under or relating to any Environmental Law or Environmental Permit
to which any Loan Party is, or to Borrower’s knowledge, or any of its Subsidiaries will be, named
as a party that is pending or, to Borrower’s knowledge, threatened.



     (d) No Loan Party has received any written request for information, or been notified that it
is a potentially responsible party under or relating to the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern.



     (e) No Loan Party has entered into or agreed to any consent decree, order, or settlement or
other agreement, or is subject to any judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance
with or liability under any Environmental Law.



     (f) No Loan Party has assumed or retained, by contract or operation of law, any liabilities of
any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any
Material of Environmental Concern.



     (g) Borrower has made available to the Administrative Agent and the Lenders copies of all
significant reports, correspondence and other documents in its possession, custody or control
regarding compliance by any Loan Party with or potential liability of any Loan party under
Environmental Laws or Environmental Permits.



     3.20 Accuracy of Information, Etc. No statement or information contained in this Agreement, any
other Loan Document or any other document, certificate or statement furnished to the Agents or the
Lenders or any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents, contained as of the date
such



37









 







statement, information, document or certificate was so furnished, any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The projections and pro forma financial information
contained in the materials referenced above are based upon good faith estimates and assumptions
believed by management of Holdings and Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a material amount. There is
no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Agents and the Lenders for use in
connection with the transactions contemplated hereby and by the other Loan Documents.



     3.21 Security Documents.



     (a) The Guarantee and Security Agreement is effective to create in favor of the Administrative
Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable security
interest in the Collateral described therein and proceeds and products thereof. In the case of the
Pledged Stock described in the Guarantee and Security Agreement, when any stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and, in the case of
Pledged Stock that is a “security” (as defined in the UCC) but is not evidenced by a certificate,
when an Instructions Agreement, substantially in the form of Annex A to the Guarantee and Security
Agreement, has been delivered to the Administrative Agent, and in the case of any other Collateral
described in the Guarantee and Security Agreement, when financing statements in appropriate form
are filed in the offices specified on Schedule 3.21(a)-1 (which financing statements may be
filed by the Administrative Agent) at any time and such other filings as are specified on Schedule
2 to the Guarantee and Security Agreement have been completed (all of which filings may be filed by
the Administrative Agent) at any time, the Guarantee and Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds and products thereof, as security for the Obligations
(as defined in the Guarantee and Security Agreement), in each case prior and superior in right to
any other Person (except (in the case of Collateral other than securities pledged by any Loan
Party) Permitted Liens). Schedule 3.21(a)-2 lists each UCC Financing Statement that (i)
names any Loan Party as debtor and (ii) will remain on file after the Closing Date. Schedule
3.21(a)-3 lists each UCC Financing Statement that (i) names any Loan Party as debtor and (ii)
will be terminated on or prior to the Closing Date; and on or prior to the Closing Date, Borrower
will have delivered to the Administrative Agent, or caused to be filed, duly completed UCC
termination statements, signed by the relevant secured party, in respect of each such UCC Financing
Statement.



     (b) The Mortgaged Properties constitute all of the Real Property owned by the Loan Parties.
Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit
of the Secured Parties, a legal, valid, binding and enforceable Lien on the Mortgaged Properties
described therein and proceeds and products thereof; and when the Mortgages are filed in the
offices specified on Schedule 3.21(b) (in the case of Mortgages to be executed and
delivered on the Closing Date) or in the recording office designated by Borrower (in the case of
any Mortgage to be executed and delivered pursuant to Section 5.10(a)), each Mortgage shall
constitute a fully perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Mortgaged Properties described therein and the proceeds and products
thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior
and superior in right to any other Person (other than Persons holding Liens or other encumbrances
or rights permitted by the relevant Mortgage).



38









 





     3.22 Solvency. Each Loan Party is, and after giving effect to the incurrence of all Indebtedness
and obligations being incurred in connection herewith will be and will continue to be, Solvent.



     3.23 Drilling Rig Assets. Set forth on Schedule 3.23 is a complete and accurate list
and description of (a) each Rig (including, on a Rig by Rig basis, (i) identification of the rig
number of each Rig and the owner thereof and (ii) identification of the location of each Rig (by
county, state and country)), (b) each Rig Accessory and (c) each contract right of any Loan Party
relating to the use, operation, refurbishment, upgrade or purchase of any Rig or Rig Accessories
(collectively, the “Drilling Rig Assets”), and such Drilling Rig Assets constitute all of the
land-based drilling rigs, Rig Accessories and related contracts rights owned or held by any Loan
Party on the Closing Date.



     3.24 Contingent Obligations. There will be no material Contingent Obligations of any Loan Party
existing at the Closing Date.



     3.25 Bank Accounts. Schedule 3.25 lists all accounts maintained by or for the benefit of
any Loan Party with any bank or financial institution.



     3.26 Access Agreements. No books or records of any Loan Party are located or maintained on any
premises owned by a third party or leased by a third party to any Loan Party other than such
premises as to which the Administrative Agent has received an Access Agreement from such Loan
Party.



     3.27 Customers and Suppliers. There exists no actual or threatened termination, cancellation or
limitation of, or modification to or change in the business relationship between (i) any Loan
Party, on the one hand, and any customer or any group thereof, on the other hand, whose agreements
with such Loan Party is individually or in the aggregate material to the business or operations of
the Loan Parties, or (ii) any Loan Party, on the one hand, and any material supplier thereof, on
the other hand; and there exists no present state of facts or circumstances that could reasonably
be expected to give rise to or result in any such termination, cancellation, limitation,
modification or change.



ARTICLE IV

CONDITIONS PRECEDENT




     4.1 Conditions to Initial Loan. The effectiveness of this Agreement, and the agreement of each
Lender to make the Loan requested to be made by it hereunder on the Closing Date is subject to the
satisfaction, prior to or concurrently with the making of such Loan on the Closing Date, of the
following conditions precedent:



     (a) Loan Documents. The Administrative Agent shall have received this Agreement and
the Guarantee and Security Agreement, in each case executed and delivered by a duly authorized
officer of each of the parties thereto.



     (b) Constituent Documents. All documents establishing or implementing the ownership,
capital and corporate, organizational, tax and legal structure of each Loan Party shall be
reasonably satisfactory to the Administrative Agent.



     (c) Projections and Business Plan. The Administrative Agent shall have received (i)
Projections for the 2008 fiscal year and a business plan for fiscal years 2008 through 2011, in
each case, satisfactory to it in its sole discretion, and (ii) projections with respect to the
expected revenue to be earned through the utilization of Rig 41 and the expected dates such Rigs
will be placed under contract.



39









 





     (d) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received
(i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements for the 2007 fiscal
year and (iii) unaudited interim consolidated financial statements of Borrower since June 30, 2008
for each fiscal month and quarterly period ended subsequent to the date of the latest applicable
financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial
statements are available; and such financial statements shall not, in the reasonable judgment of
the Administrative Agent or the Lenders, reflect any Material Adverse Effect since December 31,
2007.



     (e) Approvals. Permits and third party approvals necessary or, in the sole discretion
of the Administrative Agent, advisable to be obtained by a Loan Party in connection with this
Agreement, the Security Documents and the continuing operations of Holdings, Borrower and its
Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force
and effect, and all applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise impose adverse
conditions on the financing contemplated hereby.



     (f) Related Agreements. The Administrative Agent shall have received (in a form
reasonably satisfactory to the Administrative Agent), true and correct copies, certified to be
true, correct and complete as of the Closing Date by a Responsible Officer of Borrower, of fully
executed versions of such other documents or instruments as may be reasonably requested by the
Administrative Agent, including, a copy of any debt instrument, security agreement or other
material contract to which the Loan Parties may be a party.



     (g) Subordinated Indebtedness. No principal payments shall have been made on the
Subordinated Indebtedness prior to the Closing Date. For avoidance of doubt, interest due as of
the date of conversion, which amount is estimated to be approximately $230,000, however, is
permitted to be paid, and may be paid with proceeds from a sale of the Specified Drilling Assets.



     (h) Fees. The Lenders and the Agents shall have received all fees required to be
paid, and all expenses for which invoices have been presented (including reasonable fees,
disbursements and other charges of counsel to the Agents), on or before the Closing Date; provided,
that prior to Closing the Administrative Agent shall provide Borrower a good faith estimate of its
legal fees and expenses if such fees and expenses have reached or are expected to exceed $30,000
for services provided through the Closing Date. All such amounts will be paid with proceeds of
Loans made on the Closing Date and will be reflected in the funding instructions given by Borrower
to the Administrative Agent on or before the Closing Date.



     (i) Solvency. The Lenders shall have received a reasonably satisfactory Solvency
Certificate which shall document the solvency of the Loan Parties considered as a whole after
giving effect to the transactions contemplated hereby.



     (j) Budget. The Lenders shall have received a budget for Borrower and its
Subsidiaries for the 2008 fiscal year which budget shall be reasonably acceptable to the
Administrative Agent and the Lenders.



     (k) Lien Searches. The Administrative Agent shall have received the results of a
recent lien, search in each of the jurisdictions or offices in which UCC financing statements or
other filings or recordations should be made to evidence or perfect (with the priority required
under the Loan Documents) security interests in all assets of the Loan Parties (or would have been
made at any time during the five years immediately preceding the Closing Date to perfect Liens on
any assets owned on the Closing Date by any Loan Party), and such search shall reveal no Liens on
any of the assets of the Loan Party, except



40









 







for Permitted Liens or Liens set forth on Schedule 3.21(a)-3 that were terminated,
released or otherwise discharged on or prior to the Closing Date pursuant to documentation
satisfactory to the Administrative Agent.



     (l) Closing Certificate. The Administrative Agent shall have received a certificate
of each Loan Party, dated the Closing Date, substantially in the form of Exhibit I, with
appropriate insertions and attachments.



     (m) Other Certifications. The Administrative Agent shall have received the following:




     (i) a copy of the charter of each Loan Party and each amendment thereto, certified (as
of a date reasonably near the date of the initial extension of credit) as being a true and
correct copy thereof by the Secretary of State or other applicable Governmental Authority
of the jurisdiction in which each such Loan Party is organized;




     (ii) a copy of a certificate of the Secretary of State or other applicable
Governmental Authority of the jurisdiction in which each Loan Party is organized, dated
reasonably near the date of the initial extension of credit, listing the charter such Loan
Party and each amendment thereto on file in such office and certifying that (A) such
amendments are the only amendments to such Loan Party’s charter on file in such office, (B)
such Loan Party has paid all franchise taxes to the date of such certificate and (C) such
Loan Party is duly organized and in good standing under the laws of such jurisdiction;




     (iii) an electronic confirmation from the Secretary of State or other applicable
Governmental Authority of each jurisdiction in which each such Loan Party is organized
certifying that such Loan Party is duly organized and in good standing under the laws of
such jurisdiction on the date of the initial extension of credit; prepared by, or on behalf
of, a filing service acceptable to the Administrative Agent; and




     (iv) a copy of a certificate of the Secretary of State or other applicable
Governmental Authority of the States of Colorado and Nevada, as applicable, dated
reasonably near the date of the initial extension of credit, stating that each Loan Party
is duly qualified and in good standing as a foreign corporation or entity in each such
jurisdiction and has filed all annual reports required to be filed to the date of such
certificate; and electronic confirmation, from the Secretary of State or other applicable
Governmental Authority of each such jurisdiction on the date of the initial extension of
credit as to the due qualification and continued good standing of each such Person as a
foreign corporation or entity in each such jurisdiction on or about such date, prepared by,
or on behalf of, a filing service acceptable to the Administrative Agent.



     (n) Legal Opinions. The Administrative Agent shall have received the following
executed legal opinions:




     (i) the legal opinion of Shughart Thomson & Kilroy, counsel to the Loan Parties, with
respect to such matters as may be reasonably requested by the Administrative Agent, and in
form and substance satisfactory to the Administrative Agent; and




     (ii) the legal opinion of special Wyoming counsel to the Loan Parties, with respect to
such matters as may be reasonably requested by the Administrative Agent, and in form and
substance satisfactory to the Administrative Agent.



41









 





     (o) Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. The
Administrative Agent shall have received (i) the certificates representing the shares of Capital
Stock pledged pursuant to the Guarantee and Security Agreement, together with an undated stock
power for each such certificate executed in blank by a duly authorized officer of the pledgor
thereof, (ii) in the case of Capital Stock that is a “security” (as defined in the UCC) but is not
evidenced by a certificate, an Instructions Agreement, substantially in the form of Annex A to the
Guarantee and Security Agreement, duly executed by any issuer of Capital Stock pledged pursuant to
the Guarantee and Security Agreement and (iii) each promissory note pledged pursuant to the
Guarantee and Security Agreement endorsed (without recourse) in blank (or accompanied by an
executed transfer form in blank satisfactory to the Administrative Agent) by the pledgor thereof.



     (p) Specified Vehicles. The Administrative Agent shall have received certificates of
title for each of the Specified Vehicles.



     (q) Rig Appraisals. The Administrative Agent shall have received Rig Appraisals for
each Rig, except for the Additional Rigs.



     (r) Lender Consents. Each of the Lenders shall have received all internal consents
and approvals necessary for the consummation of the transactions contemplated by this Agreement and
the Security Documents.



     (s) No Material Adverse Effect. Since December 31, 2007, no development, event or
circumstance that has had or could reasonably be expected to have a Material Adverse Effect, or
that calls into question in any material respect financial projections previously supplied to the
Lenders or any of the material assumptions on which such financial projections were prepared, shall
have occurred and be continuing.



     (t) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the
Collateral described therein, prior and superior in right to any other Person (other than with
respect to Permitted Liens), shall have been filed, registered or recorded or shall have been
delivered to the Administrative Agent in proper form for filing, registration or recordation.



     (u) Insurance. The Administrative Agent shall have received a summary of the
insurance carried in respect of each Loan Party and its Properties, including copies of all
relevant insurance policies (which insurance shall be for such amounts, against such risk, covering
such liabilities and with such deductibles or self-insured retentions as are acceptable to the
Administrative Agent) and certificates of insurance, satisfying the requirements of Section 5.3 of
the Guarantee and Security Agreement and otherwise reasonably satisfactory to the Administrative
Agent, naming the Administrative Agent, for the ratable benefit of the Secured Parties, as “lender
loss payee” under its property loss policies and as “additional insured” on its comprehensive and
general policies.



     (v) Due Diligence. The Administrative Agent shall have completed a satisfactory due
diligence review of the Loan Parties, including business prospects, title to properties, tax, legal
and accounting issues. The Lenders shall have completed a satisfactory due diligence review of
Borrower, including its business prospects, title to its properties and tax, legal and accounting
issues.



42









 





     (w) Material Agreements. The Administrative Agent shall have received a true, correct
and complete copy, certified as to such by a Responsible Officer of the applicable Loan Parties, of
each material agreement.



     (x) Representations and Warranties. Each of the representations and warranties made
by any Loan Party in or pursuant to any Loan Document shall be true and correct on and as of the
Closing Date or, with respect to any representations and warranties that are by their express terms
made as of a specified earlier date, on and as of such earlier date.



     (y) No Default. No Default or Event of Default shall have occurred and be continuing
on such date or after giving effect to the Loans requested to be made under this Agreement on the
Closing Date.



     (z) No Collateral Value Deficiency. No Collateral Value Deficiency shall exist as of
the Closing Date nor would any Collateral Value Deficiency exist after giving effect to the
extensions of credit requested to be made on such date.



     (aa) No Capital Market Disruption. There shall not have occurred any disruption or
adverse change, as determined by the Administrative Agent in its sole discretion, in the financial
or capital markets generally, or in the markets for bank loan syndications in particular.



     (bb) Additional Documents. The Administrative Agent and the Lenders shall have
received such other documents, agreements, certificates and information as such Persons shall
reasonably request.



     4.2 Conditions Precedent to the Extension of Term B Loans. In addition to the satisfaction in full
of the conditions precedent set forth in Section 4.1, the agreement of each Lender to make Term B
Loans is subject to the satisfaction in full of the following conditions precedent:



     (a) Fees. The Lenders and the Administrative Agent shall have received all fees
required to be paid, and all expenses for which invoices have been presented (including reasonable
fees, disbursements and other charges of counsel to the Agents), on or before the initial Borrowing
Date. All such amounts will be paid with proceeds of Loans made on the initial Borrowing Date and
will be reflected in the funding instructions given by Borrower to the Administrative Agent on or
before the initial Borrowing Date.



     (b) Representations and Warranties. Each of the representations and warranties made
by the Loan Parties in or pursuant to the Loan Documents shall be true and correct on and as of
such date as if made on and as of such date, except for such representations and warranties that
are by their express terms limited to a specific date.



     (c) No Default. No Default or Event of Default shall have occurred and be continuing
on such date or after giving effect to the extensions of credit requested to be made on such date.



     (d) No Collateral Value Deficiency. No Collateral Value Deficiency shall exist as of
such date nor would any Collateral Value Deficiency exist after giving effect to the extensions of
credit requested to be made on such date.



     (e) Additional Rig Daywork Drilling Contracts. Borrower shall have obtained Daywork
Drilling Contracts for each Additional Rig with terms and on conditions and in form and substance
satisfactory to the Required Lenders; provided, that in the case of Rigs 34 and 41, Borrower shall
have



43









 







obtained Daywork Drilling Contracts for each such Rig with terms and on conditions and in form
and substance satisfactory to the Required Lenders within 45 days after the date of acquisition of
such Rig.



     (f) Additional Documentation. The Administrative Agent shall have received such
additional approvals, opinions or documents as the Administrative Agent may reasonably request.



     4.3 Deemed Fulfilled Conditions. Except to the extent that Borrower has disclosed in the Borrowing
Notice that an applicable condition specified in Section 4.1 or 4.2, as applicable, will not be
fulfilled as of the requested time for the making of the Loans, Borrower shall be deemed to have
made a representation and warranty as of such time that the conditions specified in Section 4.1 or
4.2, as applicable, have been fulfilled. No such disclosure by Borrower that a condition specified
in Section 4.1 or 4.2 will not be fulfilled as of the requested time for the making of the
requested Loans shall affect the right of each Lender not to make the Loans requested to be made by
it if such condition has not been fulfilled at such time.



ARTICLE V

AFFIRMATIVE COVENANTS




     Each of Holdings and Borrower hereby jointly and severally agree that, so long as the
Commitments remain in effect, or any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and Borrower shall, and shall cause each of its Subsidiaries to:



     5.1 Financial Statements. Furnish to each Agent and each Lender by physical means or, if requested
by the Administrative Agent, electronically via the Administrative Agent’s proprietary transmission
software and date collection method:



     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of
Holdings, commencing with the 2008 fiscal year, a copy of the audited consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous year, reported on without a
“going concern” or like qualification or exception, or qualification arising out of the scope of
the audit, by the Independent Accountants;



     (b) as soon as available, but in any event not later than 45 days after the end of each
quarterly period of each fiscal year of Holdings, the unaudited consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and of cash flows for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in comparative form the figures as
of the end of and for the corresponding period in the previous year, certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal year-end audit
adjustments); and



     (c) as soon as available, but in any event not later than 30 days after the end of each
calendar month commencing on August 31, 2008, the unaudited consolidated balance sheets of Borrower
and its Subsidiaries as at the end of such month and the related unaudited consolidated statements
of income and of cash flows for such month and the portion of the fiscal year through the end of
such month, setting forth in each case in comparative form the figures as of the end of and for the
corresponding period in the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments);



44









 





     (d) as soon as available, but in any event not later than 30 days after the end of each
calendar month commencing on August 31, 2008, a schedule of the contract status of each Rig which
schedule shall include in sufficient detail the marketing prospects for each Rig; and



     (e) promptly upon Borrower’s having knowledge that a Collateral Value Deficiency exists, or is
likely to exist, written notice thereof (if not previously provided in a certificate delivered
pursuant to Section 5.3(a)), together with a written plan to cure such deficiency by the end of the
fiscal quarter in which such plan was delivered, which plan shall be satisfactory in form and
substance to the Administrative Agent;



all such financial statements to be complete and correct in all material respects and to be
prepared in reasonable detail and in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as approved by the Independent Accountants
or officer, as the case may be, and disclosed therein, and quarterly financial statements shall be
subject to normal year-end audit adjustments and need not be accompanied by footnotes).



     5.2 Collateral Reporting. Furnish to the Administrative Agent:



     (a) (i) within 90 days after the closing Date, in the case the of the Additional Rigs and
thereafter on or before each June 30 of each year with respect to all Rigs, a Rig Appraisal dated
as of each preceding May 1 (or dated later if available) and (ii) promptly upon written request by
the Administrative Agent, a Rig Appraisal; provided that unless a Default or an Event of Default
shall then exist, the Administrative Agent may request, at Borrower’s cost and expense, no more
than one such Rig Appraisals during any 12-month period, with any additional requests for updated
Rig Appraisal during any such period to be at the Administrative Agent’s cost and expense, and
after the occurrence and during the continuance of a Default or Event of Default, the
Administrative Agent may, from time to time, request a Rig Appraisal at the sole cost and expense
of Borrower, in each case dated as of the first day of the month during which Borrower receives
such request;



     (b) reports, certifications, engineering studies, environmental assessments or other written
material or data requested by, and in form, scope and substance reasonably satisfactory to, the
Administrative Agent or the Required Lenders, in the event that Administrative Agent or the
Required Lenders at any time have a reasonable basis to believe that there may be a material
violation of any Environmental Law or a condition at any Property owned, operated or leased by any
Loan Party that could reasonably give rise to a Material Adverse Effect, or if an Event of Default
has occurred and is continuing; provided that if any Loan Party fails to provide such reports,
certifications, engineering studies or other written material or data within 75 days after the
request of the Administrative Agent or the Required Lenders, the Administrative Agent shall have
the right, at such Loan Party’s sole cost and expense, to conduct such environmental assessments or
investigations as may reasonably be required to enable the Administrative Agent and the Required
Lenders to determine whether each of the Loan Parties is in material compliance with Environmental
Laws;



     (c) prior to any Asset Sale, a notice (i) describing such Asset Sale or the nature and
material terms and conditions of such transaction and (ii) stating the estimated Net Cash Proceeds
anticipated to be received by any Loan Party;



     (d) as soon as is practicable following the written request of the Administrative Agent and in
any event within 60 days after the end of each fiscal year, (i) a report in form and substance
satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage
maintained as of the date of such report by each Loan Party and the duration of such coverage and
(ii) an insurance broker’s statement that all premiums then due and payable with respect to such
coverage have been paid and



45









 







confirming that the Administrative Agent has been named as loss payee or additional insured,
as applicable; and



     (e) upon reasonable request by the Administrative Agent, such other reports as to the
Collateral or the financial condition of the Loan Parties as may be so requested.



     5.3 Certificates; Other Information. Furnish to each Agent and each Lender or, in the case of
clause (h) to the relevant Lender or Agent or, in the case of clause (i), to the relevant Lender:



     (a) concurrently with the delivery of the financial statements referred to in Section 5.1(a),
a certificate of the independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such certificate (it being understood that
such certificate shall be limited to the items that independent certified public accountants are
permitted to cover in such certificates pursuant to their professional standards and customs of the
profession);



     (b) concurrently with the delivery of any financial statements pursuant to Section 5.1, (i) a
certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s
knowledge, each Loan Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or satisfied by such Loan Party, and
that such Responsible Officer has obtained no knowledge of (A) any Default or Event of Default or
(B) the existence of a Collateral Value Deficiency, in each case except as specified in such
certificate and (ii) in the case of quarterly or annual financial statements, a Compliance
Certificate containing all information and calculations necessary for determining compliance by the
Loan Parties with the provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of Holdings, as the case may be, and authorization to file any UCC
financing statements or other filings specified in such Compliance Certificate as being required to
be delivered therewith;



     (c) as soon as available, and in any event no later than 45 days after the end of each fiscal
year of Borrower, a detailed consolidated budget for the following fiscal year (including a
projected consolidated balance sheet of Borrower and its Subsidiaries as of the end of the
following fiscal year, and the related consolidated statements of projected cash flow, projected
changes in financial position and projected income and a description of the underlying assumptions
applicable thereto), and, as soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the “Projections”), which Projections
shall in each case be accompanied by a certificate of a Responsible Officer stating that such
Projections are based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are incorrect or misleading in
any material respect;



     (d) as soon as possible and in any event within five days of obtaining knowledge thereof: (i)
notice of any development, event, or condition that, individually or in the aggregate with other
developments, events or conditions that, individually or in the aggregate, could reasonably be
expected to result in the payment by the Loan Parties in the aggregate, of a Material Environmental
Amount; and (ii) any notice that any Governmental Authority has taken action to or may deny any
application for an Environmental Permit or other Material Permit sought by, or revoke or refuse to
renew any such Permit held by any Loan Party or condition approval of any such Permit on terms and
conditions if the effect of any such action would have a material adverse effect on any Loan Party,
or to the operation of any of its businesses or any property owned, leased or otherwise operated by
such Person;



46









 





     (e) promptly after becoming aware of the same, written notice of (i) any material labor
dispute to which either Loan Party is or may become a party, including any strikes, lockouts or
other disputes relating to any of such Person’s plants and other facilities, and (ii) any Worker
Adjustment and Retraining Notification Act or related liability incurred with respect to the
closing of any plant or other facility of any of such Person that would reasonably be expected to
have a Material Adverse Effect;



     (f) within five Business Days after receipt thereof by any Loan Party, copies of each final
management letter, exception report or similar letter or report received by such Loan Party from
its Independent Accountant;



     (g) within 45 days after the end of each fiscal quarter of Borrower, a narrative discussion
and analysis of the financial condition and results of operations of Borrower and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, as compared to the portion of the Projections covering such periods
and to the comparable periods of the previous year;



     (h) if requested by any Lender or Agent, a statement to the effect specified in Section 3.12
in conformity with the requirements of FR Form G-3 or FR Form U 1 referred to in Regulation U; and



     (i) promptly, such additional financial and other information as the Administrative Agent or
any Lender may from time to time reasonably request.



     5.4 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all its material obligations of whatever nature, except
where the amount or validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been provided on the
books of the Loan Party obligated therefor.



     5.5 Conduct of Business and Maintenance of Existence, etc.



     (a) (i) Preserve, renew and keep in full force and effect its corporate or other existence and
(ii) take all reasonable action to maintain all rights, privileges, franchises, Permits and
licenses necessary or desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 6.4 and except, in the case of clause (ii) above, to the extent that
failure to do so could not reasonably be expected to have a Material Adverse Effect.



     (b) To the extent not in conflict with this Agreement or the other Loan Documents, comply with
all (i) Contractual Obligations and Constituent Documents and (ii) Permits and Requirements of Law,
and use its reasonable efforts to cause all employees, crew members, agents, contractors and
subcontractors of any Loan Party to comply with all Permits and Requirements of Law as may be
necessary or appropriate to enable such Loan Party so to comply, except, in the case of Contractual
Obligations, Permits and Requirements of Law, where the failure to comply could not reasonably be
expected to result in a Material Adverse Effect.



     5.6 Operation and Maintenance of Property; Insurance.



     (a) Keep, preserve and maintain all Property and systems, including all improvements, personal
property and equipment, useful and necessary in its business in good working order and condition in
accordance with the general practice of other businesses of similar character and size (ordinary
wear and tear excepted) and make all necessary repairs, renewals and replacements so that its
business may be property conducted at all times



47









 





     (b) Operate or cause to be operated the Drilling Rig Assets in a good and workman-like manner.



     (c) Maintain with financially sound and reputable insurance companies insurance on all its
Property meeting the requirements of the Guarantee and Security Agreement and in at least such
amounts and against at least such risks (but including in any event general liability) as are
usually insured against in the same general area by companies engaged in the same or a similar
business, with such deductibles as are reasonably acceptable to the Administrative Agent.



     (d) Name the Administrative Agent, for the ratable benefit of the Secured Parties, as “loss
payee” under its casualty loss policies and the Administrative Agent as “additional insured” on its
comprehensive and general liability policies and cause all such casualty loss policies to be
reasonably satisfactory to the Administrative Agent in all respects and provide that they shall not
be canceled, amended or changed without at least 30 days’ (ten days for nonpayment) written notice
to the Administrative Agent, it being understood, however, that, so long as no Event of Default has
occurred and is continuing, Net Cash Proceeds of any insurance policies shall be applied in
accordance with Sections 2.7 and 2.9.



     (e) Renew all insurance policies referred to in this Section 5.6 on terms no less favorable to
the Administrative Agent for the ratable benefit of the Secured Parties during the term of this
Agreement and cause any substitute underwriter to be, in Borrower’s reasonable opinion, as
financially sound as Borrower’s existing underwriters.



     5.7 Inspection of Property; Books and Records; Discussions.



     (a) Keep proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities.



     (b) Permit the Administrative Agent and the Lenders, or any agents or representatives thereof,
from time to time during Borrower’s normal business hours, as often as may be reasonably requested
and upon two Business Days notice (except that, during the continuance of an Event of Default, no
such notice shall be required) to (i) go upon, examine, inspect and remain on the Properties of any
Loan Party, (ii) during any such visit, inspect and verify the amount, character and condition of
any of the Property of any Loan Party, (iii) during any such visit, examine and, at Borrower’s cost
and expense, make copies of and abstracts from the records and books of account of any Loan Party,
and (iv) discuss the affairs, finances and accounts of any Loan Party with any of their respective
officers, directors, employees or Independent Accountants, it being understood that, except as
otherwise stated in clause (iii) above, the Administrative Agent and each Lender will pay the costs
and expenses incurred by it in exercising its rights under this Section 5.7(b); provided that after
the occurrence of an Event of Default, Borrower shall reimburse the Administrative Agent and each
Lender promptly after a request therefor for the reasonable costs and expenses incurred by it in
connection with the exercise of its rights under this Section 5.7(b).



     (c) Authorize the Independent Accountants of Holdings or Borrower to disclose to the
Administrative Agent or any Lender any and all financial statements and other information of any
kind, as the Administrative Agent or any Lender reasonably requests from of Holdings or Borrower
and which the Independent Accountants may have with respect to the business, financial condition,
results of operations or other affairs of any Loan Party.



48









 





     5.8 Notices. Promptly, and in any event within three Business Days after Borrower’s knowledge
thereof, give notice to the Administrative Agent and each Lender of:



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



     (b) any (i) default or event of default (or alleged default) under any Contractual Obligation
of any Loan Party or (ii) litigation, investigation or proceeding which may exist at any time
between any Loan Party and any Governmental Authority, that in case of clause (i) or (ii), if not
cured or if adversely determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;



     (c) any litigation or proceeding affecting any Loan Party in which the amount involved that is
not covered by insurance is $100,000 or more or in which injunctive or similar relief is sought;



     (d) the following events, as soon as possible and in any event within 30 days after Holdings
or Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with
respect to any Benefit Plan, a failure to make any required contribution to a Benefit Plan, the
creation of any Lien in favor of the PBGC or a Benefit Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan, (ii) the institution of
proceedings or the taking of any other action by the PBGC or any Loan Party or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Benefit Plan or (iii) proceedings that have been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Benefit Plan,
that Borrower or any Commonly Controlled Entity will or may incur any material liability (including
any indirect, contingent or secondary liability) to or on account of a termination or withdrawal
from a Benefit Plan under Title IV of ERISA or with respect to a Benefit Plan under Section
401(a)(29) or 4971, 4975, or 4980 of the Code or Section 409, 502(i) or 503(l) of ERISA or with
respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B of the Code)
under Section 4890B of the Code, or that Borrower or a Commonly Controlled Entity will incur any
material liability pursuant to an employee welfare benefit plan that provides benefits to retired
employees or former employees (other than as required under Section 601 of ERISA) or any Benefit
Plan;



     (e) any development or event that has had or could reasonably be expected to have a Material
Adverse Effect; and



     (f) the audit or examination of any Tax Return by any Governmental Authority, the receipt by
any Loan Party of notice of any such audit or examination or the assertion of any claim for taxes
against any Loan Party by any Governmental Authority.



     Each notice pursuant to this Section 5.8 shall be accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to therein and stating what action any
Loan Party proposes to take with respect thereto.



     5.9 Environmental Laws.



     (a) Comply in all material respects with, and ensure compliance in all material respects at
any Property owned, leased or operated by any Loan Party by all tenants, subtenants, lessees,
sub-lessees, operators and contractors, if any, with, all applicable Environmental Laws and
Environmental Permits, and obtain and comply in all material respects with and maintain, and ensure
that all tenants, subtenants, lessees, sub-lessees, operators and contractors to obtain and comply
in all material respects with and maintain, any and all Environmental Permits required by
applicable Environmental Laws with respect to any Property owned, leased or operated by any Loan
Party.



49









 





     (b) Conduct and complete all investigations, studies, sampling and testing, and all reporting,
investigative, remedial, removal and other actions required under Environmental Laws as a result of
a release of or the discovery of Materials of Environmental Concern, and promptly comply in all
material respects with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws.



     (c) As soon as available, and in any case within five Business Days prior to the closing of
any acquisition of Property by a Loan Party for which Borrower reasonably believes that liability
of any Loan Party for environmental remediation potentially associated with the ownership or
operation of all such Property (exclusive of usual and customary platform maintenance,
refurbishment and abandonment obligations) is expected to exceed a Material Environmental Amount,
deliver to the Administrative Agent an environmental report covering such Property to be acquired,
in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders.



     (d) Promptly, but in no event later than five days of the occurrence of a triggering event,
notify the Administrative Agent in writing of any threatened action, investigation or inquiry by
any Governmental Authority or any demand or threatened lawsuit by any landowner or other third
party against any Loan Party or its Properties of which Holdings or Borrower has knowledge in
connection with any Environmental Laws (excluding routine testing and corrective action) if
Holdings or Borrower reasonably anticipates that such action may result in liability (whether
individually or in the aggregate) in excess of $100,000.



     (e) Establish and implement such procedures as may be necessary to continuously determine and
assure that the obligations of each Loan Party under this Section 5.9 are timely and fully
satisfied.



     5.10 Additional Collateral, etc.



     (a) With respect to any Property (other than Real Property) acquired after the Closing Date by
any Loan Party as to which the Administrative Agent, for the benefit of the Secured Parties, does
not have a perfected Lien and security interest, promptly (i) execute and deliver to the
Administrative Agent such Security Documents or amendments to Security Documents as the
Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in such Property, (ii) take all actions
necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured
Parties, a perfected first priority Lien and security interest in such Property (subject only to
Permitted Liens), including the execution and delivery by all necessary third parties of any
Deposit Account Control Agreements and Mortgages, the filing of UCC financing statements in such
jurisdictions as may be required by the Security Documents or by law, the filing of any Mortgages
in appropriate filing offices and the making of any other filings required by law or as may be
reasonably requested by the Administrative Agent and (iii) deliver to the Administrative Agent such
legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding as
the Administrative Agent may reasonably request, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent; provided that unless a Property
is acquired for a purchase price or other consideration in excess of $250,000, Borrower shall not
be required to take the actions specified in this Section 5.10(a) prior to the end of the fiscal
quarter in which the acquisition occurs, or if earlier, the date at which the cumulative amount of
purchase price or other consideration for all Property acquired in such quarter equals or exceeds
$250,000, at which time all Property theretofore acquired and not previously made subject to a Lien
in favor of the Administrative Agent shall be made so subject.



     (b) With respect to any fee interest in any Real Property acquired after the Closing Date by
any Loan Party (other than any such real property acquired for an aggregate consideration valued at
less



50









 







than $100,000), promptly (i) execute and deliver a first priority Mortgage (subject only to
Permitted Liens) in favor of the Administrative Agent, for the benefit of the Secured Parties,
covering such real property and designating thereon the appropriate recording office, (ii) if
requested by the Administrative Agent, provide the Administrative Agent with (A) title and extended
coverage insurance covering such real property in an amount at least equal to the purchase price of
such real property (or such other amount as shall be reasonably specified by the Administrative
Agent) as well as a current ALTA or ALTAX survey thereof, together with a surveyor’s certificate,
(B) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent
in connection with such Mortgage, each of the foregoing in form and substance reasonably
satisfactory to the Administrative Agent and (C) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters described above, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative
Agent.



     (c) With respect to any new Subsidiary created or acquired by any Loan Party or otherwise
becoming a Subsidiary after the Closing Date, concurrently with such creation, acquisition or
becoming a Subsidiary, (i) execute and deliver to the Administrative Agent such Security Documents
or amendments to Security Documents as the Administrative Agent deems necessary or advisable to
grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority Lien and security interest in the Capital Stock of such new Subsidiary that is owned by
any Loan Party, (ii) deliver to the Administrative Agent (A) the certificates (if any) representing
such Capital Stock, together with undated powers, in blank, executed and delivered by a duly
authorized officer of the Loan Party owning such Capital Stock and (B) in the case of a Subsidiary
whose Capital Stock is a security that is not evidenced by certificates, an Instructions Agreement,
substantially in the form of Annex A to the Guarantee and Security Agreement, duly executed by such
Subsidiary and each Loan Party owning such Capital Stock, (iii) cause such new Subsidiary (A) to
become a party to the Guarantee and Security Agreement and any other applicable Security Documents
(including Mortgages and Deposit Account Control Agreements) and (B) to take such other actions as
are necessary or advisable to grant to the Administrative Agent for the benefit of the Secured
Parties a perfected first priority Lien and security interest in the Collateral described in the
Guarantee and Security Agreement with respect to such new Subsidiary and, pursuant to Mortgages and
Deposit Account Control Agreements, all bank accounts owned by such Subsidiary, subject in each
case only to Permitted Liens, including the execution and delivery by all necessary third parties
of any Deposit Account Control Agreements and Mortgages, the filing of UCC financing statements in
such jurisdictions as may be required by the Guarantee and Security Agreement or by law, the filing
of any Mortgages in appropriate filing offices and the making of any other filings required by law
or as may be requested by the Administrative Agent, and (iv) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions (including Title Opinions) relating to
the matters described above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.



     (d) Notwithstanding anything to the contrary in this Section 5.10, paragraphs (a), (b) and (c)
of this Section 5.10 shall not apply to any Property or new Subsidiary created or acquired after
the Closing Date, as applicable, as to which the Administrative Agent has determined in its sole
discretion that the collateral value thereof is insufficient to justify the difficulty, time or
expense of obtaining a perfected security interest therein.



     5.11 Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in Section
3.17.



     5.12 ERISA Documents. Cause to be delivered to the Administrative Agent, promptly upon the
Administrative Agent’s request, any or all of the following: (i) a copy of each Benefit Plan (or,
where any such Benefit Plan is not in writing, a complete description thereof) and, if applicable,
related trust



51









 







agreements or other funding instruments and all amendments thereto, and all written interpretations
thereof and written descriptions thereof that have been distributed to employees or former
employees of any Loan Party; (ii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Benefit Plan; (iii) for the three most recent plan years
preceding the Administrative Agent’s request, Annual Reports on Form 5500 Series required to be
filed with any governmental agency for each Benefit Plan; (iv) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions required to be made by any
Loan Party or any Commonly Controlled Entity to each such Benefit Plan and copies of the collective
bargaining agreements requiring such contributions; (v) any information that has been provided to
any Loan Party or any Commonly Controlled Entity regarding withdrawal liability under any
Multiemployer Plan; (vi) the aggregate amount of payments made under any employee welfare benefit
plan (as defined in Section 3(1) of ERISA) to any retired employees of any Loan party (or any
dependents thereof) during the most recently completed fiscal year; and (vii) documents reflecting
any agreements between the PBGC and any Loan Party or any Commonly Controlled Entity with respect
to any Benefit Plan.



     5.13 Further Assurances.



     (a) From time to time execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates or documents, and take all such actions, as the Administrative
Agent may reasonably request for the purposes of implementing or effectuating the provisions of
this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of
the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any
additions thereto or replacements or proceeds or products thereof or with respect to any other
Property hereafter acquired by any Loan Party, which may be deemed to be part of the Collateral)
pursuant hereto or thereto.



     (b) Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege
or remedy pursuant to this Agreement or the other Loan Documents which requires any consent,
approval, recording, qualification or authorization of any Governmental Authority, execute and
deliver, or cause the execution and delivery of, all applications, certifications, instruments and
other documents and papers that the Administrative Agent or such Lender may be required to obtain
from Borrower or any of its Subsidiaries for such governmental consent, approval, recording,
qualification or authorization.



     (c) Preserve and protect the Lien status of each respective Mortgage and, if any Lien (other
than unrecorded Liens permitted under Section 6.3 that arise by operation of law) is asserted
against a Mortgaged Property, promptly and at its expense, give the Administrative Agent a detailed
written notice of such Lien and pay the underlying claim in full or take such other action so as to
cause it to be released or bonded over in a manner satisfactory to the Administrative Agent.



     5.14 Patriot Act Compliance. Provide such information and take such actions as are reasonably
required by the Agents or any Lender in order to assist the Agents and Lenders with compliance with
the Patriot Act.



     5.15 Required Equity Contribution. If, after giving effect to the borrowing of any Term B Loans,
the aggregate principal amount of all Term B Loans then outstanding would exceed $36,000,000, then
within 30 days after any such borrowing, Borrower shall receive a cash contribution to its common
equity capital equal to not less than one-third of such aggregate principal amount in excess of
$36,000,000 (the “Required Equity Contribution”), which contribution, for the avoidance of doubt,
shall not include conversion of the Subordinated Indebtedness.



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     5.16 Post Closing Deliveries.



     (a) As soon as available and in any event within 90 days after the Closing Date, Borrower
shall deliver, or cause to be delivered, to the Administrative Agent Rig Appraisals for the
Additional Rigs.



     (b) As soon as practicable and in any event within 30 days after the Closing Date, Borrower
shall deliver or caused to be delivered to the Administrative Agent an amendment to or ratification
of each of the Existing Deposit Account Agreements and the Access Agreement, in each case,
reasonably satisfactory to the Administrative Agent.



     (c) Conversion of Subordinated Indebtedness. As soon as practicable and in any event
by the close of business on August 22, 2008, the Subordinated Indebtedness shall be assigned to
Holdings and contributed to the capital of Borrowing on terms and subject to conditions
satisfactory to the Lenders; and no principal payments shall have been made on the Subordinated
Indebtedness prior to the Closing Date. For avoidance of doubt, the accrued and then payable
interest due on the Subordinated Indebtedness as of the Closing Date, which amount is, as of the
Closing Date, estimated to be approximately $230,000, is permitted to be paid, and may be paid with
proceeds from a sale of the Specified Drilling Assets.



ARTICLE VI

NEGATIVE COVENANTS




     Unless the Administrative Agent has provided Holdings and Borrower with prior written consent
for such actions, each of Holdings and Borrower hereby jointly and severally agree that, so long as
the Commitments remain in effect, any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly:



     6.1 Financial Condition Covenants.



     (a) Minimum Consolidated EBITDA. Permit the Consolidated EBITDA for any period of
four consecutive fiscal quarters of Borrower ending with any fiscal quarter to be less than the
amounts set forth below for such periods:



	 	 	 	 	 
	Period	 	EBITDA
	For the periods ending on or prior to March 31, 2009
	 	$	20,000,000	 
	For the periods ending after March 31, 2009 and before
October 1, 2010
	 	$	25,000,000	 





For the periods ending after October 1, 2010 the greater of (i)
$30,000,000 and (ii) $30,000,000 plus the product of $1,430,000 times
the number of Additional Rigs purchased and/or built with proceeds
from the Term B Loans.




     (b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the
last day of any period of four consecutive fiscal quarters of Borrower, beginning with the fiscal
quarter ending September 30, 2008, to exceed 3.5:1.0. For purposes of this Section 6.1(c) and
notwithstanding any other provision herein to the contrary, in determining Borrower’s Consolidated
EBITDA for purposes of calculating the Consolidated Leverage Ratio:



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     (i) for all determinations made prior to the last day of the first fiscal quarter of
Borrower after the Initial Service Date for any Additional Rig, the projected income for
such Additional Rig shall be as provided by Borrower in the Borrowing Notice for the Term B
Loans utilized to acquire such Additional Rig (including any deposits made for the
acquisition of such Additional Rig) and acceptable to the Administrative Agent; and




     (ii) for all determinations made as at and after the last day of the first fiscal
quarter of Borrower after the Initial Service Date for any Additional Rig and as at and
prior to the last day of any period of four consecutive fiscal quarters of Borrower after
the Initial Service Date for any Additional Rig, the income derived from the utilization of
such Additional Rig shall be an annualized amount based on the actual income derived from
the utilization of such Additional Rig so that such income for one fiscal quarter shall be
multiplied by four, for two fiscal quarters shall be multiplied by two and for three fiscal
quarters shall be multiplied by four-thirds.



     (c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage
Ratio for any period of four consecutive fiscal quarters of Borrower, beginning with the fiscal
quarter ending September 30, 2008, to be less than 2.5:1.0.



     (d) Minimum Current Ratio. Permit the Current Ratio at the end of any fiscal quarter
to be less than 1.0 to 1.0.



     6.2 Indebtedness. Create, incur, assume, issue, guaranty or suffer to exist any Indebtedness,
except for the following (“Permitted Indebtedness”):



     (a) Indebtedness of any Loan Party pursuant to any Loan Document;



     (b) Indebtedness of Borrower to any Subsidiary Guarantor and of any Wholly Owned Subsidiary
Guarantor to Borrower or any other Subsidiary Guarantor;



     (c) Indebtedness of Borrower or any Subsidiary Guarantor (including Capital Lease Obligations)
secured by Liens permitted by Section 6.3(f) in an aggregate principal amount not to exceed
$500,000 at any one time outstanding;



     (d) Guarantee Obligations made in the ordinary course of business by Borrower or any of its
Subsidiaries of obligations of Borrower or any Subsidiary Guarantor;



     (e) unsecured current accounts payable incurred in the ordinary course of business which are
(i) outstanding for not more than 90 days past the original invoice or billing date thereof or (ii)
being contested in good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor;



     (f) extensions of credit from suppliers or contractors who are not Affiliates of Borrower for
the performance of labor or services or the provision of supplies or materials under applicable
contracts or agreements in connection with Borrower’s or any Subsidiary’s oil and gas exploration
and development activities, which are not more than 60 days overdue or are being contested in good
faith by appropriate proceedings, if such reserves as may be required by GAAP shall have been made
therefor;



     (g) Indebtedness subordinated in all respects to the Obligations and otherwise on terms and
provisions acceptable to the Administrative Agent; and



     (h) until close of business on August 22, 2008, the Subordinated Indebtedness.



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     6.3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now
owned or hereafter acquired, except for:



     (a) Liens for taxes not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained on the books of
the applicable Loan Party in conformity with GAAP;



     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period of more than 30 days
or that are being contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto are maintained in the books of the applicable Loan Party in
conformity with GAAP; provided that at no time shall such sums being contested exceed, individually
or in the aggregate, $250,000;



     (c) pledges or deposits in connection with workers’ compensation, unemployment insurance and
other social security legislation;



     (d) deposits by or on behalf of Borrower or any of its Subsidiaries to secure the performance
of bids, trade contracts (other than for borrowed money), leases, statutory obligations, plugging
and abandoning surety and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, so long as the aggregate amount of such deposits at
any one time does not exceed $250,000;



     (e) encumbrances consisting of easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of Borrower or any of its Subsidiaries for
the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for
the removal of gas, oil, coal or other minerals and other like purposes, that, do not secure
Indebtedness or other monetary obligations and, in the aggregate, are not substantial in amount and
do not materially impairs the use of such property by any Loan Party in the operation of its
business and which do not in any case materially detract from the value of the Property subject
thereto are or would be violated in any material respect by existing or proposed operations of any
Loan Party;



     (f) Liens securing Indebtedness of Borrower or any of its Subsidiaries incurred pursuant to
Section 6.2(c) to finance the acquisition, construction or improvement of fixed or capital assets
(other than Drilling Rig Assets); provided that (i) such Liens and the Indebtedness secured thereby
shall be created substantially simultaneously with the acquisition, construction or improvement of
such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than
the Property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the amount of Indebtedness initially secured thereby is not more than 100% of
the purchase price or cost of construction or improvement of such fixed or capital asset;



     (g) Liens created pursuant to the Security Documents;



     (h) any interest or title of a lessor under any lease entered into by Borrower or any of its
Subsidiaries in the ordinary course of its business and covering only the assets so leased;



Liens not securing Indebtedness arising solely by virtue of any statutory or common law provision
relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only
deposit accounts or other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to restrictions against
access by the depositor in excess of those set forth by regulations promulgated by the Board and no
such deposit account is intended by any Loan Party to provide collateral to the depository
institution.



55









 





     6.4 Fundamental Changes. Enter into any merger, consolidation, restructuring, recapitalization,
reorganization or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation
or dissolution), Dispose of all or substantially all of its Property or business or amend, modify
or otherwise change its name, jurisdiction of organization, organizational number, identification
number or FEIN, except that, if no Default shall have occurred and be continuing:



     (a) any Subsidiary of Borrower may be merged or consolidated with or into Borrower (provided
that Borrower shall be the continuing or surviving entity) or with or into any Wholly Owned
Subsidiary Guarantor (provided that (i) such Subsidiary Guarantor shall be the continuing or
surviving entity or (ii) simultaneously with such transaction, the continuing or surviving entity
shall become a Subsidiary Guarantor and Borrower shall comply with Section 5.10 in connection
therewith); and



     (b) any Subsidiary of Borrower may Dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to Borrower or any Wholly Owned Subsidiary Guarantor; and



     (c) the Capital Stock of any Subsidiary may be transferred to Borrower or any other
Wholly-Owned Subsidiary Guarantor.



     6.5 Disposition of Property. Dispose of any of its Property (including, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any direct or indirect
Subsidiary of Holdings, issue or sell any shares of such Subsidiary’s Capital Stock (including
pursuant to any merger, consolidation, restructuring, recapitalization, reorganization or
amalgamation) to any Person, except:



     (a) the Disposition of obsolete or worn out property in the ordinary course of business;



     (b) Dispositions permitted by Section 6.4(b);



     (c) the sale or issuance of any Subsidiary’s Capital Stock to Borrower or any Wholly Owned
Subsidiary Guarantor;



     (d) subject to compliance with Section 2.7(a), the issuance of Capital Stock of Holdings for
cash;



     (e) Dispositions of claims against customers, other industry partners or any other Person in
connection with workouts or bankruptcy, insolvency or other similar proceedings with respect
thereto; and



     (f) any Recovery Event, provided that the requirements of Section 2.7(b) are complied with in
connection therewith.



     6.6 Restricted Payments. Declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of any Loan Party, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of Loan Party, or enter into any derivatives or other
transaction with any financial institution, commodities or stock exchange or clearinghouse (a
“Derivatives Counterparty”) obligating any Loan Party to make payments to such Derivatives
Counterparty as a result of any change in market value of any such Capital Stock, or make or offer
to make any payment or prepayment of principal, premium (if any), interest, fees (including fees to
obtain any waiver or consent) or other charges on, or effect any repurchase, redemption, purchase,
retirement, defeasance, sinking fund or similar



56









 







payment with respect to, any Indebtedness (other than the Obligations) of any Loan Party (the
payments or other transactions described in this Section 6.6 collectively, “Restricted Payments”),
except that:



     (a) any Subsidiary may make Restricted Payments to Borrower or any Subsidiary Guarantor;



     (b) Holdings may make Restricted Payments in the form of the common stock of Holdings;



     (c) Borrower or any Subsidiary Guarantor may make any required payment, prepayment, repurchase
redemption, purchase, retirement or other payment of other Permitted Indebtedness, in each case to
the extent required to be made by the terms thereof and permitted by such terms after giving effect
to any applicable subordination provisions (provided that in the case of the Subordinated
Indebtedness, such Indebtedness may be contributed and interest may be paid thereon, in each case,
as contemplated in Section 5.16(c)); and



     (d) Borrower or any Subsidiary Guarantor may prepay Capital Leases or purchase money financing
comprising Permitted Indebtedness upon the sale or exchange of the equipment subject thereto;



provided, however, that the Restricted Payments described in clauses (c) and (d) above shall not be
permitted if a Default or Event of Default shall have occurred and be continuing at the date of
declaration or payment thereof or would result therefrom.



     6.7 Capital Expenditures. Make or commit to make any Capital Expenditure, except Capital
Expenditures of Borrower and its Subsidiaries (a) made with the proceeds of Term B Loans to acquire
the Additional Rigs, (b) made in the ordinary course of business made with the proceeds of any
Permitted Equity Financing, (c) Capital Expenditures not exceeding the Permitted Capex Amount in
any fiscal year; provided that (i) up to $3,000,000 of any such amount referred to above, if not so
expended in the fiscal year for which it is permitted, may be carried over for expenditure in the
next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this clause (c) during
any fiscal year shall be deemed made, first, in respect of amounts permitted for such fiscal year
as provided above and second, in respect of amounts carried over from the prior fiscal year
pursuant to subclause (i) above and (d) Capital Expenditures constituting Qualified Investments
made with the proceeds of any Reinvestment Deferred Amount (any such Capital Expenditures permitted
hereunder, a “Permitted Capital Expenditure”). For purposes hereof, “Permitted Capex Amount” means
an aggregate amount equal to the sum of (i) $7,000,000 in any fiscal year and (ii) an amount equal
to 33% of the Consolidated EBITDA of Borrower for the prior quarter in excess of $6,250,000.



     6.8 Investments. Make any Investment in any other Person, except:



     (a) extensions of trade credit and advances to non-operators under operating agreements in the
ordinary course of business;



     (b) Investments in Cash Equivalents;



     (c) Investments arising in connection with the incurrence of Indebtedness permitted by Section
6.2(b) or Section 6.2(d);



     (d) Qualified Investments made by Borrower or any Wholly Owned Subsidiary Guarantor with any
Reinvestment Deferred Amount;



57









 





     (e) Investments (other than those relating to the incurrence of Indebtedness permitted by
Section 6.8(c)) by Holdings, Borrower or any of its Subsidiaries in Borrower or any Person that,
prior to such Investment, is a Wholly Owned Subsidiary Guarantor;



     (f) subject to the provisions of Section 6.7, Investments constituting Permitted Capital
Expenditures; and



     (g) Investments received by Borrower or any Subsidiary in connection with workouts with, or
bankruptcy, insolvency or other similar proceedings with respect to, customers, working interest
owners, other industry partners or any other Person.



     6.9 Transactions with Affiliates. Enter into any transaction, including, any purchase, sale, lease
or exchange of Property, the rendering of any service or the payment of any management, advisory or
similar fees, with any Affiliate (other than any Loan Party) unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary course of business of the Loan Party
that is party to such transaction and (c) upon fair and reasonable terms no less favorable to such
Loan Party than it would obtain in a comparable arm’s length transaction with a Person that is not
an Affiliate; provided that, for the avoidance of doubt, no transaction with any Affiliate effected
pursuant to an agreement existing on the date hereof shall be prohibited by this Section 6.9.



     6.10 Sales and Leasebacks. Enter into any Sale and Leaseback Transaction.



     6.11 Changes in Fiscal Periods. Permit the fiscal year of any Loan Party to end on a day other
than December 31 or change the method of determining its fiscal year for any Loan party.



     6.12 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that
prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any
Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the
Obligations or, in the case of any Guarantor, its obligations under the Guarantee and Security
Agreement, other than (a) this Agreement and the other Loan Documents and (b) in the case of
Borrower or any Subsidiary Guarantor any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).



     6.13 Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted
Payments in respect of any Capital Stock of such Subsidiary held by, or pay or subordinate any
Indebtedness owed to, any Loan Party, (b) make Investments in any Loan Party or (c) transfer any of
its assets to any Loan Party, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection
with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary.



     6.14 Lines of Business. Enter into any business, either directly or through any Subsidiary, except
for those businesses in which the Loan Parties are engaged on the date of this Agreement or that
are reasonably related thereto.



     6.15 Amendments of Certain Documents. Amend, modify or otherwise change, or permit any amendment,
modification or other change to (pursuant to a waiver or otherwise), any Constituent Documents
(including by the filing or modification of any certificate of designation, or any agreement or
arrangement (including any shareholders’ agreement) entered into, with respect to any of its
Capital



58









 







Stock) or enter into any new agreement with respect to any of its Capital Stock, in each case,
except any such amendments, modifications or changes or any such agreements or arrangements that do
not adversely affect any right, privilege or interest of the Administrative Agent or the Lenders
under the Loan Documents or in the Collateral.



     6.16 Activities of Holdings. In the case of Holdings, notwithstanding anything to the contrary in
this Agreement or any other Loan Document, (a) conduct, transact or otherwise engage in, or commit
to conduct, transact or otherwise engage in, any business or operations other than those incidental
to its ownership of the Capital Stock of Borrower, (b) incur, create, assume or suffer to exist any
Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations
imposed by operation of law, (ii) pursuant to the Loan Documents to which it is a party and (iii)
obligations with respect to its Capital Stock, or (c) own, lease, manage or otherwise operate any
properties or assets (including cash (other than cash received by Holdings in connection with
dividends made by Borrower in accordance with Section 6.6 pending application in the manner
contemplated by Section 6.6) and Cash Equivalents) other than the ownership of shares of Capital
Stock of Borrower.



     6.17 New Subsidiaries. Acquire, form, incorporate or organize any Subsidiary or permit to exist
any Subsidiary (i) having any Capital Stock that is not wholly owned by Borrower directly or
through other Wholly-Owned Subsidiaries or (ii) that is not a Guarantor.



     6.18 Use of Proceeds. Use or permit the use of all or any portion of the proceeds of the Loans for
any purpose other than as permitted pursuant to Section 5.11.



     6.19 New Bank Accounts. Open or otherwise establish, or deposit or otherwise transfer funds into,
any bank account (other than the bank accounts listed on Schedule 3.25) in the name or
otherwise for the benefit of Borrower or any Subsidiary unless the Administrative Agent shall have
received a Deposit Account Control Agreement, in form and substance satisfactory to the
Administrative Agent in its sole discretion, executed and delivered by Borrower and the bank or
other financial institution at which such account is maintained.



     6.20 Storage of Drilling Rig Assets. Store or permit any Drilling Rig Assets to remain at any
location (other than any drill site) for more than 60 days other than on real property to which
Borrower has title in fee simple unless the Administrative Agent shall have received an Access
Agreement duly executed and delivered by the owner of such location.



     6.21 Hedging Agreements. Enter into, or suffer to exist, any Hedging Agreement unless
approved in advance in writing by the Administrative Agent.



ARTICLE VII

EVENTS OF DEFAULT




     7.1 Events of Default. If any of the following events shall occur and be continuing:



     (a) Borrower shall fail to pay when due and payable or when declared due and payable (in each
case whether at the stated maturity, by acceleration or otherwise), including, pursuant to Section
2.7, all or any portion of the Obligations (whether of principal, interest, fees and charges due to
the Lenders or other amounts constituting Obligations); or



     (b) Any representation or warranty made or deemed made by any Loan Party herein or in any
other Loan Document or that is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this Agreement or any such other
Loan Document



59









 







shall prove to have been inaccurate in any material respect on or as of the date made or
deemed made or furnished; or



     (c) Any Loan Party shall default in the observance or performance of any agreement contained
in clause (i) or (ii) of Section 5.5(a) (with respect to Holdings or Borrower only), Section
5.6(e), Section 5.7, Section 5.8(a), Section 5.10, Section 5.15, Section 5.16 or Article VI, or in
Section 5 of the Guarantee and Security Agreement; or an “Event of Default” under and as defined in
any Mortgage shall have occurred and be continuing; provided that notwithstanding anything to the
contrary in this Agreement, Borrower shall be permitted to cure any breach of Section 6.1(c)
(Consolidated Interest Coverage Ratio), and the same shall not constitute an Event of Default
hereunder, by making an optional prepayment on or prior to the date of determination of the
Consolidated Interest Coverage Ratio sufficient in principal amount such that, upon exclusion from
the calculation of such ratio of the interest expense attributable to such prepayment amount, no
such default would exist; or



     (d) Any Loan Party shall default in the observance or performance of any other agreement
contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section 7.1), and such default shall continue unremedied for a period of 30
days; or



     (e) Any Loan Party shall (i) default in making any payment of any principal or interest of any
Indebtedness (including, any Guarantee Obligation, but excluding the Loans and other Obligations)
on the scheduled or original due date with respect thereto; or (ii) default in the observance or
performance of any other agreement or condition relating to any such Indebtedness (including any
Guarantee Obligation but excluding the Obligations) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due prior to its stated
maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the
case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided that
a default, event or condition described in clause (i) or (ii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one or more defaults, events or
conditions of the type described in clauses (i) and (ii) of this paragraph (e) shall have occurred
and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in
the aggregate $100,000; or



     (f) (i) Any Loan Party shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part of its assets, or
such Loan Party shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against any Loan Party any case, proceeding or other action of a nature referred
to in clause (i) above that (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against any Loan Party any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets that results in the entry of an order for any such relief that
shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) any Loan Party shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) any Loan Party shall



60









 







generally not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or



     (g) (i) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of
ERISA or Section 4975 of the Code) involving any Benefit Plan, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect
to any Benefit Plan, or any Lien in favor of the PBGC or a Benefit Plan shall arise on the assets
of any Loan Party any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Benefit Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Loan Party or
any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders shall be
likely to, incur any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist
with respect to a Benefit Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could, in the sole judgment
of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or



     (h) One or more judgments or decrees shall be entered against any Loan Party involving for the
Loan Parties taken as a whole a liability (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) of $100,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days
from the entry thereof; or



     (i) Any of the Security Documents shall cease, for any reason (other than by reason of the
express release thereof pursuant to Section 9.15), to be in full force and effect or any Loan Party
or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and priority purported to be created
thereby; or



     (j) The guarantee contained in Section 2 of the Guarantee and Security Agreement shall cease,
for any reason (other than by reason of the express release thereof pursuant to Section 9.15), to
be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert;
or



     (k) Any Change of Control shall occur; or



     (l) There shall occur any event or circumstance which has had, or would reasonably be expected
to have, a Material Adverse Effect;



then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) above with respect to Borrower, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents shall immediately become due and payable,
and (B) if such event is any other Event of Default, either or both of the following actions may be
taken: (i) at any time prior to the Commitment Expiration Date, with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this



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Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall
immediately become due and payable.



     7.2 Remedies. Upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent and the Lenders shall be entitled to exercise any and all remedies available
under the Security Documents or otherwise available under applicable law or otherwise.



ARTICLE VIII

THE AGENTS




     8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents
of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably
authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and perform such duties as
are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.



     8.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the
other Loan Documents by or through agents or attorneys in fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys-in fact selected by it with reasonable care.



     8.3 Exculpatory Provisions. Neither any Agent nor any of its officers, directors, employees,
agents, attorneys in fact or affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this Agreement or any other
Loan Document (except to the extent that any of the foregoing are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted solely and proximately
from its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for in, or received by
the Agents under or in connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document or for any failure of any Loan Party to perform its obligations hereunder or
thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan
Party.



     8.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, counsel to the Loan Parties),
independent accountants and other experts selected by such Agent. The Agents may deem and treat
the payee of any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 9.6 and all actions required by such Section in connection
with such transfer shall have been taken. Each Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so



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specified by this Agreement, all Lenders or any other instructing group of Lenders specified by
this Agreement) as it deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement and the other Loan Documents in accordance with a
request of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other
instructing group of Lenders specified by this Agreement), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the
Loans.



     8.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless such Agent shall have received notice from a
Lender or Borrower referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”. In the event that the Administrative Agent
shall receive such a notice, the Administrative Agent shall give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all
Lenders or any other instructing group of Lenders specified by this Agreement); provided that
unless and until the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in the best interests
of the Lenders.



     8.6 Non Reliance on the Agents and Other Lenders. Each Lender expressly acknowledges that neither
any of the Agents nor any of their respective officers, directors, employees, agents, attorneys and
other advisors, partners, attorneys in fact or affiliates have made any representations or
warranties to it and that no act by any Agent hereafter taken, including any review of the affairs
of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation
or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and creditworthiness of the Loan
Parties and their affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and without reliance upon
any Agent 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 analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their affiliates.
Except for notices, reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide
any Lender with any credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any
affiliate of a Loan Party that may come into the possession of any Agent or any of its officers,
directors, employees, agents, attorneys and other advisors, partners, attorneys in fact or
affiliates.



     8.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the
extent not reimbursed by any Loan Party and without limiting the obligation of any Loan Party to do
so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on
which indemnification is sought under this Section (or, if indemnification is sought after the date
upon which the Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date),
for, and to save each Agent harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time



63









 





(including, at any time following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under
or in connection with any of the foregoing; provided that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted solely and proximately from such Agent’s gross
negligence or willful misconduct. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable hereunder.



     8.8 Agents in their Individual Capacities. Each Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with any Loan Party as though such Agent
were not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include each
Agent in their individual capacities.



     8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent
upon 10 days’ notice to the Lenders and Borrower. If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall
(unless an Event of Default shall have occurred and be continuing) be subject to approval by
Borrower (which approval shall not be unreasonably withheld, conditioned or delayed), whereupon
such successor agent shall succeed to the rights, powers and duties of the Administrative Agent,
and the term “Administrative Agent” shall mean such successor agent effective upon such appointment
and approval, and the former Administrative Agent’s rights, powers and duties as Administrative
Agent shall be terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no
successor agent has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and
perform all of the duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. After any retiring
Administrative Agent’s resignation as Administrative Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.



     8.10 Authorization to Release Liens and Guarantees. The Administrative Agent is hereby irrevocably
authorized by each of the Lenders to effect any release of Liens or guarantee obligations
contemplated by Section 9.15.



     8.11 Arranger; Syndication Agent. Each of the Syndication Agent and the Arranger, in its
respective capacity as such, shall have no duties or responsibilities, and shall incur no
liability, under this Agreement and the other Loan Documents.



     8.12 Withholding Tax.



     (a) To the extent required by any applicable law, the Administrative Agent may withhold from
any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the
forms or other documentation required by Section 2.11(e) are not delivered to the Administrative
Agent,



64









 







then the Administrative Agent may withhold from any interest payment to any Lender not
providing such forms or other documentation, a maximum amount of the applicable withholding tax.



     (b) If the Internal Revenue Service or any authority of the United States or other
jurisdiction 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,
was not properly executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of, withholding tax
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 or otherwise,
including penalties and interest, together with all expenses incurred, including legal expenses,
allocated staff costs and any out of pocket expenses.



     (c) If any Lender sells, assigns, grants a participation in, or otherwise transfers its rights
under this Agreement, the purchaser, assignee, participant or transferee, as applicable, shall
comply and be bound by the terms of Sections 2.11(e) and 8.12; provided that with respect to any
Participant, as set forth in Section 9.6(b), such Participant shall only be required to comply with
the requirements of Sections 2.11(e) and 8.12 if such Participant seeks to obtain the benefits of
Section 2.11.



ARTICLE IX

MISCELLANEOUS




     9.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document nor any terms
hereof or thereof may be amended, supplemented or modified except in accordance with the provisions
of this Section 9.1. The Required Lenders and each Loan Party that is party to the relevant Loan
Document may, or (with the written consent of the Required Lenders) the Administrative Agent and
each Loan Party that is party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan Documents (including
amendments and restatements hereof or thereof) for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the
Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as may be specified
in the instrument of waiver, any of the requirements of this Agreement or the other Loan Documents
or any Default or Event of Default and its consequences; provided, however, that no such waiver and
no such amendment, supplement or modification shall:




     (i) forgive the principal amount or extend the final scheduled date of maturity of any
Loan, reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof, or increase the amount or extend the expiration date
of any Commitment of any Lender, in each case without the consent of each Lender directly
affected thereby;




     (ii) amend, modify or waive any provision of this Section or reduce any percentage
specified in the definition of Required Lenders, consent to the assignment or transfer by
Borrower of any of its rights and obligations under this Agreement and the other Loan
Documents, or (except as specified in Section 9.15) release all or substantially all of the
Collateral or release all or substantially all of the Subsidiary Guarantors from their
Guarantee Obligations under the Guarantee and Security Agreement, in each case without the
consent of all Lenders;




     (iii) amend, modify or waive any provision of Article VIII or any other provision
affecting the rights, duties and obligations of any Agent without the consent of the Agent
directly affected thereby;



65









 






     (iv) amend, modify or waive the pro rata provisions of Section 2.9 without the consent
of each Lender directly affected thereby; or




     (v) impose restrictions on assignments and participations that are more restrictive
than, or additional to, those set forth in Section 9.6.



     Any such waiver and any such amendment, supplement or modification shall apply equally to each of
the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders, the Agents shall
be restored to their former position and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or impair any right
consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a
written instrument signed by the parties required to sign pursuant to the foregoing provisions of
this Section 9.1; provided, however, that delivery of an executed signature page of any such
instrument by facsimile transmission shall be effective as delivery of a manually executed
counterpart thereof.



     9.2 Notices. Notwithstanding anything to the contrary set forth in this Agreement, all notices,
requests and demands to or upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made when delivered, or three Business Days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of
Holdings, Borrower or the Agents, as follows and (b) in the case of the Lenders, as set forth in an
administrative questionnaire delivered to the Administrative Agent or, in the case of a Lender
which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such
Assignment and Acceptance or (c) in the case of any party, to such other address as such party may
hereafter notify to the other parties hereto:



	 	 	 	 	 
	 

	 	Holdings:
	 	DHS Drilling Company
	 

	 	 	 	P.O. Box 277
	 

	 	 	 	1813 Coleman Circle
	 

	 	 	 	Casper, Wyoming 8260           
	 

	 	 	 	Attention: Bill Sauer, Jr.
	 

	 	 	 	Facsimile:  (307) 473-5377
	 
	 	 	 	 
	 

	 	Borrower
	 	DHS Drilling Company
	 

	 	 	 	P.O. Box 277
	 

	 	 	 	1813 Coleman Circle
	 

	 	 	 	Casper, Wyoming 8260           
	 

	 	 	 	Attention: Bill Sauer, Jr.
	 

	 	 	 	Facsimile:  (307) 473-5377






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	 	with a copy to:
	 	DHS Drilling Company
	 

	 	 	 	370 17th Street, Suite 4300
	 

	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Attention: Gregg Tubbs
	 

	 	 	 	Facsimiles: (303) 575-0403
	 
	 	 	 	 
	 

	 	 	 	Shughart Thomson & Kilroy, P.C.
	 

	 	 	 	1050 Seventeenth Street, Suite 2300
	 

	 	 	 	Denver, Colorado 80265
	 

	 	 	 	Attention: Peter T. Moore
	 

	 	 	 	Facsimile: (720) 228-2309
	 
	 	 	 	 
	 

	 	Agent(s):
	 	Lehman Commercial Paper Inc.
	 

	 	 	 	745 Seventh Avenue, 16th Floor
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Attention: Yvonne Lin-Lu
	 

	 	 	 	Facsimile: (212) 299-0202
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Lehman Brothers Inc.
	 

	 	 	 	600 Travis Street, Suite 7200
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: Mathew Verghese
	 

	 	 	 	Facsimile: (713) 236-3912
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Akin Gump Strauss Hauer & Feld LLP
	 

	 	 	 	1111 Louisiana Street, Suite 4400
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: J. Michael Chambers
	 

	 	 	 	Facsimile: (713) 236-0822





provided that any notice, request or demand to or upon any Agent or any Lender shall not be
effective until received.



The Administrative Agent or Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices or communications.




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



     9.4 Survival of Representations and Warranties. All representations and warranties made herein, in
the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery of this Agreement and the making of
the Loans and other extensions of credit hereunder.



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     9.5 Payment of Expenses. Borrower agrees (a) to pay or reimburse the Agents for all their
reasonable out of pocket costs and expenses incurred in connection with the syndication of the
Loans and the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, the reasonable fees and disbursements and other charges
of counsel and consultants to the Administrative Agent and the charges of Intralinks, (b) to pay or
reimburse each Lender and the Agents for all their costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other Loan Documents and
any other documents prepared in connection herewith or therewith, including, the fees and
disbursements of counsel (including the allocated fees and disbursements and other charges of
in-house counsel) to each Lender and of counsel to the Agents, (c) to pay, indemnify, or reimburse
each Lender and the Agents for, and hold each Lender and the Agents harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or resulting from any delay
in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify or reimburse each Lender, each Agent, their respective
affiliates, and their respective officers, directors, trustees, employees, affiliates,
shareholders, attorneys and other advisors, agents and controlling persons (each, an “Indemnitee”)
for, and hold each Indemnitee harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other documents, including,
any of the foregoing relating to the use of proceeds of the Loans or the violation of,
noncompliance with or liability under, any Environmental Law applicable to the operations of any
Loan Party or the use by unauthorized persons of information or other materials sent through
electronic, telecommunications or other information transmission systems that are intercepted by
such persons and the fees and disbursements and other charges of legal counsel in connection with
claims, actions or proceedings by any Indemnitee against Borrower hereunder (all the foregoing in
this clause (d), collectively, the “Indemnified Liabilities”); provided that Borrower shall have no
obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted solely and proximately from the gross negligence or willful
misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use
by unauthorized persons of information or other materials sent through electronic,
telecommunications or other information transmission systems that are intercepted by such persons
or for any special, indirect, consequential or punitive damages in connection with the Loans.
Without limiting the foregoing, and to the extent permitted by applicable law, each of Holdings and
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any Indemnitee. All amounts due under this Section
9.5 shall be payable not later than ten days after written demand therefor. Statements payable by
Borrower pursuant to this Section shall be submitted to Borrower at the address of Borrower set
forth in Section 9.2, or to such other Person or address as may be hereafter designated by Borrower
in a notice to the Administrative Agent. The agreements in this Section 9.5 shall survive
repayment of the Loans and all other amounts payable hereunder.



     9.6 Successors and Assigns; Participations and Assignments.



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     (a) This Agreement shall be binding upon and inure to the benefit of Holdings, Borrower, the
Lenders, the Agents, all future holders of the Loans and their respective successors and assigns,
except that neither Holdings nor Borrower may assign or transfer any of its respective rights or
obligations under this Agreement without the prior written consent of the Agents and each Lender
(and any attempted assignment or transfer by the Borrower without such consent shall be null and
void).



     (b) Any Lender may, without the consent of Borrower or any other Person, in accordance with
applicable law, at any time sell to one or more banks, financial institutions or other entities
(each, a “Participant”) participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s
obligations under this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and
Borrower and the Agents shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement and the other Loan Documents. In no
event shall any Participant under any such participation have any right to approve any amendment or
waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party
therefrom, except to the extent that such amendment, waiver or consent would require the consent of
all Lenders pursuant to Section 9.1. Borrower agrees that if amounts outstanding under this
Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this Agreement, provided that,
in purchasing such participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 9.7(a) as fully as if such Participant
were a Lender hereunder. Borrower also agrees that each Participant shall be entitled to the
benefits of Sections 2.10 and 2.11 with respect to its participation in the Commitments and the
Loans outstanding from time to time as if such Participant were a Lender; provided that, in the
case of Section 2.11, such Participant shall have complied with the requirements of Section 2.11
and Section 8.12, and; provided, further, that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.



     (c) Any Lender (an “Assignor”) may, without the consent of any Loan Party, in accordance with
applicable law and upon written notice to the Administrative Agent, at any time and from time to
time assign to any Lender or any affiliate, Related Fund or Control Investment Affiliate thereof
or, with the consent of the Administrative Agent (which, in each case, shall not be unreasonably
withheld, conditioned or delayed) (provided that no such consent need be obtained by the
Administrative Agent or its affiliates), to an additional bank, financial institution or other
entity (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant
to an Assignment and Acceptance, substantially in the form of Exhibit J (an “Assignment and
Acceptance”), executed by such Assignee and such Assignor (and, where the consent of Borrower or
the Administrative Agent is required pursuant to the foregoing provisions, by Borrower and such
other Persons) and delivered to the Administrative Agent for its acceptance and recording in the
Register; provided that no such assignment to an Assignee (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount of less than $5,000,000 (other than, in each
case, in the case of an assignment of all of a Lender’s interests under this Agreement), unless
otherwise agreed by Borrower and the Administrative Agent. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant to such Assignment
and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with
Commitments or



69









 







Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of an Assignor’s rights and obligations under
this Agreement, such Assignor shall cease to be a party hereto, except as to Sections 2.10, 2.11,
8.12 and 9.5 in respect of the period prior to such effective date). For purposes of the minimum
assignment amounts set forth in this Section 9.6(c), multiple assignments by two or more Related
Funds shall be aggregated.



     (d) The Administrative Agent shall, on behalf of Borrower, maintain at its address referred to
in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower, each Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans
and any Note evidencing such Loans recorded therein for all purposes of this Agreement. Any
assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each Note shall expressly
so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment or transfer of the
Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the designated
Assignee, and the old Notes shall be returned by the Administrative Agent to Borrower marked
“canceled”. The Register shall be available for inspection by Borrower or any Lender (with respect
to any entry relating to such Lender’s Loans) at any reasonable time and from time to time upon
reasonable prior notice.



     (e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee
(and, in any case where the consent of any other Person is required by Section 9.6(c), by each such
other Person), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the information contained therein
in the Register and give notice of such acceptance and recordation to Borrower. On or prior to
such effective date, Borrower, at its own expense, upon request, shall execute and deliver to the
Administrative Agent (in exchange for the applicable Note, if any, of the assigning Lender) new
Note or Notes to the order of such Assignee in an amount equal to the Commitment or Loan assumed or
acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a
Commitment or Loan, as the case may be, upon request, a new Note or Notes to the order of the
Assignor in an amount equal to the Commitment or Loans, as the case may be, retained by it
hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the
form of the Note or Notes replaced thereby.



     (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of
this Section concerning assignments of Loans and Notes relate only to absolute assignments and that
such provisions do not prohibit assignments creating security interests in Loans and Notes,
including, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with applicable law.



     (g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing
from time to time by the Granting Lender to the Administrative Agent and Borrower, the option to
provide to Borrower all or any part of any Loan that such Granting Lender would otherwise be
obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the



70









 







Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender.
Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the Granting Lender).
In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other indebtedness of any SPC, it will not
institute against, or join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United
States or any state thereof. In addition, notwithstanding anything to the contrary in this Section
9.6(g), any SPC may (x) with notice to, but without the prior written consent of, Borrower and the
Administrative Agent and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to the Granting Lender, or with the prior written consent of Borrower and
the Administrative Agent (which consent shall not be unreasonably withheld, conditioned or delayed)
to any financial institutions providing liquidity or credit support to or for the account of such
SPC to support the funding or maintenance of Loans, and (y) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial paper dealer or
provider of any surety, guarantee or credit or liquidity enhancement to such SPC; provided that
non-public information with respect to Borrower may be disclosed only with Borrower’s consent which
will not be unreasonably withheld, conditioned or delayed. This Section 9.6(g) may not be amended
without the written consent of any SPC with Loans outstanding at the time of such proposed
amendment.



     9.7 Adjustments; Set off.



     (a) If any Lender (a “Benefitted Lender”) shall at any time receive any payment of all or part
of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set off, pursuant to events or proceedings of the nature referred to in clause
(f) of Article VII, or otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender’s Obligations, such
Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender’s Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the
excess payment or benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter recovered from such
Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.



     (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall
have the right, without prior notice to Holdings or Borrower, any such notice being expressly
waived by Holdings and Borrower to the extent permitted by applicable law, upon any amount becoming
due and payable by Holdings or Borrower hereunder (whether at the stated maturity, by acceleration
or otherwise), to set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of Holdings or Borrower, as the case may be. Each
Lender agrees to notify promptly Borrower and the Administrative Agent after any such setoff and
application made by such Lender, provided that the failure to give such notice shall not affect the
validity of such setoff and application.



     9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement
on any number of separate counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument. Delivery of an executed signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually executed
counterpart



71









 







hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with
Borrower and the Administrative Agent.



     9.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.



     9.10 Integration; Construction.



     (a) This Agreement and the other Loan Documents represent the entire agreement of Borrower,
Holdings, the Agents and the Lenders with respect to the subject matter hereof and thereof, and
there are no promises, undertakings, representations or warranties by any Agent or any Lender
relative to the subject matter hereof not expressly set forth or referred to herein or in the other
Loan Documents.



     (b) Each covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance
with any other covenant. Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.



     9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.



     9.12 Submission To Jurisdiction; Waivers. Each of Holdings and Borrower hereby irrevocably and
unconditionally:



     (a) submits for itself and its Property in any legal action or proceeding relating to this
Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement
of any judgment in respect thereof, to the non exclusive general jurisdiction of the courts of the
State of New York located in the County of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;



     (b) consents that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;



     (c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to Holdings or Borrower, as the case may be, at its address set forth in Section 9.2 or at
such other address of which the Administrative Agent shall have been notified pursuant thereto;



     (d) agrees that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other jurisdiction; and



72









 





     (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.



     9.13 Acknowledgments. Each of Holdings and Borrower hereby acknowledges that:



     (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;



     (b) neither any Agent nor any Lender has any fiduciary relationship with or duty to Holdings
or Borrower arising out of or in connection with this Agreement or any of the other Loan Documents,
and the relationship between the Agents and the Lenders, on one hand, and Holdings and Borrower, on
the other hand, in connection herewith or therewith is solely that of debtor and creditor; and



     (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Arranger, the Agents and the Lenders or
among Holdings, Borrower and the Lenders.



     9.14 Confidentiality. Each of the Agents and the Lenders agrees to keep confidential all
non-public information provided to it by any Loan Party pursuant to this Agreement that is
designated by such Loan Party as confidential; provided that nothing herein shall prevent any Agent
or any Lender from disclosing any such information (a) to any Agent, any other Lender or any
affiliate of any thereof, (b) to any Participant or Assignee (each, a “Transferee”) or prospective
Transferee that agrees to comply with the provisions of this Section or substantially equivalent
provisions, (c) to any of its employees, directors, agents, attorneys, accountants and other
professional advisors, (d) upon the request or demand of any Governmental Authority having
jurisdiction over it, (e) in response to any order of any court or other Governmental Authority or
as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do
so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed
other than in breach of this Section, (h) to the National Association of Insurance Commissioners or
any similar organization or any nationally recognized rating agency that requires access to
information about a Lender’s investment portfolio in connection with ratings issued with respect to
such Lender or (i) in connection with the exercise of any remedy hereunder or under any other Loan
Document. Notwithstanding anything to the contrary in the foregoing sentence or any other express
or implied agreement, arrangement or understanding, the parties hereto hereby agree that, from the
commencement of discussions with respect to the financing provided hereunder, any party hereto (and
each of its employees, representatives, or agents) is permitted to disclose to any and all persons,
without limitation of any kind, the tax structure and tax aspects of the transactions contemplated
hereby, and all materials of any kind (including opinions or other tax analyses) related to such
tax structure and tax aspects.



     9.15 Release of Collateral and Guarantee Obligations.



     (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document,
upon request of Borrower in connection with any Disposition of Property permitted by the Loan
Documents (other than to a Loan Party), the Administrative Agent shall (without notice to, or vote
or consent of, any Lender) take such actions as shall be required to release its security interest
in any Collateral that is, or owned by any Person all the Capital Stock of which is, being Disposed
of in such Disposition, and to release any Guarantee Obligations under any Loan Document of any
Person being Disposed of in such Disposition, to the extent necessary to permit consummation of
such Disposition in accordance with the Loan Documents; provided that Borrower shall have delivered
to the Administrative Agent, at least ten Business Days prior to the date of the proposed release
(or such shorter period agreed



73









 







to by the Administrative Agent), a written request for release identifying the relevant
Collateral being Disposed of in such Disposition and the terms of such Disposition in reasonable
detail, including the date thereof, the price thereof and any expenses in connection therewith,
together with a certification by Borrower stating that such transaction is in compliance with this
Agreement and the other Loan Documents and that the proceeds of such Disposition will be applied in
accordance with this Agreement and the other Loan Documents.



     (b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when
all Obligations have been paid in full, all Commitments have terminated or expired, upon request of
Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender)
take such actions as shall be required to release its security interest in all Collateral, and to
release all Guarantee Obligations provided for in any Loan Document. Any such release of Guarantee
Obligations shall be deemed subject to the provision that such Guarantee Obligations shall be
reinstated if after such release any portion of any payment in respect of the Obligations
guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, Borrower or any Guarantor or any substantial part of its Property, or
otherwise, all as though such payment had not been made.



     9.16 Accounting Changes. In the event that any Accounting Change shall occur and such change
results in a change in the method of calculation of financial covenants, standards or terms in this
Agreement, then Holdings, Borrower and the Administrative Agent agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change
with the desired result that the criteria for evaluating the consolidated financial condition of
Holdings and Borrower shall be the same after such Accounting Change as if such Accounting Change
had not been made. Until such time as such an amendment shall have been executed and delivered by
Holdings, Borrower, the Administrative Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated or construed as if such
Accounting Change had not occurred. “Accounting Change” refers to any change in accounting
principles required by the promulgation of any rule, regulation, pronouncement or opinion by the
Financial Accounting Standards Board of the American Institute of Certified Public Accountants or,
if applicable, the SEC.



     9.17 WAIVERS OF JURY TRIAL. THE BORROWER, HOLDINGS, THE ARRANGER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN (IN EACH
CASE, WHETHER FOR CLAIMS SOUNDING IN CONTRACT OR IN TORT OR OTHERWISE).



     9.18 Customer Identification – USA PATRIOT Act Notice. The Administrative Agent (for itself and
not on behalf of any other party) and each Lender hereby notifies the Loan Parties that, pursuant
to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56, signed into law October
26, 2001 (the “Patriot Act”), it is required to obtain, verify and record information that
identifies the Loan Parties, which information includes the name and address of the Loan Parties
and other information that will allow the Administrative Agent or such Lender, as applicable, to
identify the Loan Parties in accordance with the Patriot Act.



     9.19 Amendment and Restatement.



     (a) From and after the Closing Date, this Agreement amends and restates in its entirety the
Existing Credit Agreement; the Notes issued under this Agreement, if any, amend and restate the
“Notes”



74









 





(as defined in the Existing Credit Agreement) issued under the Existing Credit Agreement; and
the Existing Credit Agreement shall thereafter be of no further force and effect except to evidence
(i) the incurrence by any Loan Party of the Existing Loans and other “Obligations” under and as
defined therein (whether or not such “Obligations” are contingent as of the Closing Date), (ii) the
representations and warranties made by any Loan Party prior to the Closing Date and (iii) any
action or omission performed or required to be performed pursuant to the Existing Credit Agreement
prior to the Closing Date (including any failure, prior to the Closing Date, to comply with the
covenants contained in such Existing Credit Agreement). The amendments and restatements set forth
herein shall not cure any breach thereof or any “Default” or “Event of Default” under and as
defined in the Existing Credit Agreement existing prior to the Closing Date. This Agreement and
the Notes, if any, issued do not constitute and shall not be construed to evidence a novation of or
a payment and readvance of any of the “Obligations” (as defined in the Existing Credit Agreement)
heretofore outstanding under the Existing Credit Agreement, it being the intention of the parties
hereto that this Agreement provide for the terms and conditions of, and the Notes issued, if any,
evidence, at such time, the same “Obligations” as were then outstanding under the Existing Credit
Agreement. Each Lender shall surrender the “Notes” outstanding on the Effective Date issued to it
under the Existing Credit Agreement.



     (b) The terms and conditions of this Agreement and the Administrative Agent’s and the Lenders’
rights and remedies under this Agreement and the other Loan Documents shall apply to all of the
“Obligations” (as defined in the Existing Credit Agreement) incurred under the Existing Credit
Agreement and the Notes issued thereunder.



     (c) Borrower reaffirms the Liens granted pursuant to the Existing Loan Documents to the
Administrative Agent for the benefit of the Lenders, which Liens shall continue in full force and
effect during the term of this Agreement and any renewals or extensions thereof and shall continue
to secure the Obligations hereunder.



     (d) From and after the Closing Date, (i) all references to the Existing Credit Agreement (or
to any amendment, supplement, modification or amendment and restatement thereof) in the Loan
Documents (other than this Agreement) shall be deemed to refer to the Existing Credit Agreement as
amended and restated hereby, (ii) all references to any section (or subsection) of the Existing
Credit Agreement in any Loan Document (but not herein) shall be amended to become mutatis mutandis,
references to the corresponding provisions of this Agreement and (iii) except as the context
otherwise provides, from or after the Closing Date, all references to this Agreement herein
(including for purposes of indemnification and reimbursement of fees) shall be deemed to be
references to the Existing Credit Agreement as amended and restated hereby.



     (e) This amendment and restatement is limited as written and is not a consent to any other
amendment, restatement, waiver or other modification, whether or not similar, and, except as
expressly provided herein or in any other Loan Document, all terms and conditions of the Loan
Documents remain in full force and effect unless otherwise specifically amended by this Agreement
or any other Loan Document.



[Signature Page to Follow]




75









 





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



	 	 	 	 	 	 	 
	 	 	DHS HOLDING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory D. Tubbs
 

Gregory D. Tubbs
	 	 
	 

	 	 	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	DHS DRILLING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory D. Tubbs
 

Gregory D. Tubbs
	 	 
	 

	 	 	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	LEHMAN BROTHERS INC., as Arranger	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Robert Chambers
 

J. Robert Chambers
	 	 
	 

	 	 	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	LEHMAN COMMERCIAL PAPER INC.,

as Administrative Agent, Syndication Agent
and as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Robert Chambers
 

J. Robert Chambers
	 	 
	 

	 	 	 	Authorized Signatory	 	 






[Signature Page to DHS Drilling Company Amended and Restated Credit Agreement]




 









 





SCHEDULE 1.1




COMMITMENTS




	 	 	 	 	 
	Lender	 	Term A Commitment	 	Term B Commitment
	Lehman Commercial Paper Inc.

745 Seventh Avenue

New York, New York 10019

Attention:

Facsimile:
	 	$75,000,0000	 	$75,000,000






1









 





SCHEDULE 1.2




MORTGAGED PROPERTY




     There are no mortgage properties. The only leased property is located at 1813 Coleman Circle,
Casper, Wyoming.



2









 





SCHEDULE 1.3




SPECIFIED DRILLING ASSETS




     1. Rig 16 Assets



RIG 16 – 10,000’ CAPACITY WITH 4 1/2” DRILL PIPE

KREMCO K750-T




DRAW-WORKS



KREMCO K750-T Trailer Mounted Portable Unit, Powered by (2) – Cat D-3408 Engines. (2) Allison
Transmission. 22” Hydromatic. 700 HP.




SUBSTRUCTURE & MAST



KREMCO 116’ 350,000# Telescoping Mast. Hydraulic Raising Rams. 1” 1/8 Drilling Line.

KREMCO Slingshot Substructure 19’ 2” High.




GENERATOR



(2)- 275 KW AC Generators Powered by (2 – Cat D-3408 Diesel Engines.)




MUD PUMPS



(2) GD. PZ-9 Triplex Powered by Cat D-3508




ROTATING & TRAVELING EQUIPMENT




Ideco 17.5” Rotary Table

Emsco 250 – Ton Block Hook Combination BJ. Hook

TSM 150 – Ton Swivel

51/4 “ x 40‘ Hex Kelly — Varco Drive Bushings




BLOWOUT PREVENTION




11” 3,000 psi Annular BOP

11” 3,000 psi Shaffer LWS 102”

Model 120-Gallon Automatic Accumulator; 4-Station Air Accuated Remote Control Panel

2” 3,000 psi Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 600 Bbl. Mud Tanks Complete with (2) — 5” x 6” Electrical Driven Centrifugal Pump
Manifolded to Low Pressure System, Mud Guns and (2) Shakers




(1) Water Tank – 500-Bbls.

10,000-gallon Fuel Tank



National 10” – 2-cone Desander, 10-cone Desilter




HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type B Tongs

Bear Automatic Driller

Sure Shot 7o A-1 Survey Instrument




3









 





Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




10,000’ 4 1/2 16.60 lb Grade Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8“ Drill Collars




     2. Rooster Drilling Assets



	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	E

	 	16.60 New	 	 
	Mixed

	 	16.60 Yellow	 	 
	4 1/2" XH

	 	New	 	 
	4 1/2" XH

	 	Used	 	 
	4" H-90

	 	Used	 	 
	6 5/8" IF

	 	Used	 	 
	3 1/2" IF

	 	Used	 	 
	4 1/2" XH

	 	New	 	 
	4 1/2" IF

	 	Used	 	 
	3 1/2" IF

	 	Used	 	 
	Patchmaster

	 	150 Ton
	 	 
	Gardner-Denver

	 	200 Ton	 	 
	Emsco

	 	150 Ton
	 	36"
	Sowa

	 	350 Ton
	 	 
	Emsco

	 	150 Ton
	 	36"
	Sowa

	 	500 Ton
	 	 
	Emsco

	 	500 Ton
	 	 
	Ideco

	 	350 Ton
	 	 
	Ideco

	 	525 Ton
	 	 
	Oilwell

	 	350 Ton
	 	 
	Ideco

	 	350 Ton
	 	 
	Ideal

	 	350 Ton
	 	 
	Emsco

	 	350 Ton
	 	 
	Emsco

	 	150 Ton
	 	 
	Ideal

	 	150 Ton
	 	 
	BJ

	 	150 Ton
	 	 
	N-815

	 	400 Ton
	 	 
	N-815

	 	400 Ton
	 	 
	LB-200

	 	200 Ton
	 	 
	SS-250

	 	250 Ton
	 	 
	PC-500

	 	500 Ton
	 	 
	B-44

	 	300 Ton
	 	 
	B-44

	 	300 Ton
	 	 
	B-44

	 	300 Ton
	 	 
	Ideal

	 	Type R
	 	 
	Ideal

	 	Type F
	 	 
	N-1100

	 	Duplex
	 	 






4









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	N-900

	 	Duplex
	 	 
	G-700

	 	Duplex
	 	 
	Homemade

	 	 	 	With / pump / Pluming / lights & rigup
	C-18

	 	Cat 650 HP.
	 	 
	G-700

	 	Duplex
	 	 
	Homemade

	 	 	 	With / pump / Pluming / lights & rigup
	C-18

	 	Cat 650 HP.
	 	 
	G-700

	 	Duplex
	 	 
	E-500

	 	Duplex
	 	 
	G-1000

	 	Duplex
	 	 
	E-700

	 	Duplex
	 	National Fluid End
	D-1000

	 	Duplex
	 	Mattco Fluid End
	D-1001

	 	Duplex
	 	Mattco Fluid End
	D-1000

	 	Duplex
	 	Mattco Fluid End
	D-1000

	 	Duplex	 	 
	D-1000

	 	Duplex
	 	Mattco Fluid End
	KRX-1000

	 	GD-Duplex
	 	Mattco Fluid End
	GXR-1000

	 	GD-Duplex
	 	Southwest Fluid End
	GXR-1000

	 	GD-Duplex
	 	Southwest Fluid End
	GXR-1000

	 	GD-Duplex
	 	Southwest Fluid End
	Homemade

	 	 	 	With / pump / Pluming / lights & rigup
	D-850

	 	Duplex
	 	 
	PD-43

	 	10 Gallon
	 	 
	PD-43

	 	10 Gallon
	 	 
	PD-53

	 	20 Gallon
	 	 
	PD-53

	 	20 Gallon
	 	 
	Mattco

	 	20 Gallon
	 	 
	Hydril

	 	20 Gallon
	 	 
	Hydril

	 	20 Gallon
	 	 
	 

	 	 
	 	Pump Mates
	 

	 	 
	 	Pump Mates
	 

	 	 
	 	Pump Mates
	 

	 	 
	 	Pump Mates
	 

	 	 
	 	Pump Mates
	National

	 	 
	 	Pump Mates
	National

	 	 
	 	Pump Mates
	 

	 	 
	 	20 1/2" x 54" Center
	 

	 	 
	 	20 1/2" x 54" Center
	 

	 	 
	 	20 1/2" x 54" Center
	 

	 	 
	 	27 1/2" x 54" Center
	 

	 	 
	 	27 1/2" x 54" Center
	 

	 	 
	 	27 1/2" x 54" Center
	 

	 	 
	 	20 1/2" x 54" Center
	 

	 	 
	 	20 1/2" x 54" Center
	 

	 	 
	 	Master bushing
	 

	 	Double
	 	13 5/8" 3000#
	 

	 	Double
	 	11" 5000#






5









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	 

	 	Double
	 	11" 5000#
	 

	 	New
	 	 
	 

	 	Remote
	 	 
	 

	 	Remote
	 	 
	 

	 	Lower Kelly
	 	4 1/2" XH
	 

	 	Lower Kelly
	 	4 1/2" XH
	 

	 	Dart
	 	4 1/2" XH
	 

	 	11"
	 	3000# Spool 2" & 4" Outlets
	 

	 	13 5/8"
	 	5000# Spool with 2" & 4" Outlet
	 

	 	11"
	 	3000# Spool
	 

	 	 
	 	3000# Spool
	 

	 	 
	 	3000# Spool
	 

	 	11" 3000#
	 	 
	 

	 	13 5/8" 3000#
	 	 
	46"

	 	Parkersburg
	 	 
	46"

	 	Parkersburg
	 	 
	46"

	 	Parkersburg
	 	 
	46"

	 	Parkersburg
	 	 
	46"

	 	Parkersburg
	 	 
	46"

	 	Parkersburg
	 	 
	40"

	 	Parkersburg
	 	 
	40"

	 	Parkersburg
	 	 
	40"

	 	Parkersburg
	 	 
	60"

	 	Parkersburg
	 	 
	60"

	 	Parkersburg
	 	 
	60"

	 	Parkersburg
	 	 
	60"

	 	Parkersburg
	 	 
	40"

	 	Parkersburg
	 	 
	36"

	 	Parkersburg
	 	 
	22"

	 	Parmac
	 	 
	22"

	 	TSI
	 	 
	481

	 	Parkersburg
	 	 
	B

	 	 
	 	 
	B

	 	 
	 	 
	C

	 	 
	 	 
	C

	 	 
	 	 
	C

	 	 
	 	 
	GC-50

	 	Emsco
	 	 
	J-750

	 	Emsco
	 	 
	50-A

	 	National
	 	 
	96

	 	Oilwell
	 	 
	130

	 	National
	 	 
	Emsco

	 	 
	 	 
	100

	 	National
	 	 
	50A

	 	National
	 	7'5'H x 18'5'L x 8'W w/(4) Post
	750 HP

	 	 
	 	2 Engine
	 

	 	 
	 	Just Houses






6









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	 

	 	Brewster
	 	2- Engine
	1300 HP

	 	OIME
	 	2- Engine
	 

	 	Ideco
	 	3-Engine
	 

	 	National
	 	3-Engine
	Homemade

	 	 
	 	7'1" x 9'2"H x 26'L
	Homemade

	 	 
	 	9'8"w x 10'H x 26'L
	Homemade

	 	 
	 	10'6"W x 11'8"H x 33'L
	 

	 	150 HP
	 	 
	 

	 	200 HP
	 	 
	 

	 	300 HP
	 	 
	 

	 	300 HP
	 	 
	 

	 	200 HP
	 	 
	5 1/4"

	 	Hex
	 	46' L
	5 1/4"

	 	Hex
	 	40' L
	5 1/4"

	 	Hex
	 	Pin Drive
	5 1/4"

	 	 
	 	Square Drive
	5 1/4"

	 	 
	 	Hex Rollers
	ALS

	 	Swaco
	 	 
	ALS

	 	Swaco
	 	 
	Brandt

	 	 
	 	 
	Shaker

	 	 
	 	9'H x 9'W x 48'5"L
	Suction

	 	 
	 	9'H x 9'W x 48'L
	Premix

	 	 
	 	9'H x 10'2"W x 30'L
	Shaker

	 	 
	 	4'8"H x 7'9"w x 45'L
	Suction

	 	 
	 	4'8"H x 7'9"w x 42'L
	 

	 	 
	 	8'1"H x 10'W x 40'L
	 

	 	 
	 	7'3"H x 12'W x 52'L
	 

	 	 
	 	6'7"H x 11'1"W x 38'L
	 

	 	 
	 	6'2"H x 10'W x 40'2"L
	 

	 	 
	 	7'1"H x 11'W x 47'L
	 

	 	 
	 	7'7"H x 9'W x 52'3"L
	Shaker

	 	 
	 	6'8"H x 9W x 40'L
	Suction

	 	 
	 	6'8"H x 9W x 40'L
	 

	 	 
	 	5'W x 24'L
	 

	 	 
	 	10'W x 40'L House on end
	 

	 	 
	 	7'6"W x
	 

	 	 
	 	8'W x 24'L
	 

	 	 
	 	8'W x 21'8"L
	 

	 	 
	 	9'H x 10'W x 43'9"L
	 

	 	 
	 	9'8"H x 10'W x 43'8"L
	 

	 	 
	 	8'10"H x 11'1"W x 40'L
	 

	 	 
	 	11'2"H x 10'6"W x 41'3"L
	 

	 	 
	 	8'H x 11'W x 34'L
	 

	 	Generator
	 	10'3"H x 11'6"W x 43'L
	 

	 	Generator
	 	7'7"H x 9'W x 40L
	 

	 	Generator
	 	10'6"H x 9'W x 30'10"L
	 

	 	 
	 	10'2"H x 7'3"W x 20'L






7









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	 

	 	 
	 	10'6"H x 10'W x 47'L
	 

	 	 
	 	10'H x 8'W x 15'L w/ 500-Gallon Fuel
Tank
	 

	 	 
	 	10'H x 12'W x 20'L
	 

	 	 
	 	8'7"H x 8"W x 29'8"L
	 

	 	 
	 	8'4"H x 8'W x 10'L
	To Short?

	 	Pump House
	 	11'H x 12'W x 23'L
	To Short?

	 	Pump House
	 	11'H x 12'W x 23'L
	To Short?

	 	Pump House
	 	10'H x 11'6"W x 19'3"L
	 

	 	Pump House
	 	 
	 

	 	Pump House
	 	 
	 

	 	Pump House
	 	 
	 

	 	Pump House
	 	 
	 

	 	Pump House
	 	 
	 

	 	Doghouse w/Lockers
	 	8'9"H x 10'W x 35'L
	 

	 	Doghouse
	 	9'9"H x 10'4"W x 32'L
	 

	 	Doghouse
	 	 
	 

	 	Doghouse
	 	 
	 

	 	Doghouse
	 	7'2"H x 7'W x 24'L
	 

	 	 
	 	42"H x 5'1"W x 40'L
	 

	 	 
	 	43"H x 60"W x 29'L
	 

	 	 
	 	40"H x 5'8"W x28'L
	 

	 	 
	 	41"H x 56"W x 51'L
	 

	 	 
	 	41"H x 52"W x 49'L
	 

	 	 
	 	42"H x 72"W x 60'L
	 

	 	 
	 	42"H x 92"W x 28'L
	 

	 	 
	 	40"H x 56"W x 28'L
	 

	 	 
	 	48"H x 48"W x 40'L
	 

	 	Junk
	 	42"H x 57"W x 51'L
	 

	 	 
	 	40"H x 70"W x 32'L
	 

	 	 
	 	36"H x 61"W x 40'L
	 

	 	 
	 	41"H x 70"W x 28'L
	 

	 	 
	 	41"H x 92"W x 42'L
	 

	 	 
	 	Long Slide
	 

	 	 
	 	Long Slide
	 

	 	 
	 	Pipe Beaver Slide
	 

	 	Square Set
	 	 
	 

	 	Short Racks
	 	 
	 

	 	Assorted Racks
	 	 
	Rebuilt

	 	690,000 SHL
	 	142'H x 21'W
	 

	 	308,00 SHL
	 	131' x 18'6"W
	LCM

	 	800,000 SHL
	 	142'H x 21'W
	Brewster

	 	1,000,000 SHL
	 	25'W
	Sold — Naill

	 	240,000 SHL
	 	127'H
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 
	 	Cluster






8









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	LC. Moore

	 	 
	 	 
	 

	 	Step Down
	 	15'H x 6'8"W
	Ideco

	 	Box on Box
	 	20'H x 7'10"W x 40'L
	Rebuilt

	 	Box on Box Step Down
	 	22'6"H
	Ideco

	 	Step Down
	 	10'H x 7'9"W x 36'L
	Rebuilt

	 	 
	 	13'H x 6'8"W x 51'L
	Pony

	 	 
	 	 
	Pony

	 	 
	 	7'H x 7'4"W x 42'6"L
	Pony

	 	 
	 	4'6"H x 7'9"W x 33'L
	Pony

	 	 
	 	3'4"H x 7'6"W x 38'L
	Pony

	 	 
	 	4'H x 7'4"W x 33'L
	 

	 	Engine Base
	 	10'H
	 

	 	Engine Base
	 	9'H x 7'4"W x 24'4"L
	 

	 	2" Pumps
	 	 
	 

	 	Liners
	 	4- 6" / 6- 51/2" 10- 6"
	 

	 	Piston Rods
	 	8- C1000 / 2-G700 / 3-D500
	 

	 	Pony Rods
	 	 
	 

	 	Group
	 	 
	 

	 	 
	 	16" 20" & 24"
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	Pusher
	 	10'W x 50'L
	 

	 	 
	 	4 1/2" Med
	 

	 	 
	 	4 1/2" XL
	 

	 	 
	 	5 1/2" x 7"
	 

	 	 
	 	8 5/8"
	 

	 	 
	 	4 1/2" 350 Ton
	 

	 	 
	 	4 1/2" 250 Ton
	 

	 	 
	 	4 1/2" 150 Ton
	 

	 	 
	 	3 1/2" 150 Ton
	Web Wilson

	 	 
	 	4 1/2" 250 Ton
	Martin Decker

	 	 
	 	 
	 

	 	 
	 	27'
	 

	 	 
	 	22'
	 

	 	 
	 	 
	K6UL

	 	Ingersoll Rand
	 	 
	 

	 	Five Star
	 	 
	N-55

	 	 
	 	Lebus Grooving
	National 50-A

	 	 
	 	Lebus Grooving
	Oilwell 76

	 	 
	 	Lebus Grooving
	GB- 500

	 	 
	 	Lebus Grooving
	 

	 	 
	 	5000 PSI
	 

	 	 
	 	6'8"L x 3"OD
	 

	 	250 Ton
	 	5'11"L x 2 1/4"
	 

	 	250 Ton
	 	5'11"L x 2 1/4"
	 

	 	350 Ton
	 	6'10"L x 2 5/8"






9









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	 

	 	 
	 	7'8"L x 3 1/2"
	 

	 	 
	 	 
	Home Made

	 	 
	 	 
	For forklift

	 	 
	 	 
	 

	 	 
	 	5 x 6 With Motor
	 

	 	 
	 	2" x 3"
	 

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	For Derricks
	 

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	Board Parts
	 

	 	 
	 	 
	Used

	 	 
	 	 
	N-55

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	New

	 	 
	 	 
	 

	 	 
	 	 
	Small

	 	 
	 	 
	New

	 	 
	 	 
	Used

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	Rebuilt

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	40'
	 

	 	 
	 	30'
	 

	 	 
	 	20'
	 

	 	 
	 	10'
	Beams

	 	 
	 	 
	 

	 	 
	 	2"- A572
	 

	 	 
	 	6" TO 12"
	 

	 	 
	 	6" x 6"
	Pullers

	 	 
	 	 
	New

	 	 
	 	 
	GB-500

	 	New
	 	 
	N — 55

	 	New
	 	 
	Oilwell 76

	 	New
	 	 
	 

	 	New
	 	Belts Rig 2
	 

	 	New
	 	Boiler
	 

	 	New
	 	 
	 

	 	Used
	 	 
	 

	 	New
	 	Short
	 

	 	 
	 	Air & Fuel






10









 






	 	 	 	 	 
	Model	 	Required Information	 	Inventory Comments
	 

	 	 
	 	 
	Diesel

	 	 
	 	 
	Electric

	 	 
	 	 
	Tioga

	 	 
	 	 
	 

	 	 
	 	 
	Work Over

	 	 
	 	 
	 

	 	Used
	 	 
	Motor

	 	 
	 	 
	A-1 Sureshot

	 	 
	 	 






     3. Rig 21



	 	 	 	 	 	 	 	 	 
	Make	 	Model	 	Serial No.	 	Required Info	 	Inventory Comments
	Cat
	 	3406	 	365 kw	 	 	 	# 1 Generator
	Cat
	 	3406	 	365 kw	 	 	 	# 2 Generator
	Ingersol-Rand
	 	HU-6	 	 	 	 	 	 
	Ingersol-Rand
	 	HU-6	 	 	 	 	 	 
	National
	 	G-1000	 	 	 	 	 	# 1 Pump
	Emsco
	 	 	 	 	 	 	 	 
	Martin Decker
	 	 	 	 	 	 	 	 
	Cat
	 	 	 	 	 	KW Rating 365	 	# 1 Lightplant
	Cat
	 	 	 	 	 	KW Rating 365	 	# 2 Lightplant
	Gardner Denver
	 	 	 	 	 	 	 	 
	Gardner Denver
	 	 	 	 	 	 	 	 
	Oilwell
	 	20 1/2" x 54"	 	 	 	 	 	 
	National
	 	N-47	 	 	 	200 Ton	 	 
	Varco
	 	40'	 	 	 	 	 	 
	Dencon
	 	 	 	 	 	150 Ton	 	 
	Dencon
	 	 	 	 	 	 	 	 
	Dencon
	 	 	 	 	 	 	 	 
	BJ
	 	96"	 	 	 	150 Ton	 	 
	WTM
	 	Type B	 	 	 	 	 	 
	Shaffer
	 	11" 3000#	 	 	 	 	 	 
	2" x 3" x 20" 3K
	 	 	 	 	 	 	 	 
	Derrick
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	                 	 	 	 	 	 	 
	 
	 	7' x 10' x 35'	 	 	 	 	 	 
	 
	 	7' x 10' x 35'	 	 	 	 	 	 
	 
	 	8'10"H x 10'W x 32'L	 	 	 	 	 	 






11









 






	 	 	 	 	 	 	 	 	 
	Make	 	Model	 	Serial No.	 	Required Info	 	Inventory Comments
	 
	 	 	 	 	 	 	 	 
	 
	 	7'6"H x 12'2"W x 18'L	 	 	 	 	 	Top Dog House
	 
	 	 	 	 	 	 	 	# 1 Pump House
	 
	 	 	 	 	 	 	 	# 2 Pump House
	 
	 	 	 	 	 	 	 	Parts & Misc.
	 
	 	10'H x 10'W x 43'L	 	 	 	 	 	Generator House
	Burnsco
	 	5 Station	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	T Base
	 	10'H x 11'W x 40'L	 	 	 	 	 	 
	 
	 	42"H x 6'W x 50'L	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	                 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	2 x 3 30003
	 	 	 	 	 	 	 	 
	 
	 	16.60 G	 	10,000'	 	 	 	 






12









 





SCHEDULE 3.1(b)




DISPOSITIONS




     No dispositions since June 30, 2008, except for the specified assets set forth in Schedule 1.3
to be sold on an on-going basis.



13









 





SCHEDULE 3.4




CONSENT, AUTHORIZATIONS, FILINGS AND NOTICES




     None.



14









 





SCHEDULE 3.16




CAPITAL STOCK OWNERSHIP




     C&L Drilling Company, a Colorado corporation, is 100% owned by Borrower as reflected by share
certificate 8 representing 500 shares.



     Chapman Trucking Company, a Wyoming corporation, is 100% owned by Borrower as reflected by
share certificate 2 representing 10,000 shares.



     Hastings Drilling Company, a Nevada corporation, is 100% owned by Borrower as reflected by
share certificate 2 representing 1,000 shares.



15









 





SCHEDULE 3.21(a)-1




SECURITY AGREEMENT UCC FILING JURISDICTIONS




Borrower and C&L Drilling Company



Colorado Secretary of State

Business/UCC Division

1700 Broadway – Suite 200

Denver, CO 80202



Borrower entity no: 20051112961

C&L entity no.: 20011232283




Hastings Drilling Company



Nevada Secretary of State

UCC Division

101 North Carson Street – Suite 3

Carson City, Nevada 89701-3714



Entity no.: C21102-2003




Chapman Trucking Company, Inc.:



Wyoming Secretary of State

Corporation/UCC Division

State Capitol Building

200 West 24th Street – Room 110

Cheyenne, Wyoming 82002-0020



Entity no.: 1980-000177870




DHS Holding Company



Delaware Secretary of State

Corporation/UCC Division

John G. Townsend Building

Dover, Delaware 19901



Entity no.: 4152252




16









 





SCHEDULE 3.21(a)-2




UCC FINANCING STATEMENTS TO REMAIN ON FILE




	 	 	 	 	 	 	 
	Lender	 	Debtor	 	Jurisdiction	 	Filing No.
	Lehman Commercial 

Paper, Inc., as 

administrative agent
	 	DHS Holding Company
	 	Delaware
	 	20074835939
	Lehman Commercial 

Paper, Inc., as 

administrative agent
	 	DHS Drilling Company
	 	Colorado
	 	20072127152
	Lehman Commercial 

Paper, Inc., as 

administrative agent
	 	Chapman Trucking

Company
	 	Wyoming
	 	200735186944
	Lehman Commercial 

Paper, Inc., as 

administrative agent
	 	Hastings Drilling

Company
	 	Nevada
	 	20070421945
	Lehman Commercial 

Paper, Inc., as 

administrative agent
	 	C&L Drilling Company
	 	Colorado
	 	20072127151






17









 





SCHEDULE 3.21(a)-3




UCC FINANCING STATEMENTS TO BE TERMINATED




     None.



18









 





SCHEDULE 3.21(b)




MORTGAGE FILING JURISDICTIONS




     None.



19









 





SCHEDULE 3.23




DRILLING RIG ASSETS




RIG INVENTORIES




RIG 1 – 18,000’ CAPACITY WITH 5” DRILL PIPE

GARDNER-DENVER 1100




DRAW-WORKS



     Gardner-Denver 1100 Draw-works with 481 Parmac Hydromatic Brake Powered by (3) — CAT D-3508 Engines
with National C-300-64 Torque Converters – 1500 hp



SUBSTRUCTURE & MAST



Pyramid 147 Mast, 980,000 GNC. 1” 3/8 Line

Pyramid 24’ x 60’ Step down Substructure




GENERATOR



(1)- 350 KW AC Generators Powered by (1) Cummins KTA 1961– Turbo Charged Diesel engines) (1) 325 KW
AC Generator Powered by (1) Cummins KTA 1150 GC Engine




MUD PUMPS



(2) Emsco FB 1300 Triplex Mud Pumps

(1) D-399 Cat Engine (1) 3512 Cat Engine




ROTATING & TRAVELING EQUIPMENT




Oilwell 37 1/2” Rotary Table

Gardner Denver 550 Ton Block 500-Ton BJ. Hook

Ideco Type IL 400-Tons Swivel

51/4“ x 46‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP

13” 10,000 lb. Double Gate Bop

13” 10,000 Ib. Single Gate Bop

Koomey Model 160-Gallon Automatic Accumulator; 6-Station Air Accuated Remote Control Panel

4” & 3” 10,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (3) 10’ x 8’ x 52’ Mud Tanks Complete with (5) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 1400-Barrel
Capacity



20









 





     (1) - Water Tank – 500-Bbls.



     12,000-gallon Fuel Tank



(2) — Swaco Linear Mongoose Shakers

Mission Desander (2) – 10” Cones

Mission Desilter (12) — 4” Cones




HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ Type SDD Tongs

Bear Automatic Driller

Sure Shot 14o A-1 Survey Instrument

M.D.Totco Type 100 Weight Indicator




DRILL PIPE & COLLARS




18,000’ 5” OD 19.50 lb Drill Pipe E, G & S

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(3) 8” x 30’ Drill Collars




21









 





RIG 4 – 11,000’ CAPACITY WITH 4 1/2” DRILL PIPE

NATIONAL 45




DRAW-WORKS



National 45 electric, Driven By 752 Traction Motor, 750 HP.With Eaton Disc Brake.




SUBSTRUCTURE & MAST



Dreco 131’ Mast, 550,000 HL. 1” 1/8 Line

LCM18’ x 28’ x 41 Substructure Box On Box




GENERATOR



SCR. System IPS 4 Bay

(3)- Cat C-32 Generator Set 725 KW.




MUD PUMPS



(1) MD — PZ. 9, Driven By (1) 752 Traction Motor Triplex

(1) MD — PZ. 9, Driven By (1) 752 Traction Motor Triplex




ROTATING & TRAVELING EQUIPMENT




Gardner Denver 20.5” Table

Traveling Blocks Bass Ross 300 Ton.

Bass Ross 250 Ton.

Swivel Emsco LB-200

BJ Type B Tongs




BLOWOUT PREVENTION




11” 3,000 lb. Annular BOP .

11” 3,000 lb. Shaffer LWS

Model 180-Gallon Automatic Accumulator; 4-Station Air Accuated Remote Control Panel

3” 3,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse

400 BBL. Water Tank

(2) Tank Mud System 850 Bbl’s. With (4) 5 x 6 Pumps with Low Pressure System. (3) Agitators.

(2) Swaco ALS Linear Shakers.

National (2) Cone Desander

National (10) Cone Desilter.

Fuel Tank 8,000 Gal.




HANDLING TOOLS/AUXILIARY EQUIPMENT



Pilot II Automatic Driller

Sure Shot 7o A-1 Survey Instrument




22









 





Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




11,000’ 4 1/2 16.60 lb Grade Mixed Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




23









 





RIG 5 – 12,000’ CAPACITY WITH 4 1/2” DRILL PIPE

OIME SL750




DRAW-WORKS



Oime SL750 Electric, Driven By 752 Traction Motor, 750 HP.With Parmac. 341 Brake. 700 HP.




SUBSTRUCTURE & MAST



Parco 131’ Mast, 550,000 HL. 1” 1/8 Line

Parco 18’ x 25’ x 35 Substructure Self Elevating




GENERATOR



SCR. System IDM 4 Bay

(3)- Cat D-3412 Generator Set 725 KW.




MUD PUMPS



(1) Gardner Denver PZ. 8, Driven By (1) 752 Traction Motor Triplex

(1) Gardner Denver PZ. 9, Driven By (1) 752 Traction Motor Triplex




ROTATING & TRAVELING EQUIPMENT




Gardner Denver 27.5” Table

Traveling Blocks Gardner Denver 300 Ton.

Hook BJ. 250 Ton.

Swivel Emsco LB-200

Iron Roughneck Twister Torque Access Tool




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP .

13” 5,000 lb. Shaffer LWS

Model 180-Gallon Automatic Accumulator; 4-Station Air Accuated Remote Control Panel

3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse

400 BBL. Water Tank

(2) Tank Mud System 850 Bbl’s. With (4) 5 x 6 Pumps with Low Pressure System. (3) Agitators.

(2) Swaco Mongoose Linear Shakers.

National (2) Cone Desander

National (10) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT




Pilot II Automatic Driller

Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type D Weight Indicator




24









 





DRILL PIPE & COLLARS




12,000’ 4 1/2 16.60 lb Grade Mixed Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




25









 





RIG 6 – 12,000’ CAPACITY WITH 4 1/2” DRILL PIPE

SUPERIOR 700 UE




DRAW-WORKS



Superior 700 UE 750 HP. Electric, Driven By (1) 752 Traction Motor. With V80 Parmac Hydromatic.




700 HP.




SUBSTRUCTURE & MAST



Oilfield welding Ltd.131’ Mast, 366,000 HL. 1” 1/8 Line

Oilfield welding Ltd. Substructure 16’ H




GENERATOR



SCR System Baylor (3) Bay, With Allen Bradley MCC.

(3)- Cat D-3412 Generator Set 725 KW.




MUD PUMPS




(2) Emsco F-800, Driven By (2) 752 Traction Motor Triplex




ROTATING & TRAVELING EQUIPMENT




National C- 27.5” Rotary Table

National 250 Ton, BJ. 540 –G- 250 Hook

National P-200, 200 Ton Swivel




BLOWOUT PREVENTION




13 5/8” 5,000 lb. Annular BOP .

13 5/8” 5,000 lb. Shaffer LWS

Koomey Model 160-Gallon Automatic Accumulator; 6-Station Air Actuated Remote Control Panel

3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse

Water Tank 400 BBL.

(2) Tank Mud System 650 Bbl’s. With (3) 5 x 6 Pumps with Low Pressure System. (3) Agitators.

(2) Swaco Mongoose Linear Shakers.

National (2) Cone Desander

National (10) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT




5 1/4” Kelly Drive 42’

Pilot ll Automatic Driller

Sure Shot 7o A-1 Survey Instrument




26









 





Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




13,000’ 4 1/2” 16.60 lb Grade G Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




27









 





RIG 7 – 20,000’ CAPACITY WITH 5” DRILL PIPE

NATIONAL 1320




DRAW-WORKS



National 1320 with 60 Parmac Hydromatic Brake Powered by (3) — CAT D-3508 Engines With National
C-300-80 Torque Converters – 1500 hp




SUBSTRUCTURE & MAST



DSI 142’ Mast, 1,025,000 SHL. 1” 3/8 Line

DSI 25’ x 64’ Step down Substructure




GENERATOR




(2)- 455 KW AC Generators Powered by (2) Cat 3456 Diesel engines)




MUD PUMPS




(2) 1600 HP. Chinese Triplex Powered by 2 D-399Cat Engines.




ROTATING & TRAVELING EQUIPMENT




National 27 1/2” Rotary Table

National 500 Ton Block & Hook

National 500-Ton Swivel

51/4“ x 53‘ Kelly Varco HD Pin Drive Bushings



TOP DRIVE

Varco 500 Ton Top Drive D-3508 Power




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP

13” 10,000 lb. Double Gate Bop

13” 10,000 Ib. Single Gate Bop

160-Gallon Automatic Accumulator; 7-Station Air Actuated Remote Control Panel

4” X 3” 10,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (3) 10’ x 10’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 1500-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     18,000-gallon Fuel Tank


(2) – Fluid System Linear Shale Shakers



28









 






Fluid
System Desander (2) — 10” Cones

Fluid System Desilter (10) — 4” Cones




HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type DB Tongs

Piolt ll Automatic Driller

Sure Shot 7o A-1 Survey Instrument

M.D. Type E Weight Indicator




DRILL PIPE & COLLARS




20,000’ 5” OD 19.50 lb Drill Pipe G & S

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




29









 





RIG 8 – 12,500’ CAPACITY WITH 4 1/2” DRILL PIPE

GARDNER-DENVER 700




DRAW-WORKS



Gardner-Denver 700 Draw-works with 342 Parmac Hydromatic Brake Powered by (2) — CAT C-15 Engines
With National 195-80 Torque Converters – 800 hp




SUBSTRUCTURE & MAST



Pyramid 131 Mast, 550,000 GNC. 1” 1/4 Line

Pyramid 17’ H Substructure




GENERATOR




(2)- 320 KW AC Generators Powered by (2) Cat C-15 Diesel engines)




MUD PUMPS




((2) 1000 HP. Weatherford Chinese Triplex Powered by 3508 Cat Engines.




ROTATING & TRAVELING EQUIPMENT




Chinese 27 1/2” Rotary Table

Emsco 250 Ton Block BJ. Hook

Ideco Type 300-Tons Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP

13” 5,000 lb. Double Gate Bop

Koomey Model 80-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” & 3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 10’ x 5’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 650-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     12,000-gallon Fuel Tank



(2) – Fluid System Linear Shale Shakers

Fluid System Desander (2) – 10” Cones

Fluid System Desilter (10) — 4” Cones




HANDLING TOOLS/AUXILIARY EQUIPMENT



30









 





BJ 48” Type B Tongs

Piolt ll Automatic Driller

Sure Shot 14o A-1 Survey Instrument

M.D.Totco Type D Weight Indicator




DRILL PIPE & COLLARS




12,500’ 4 1/2” OD 16.60 lb Drill Pipe

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




31









 





RIG 9 – 15,000’ CAPACITY WITH 4 1/2” DRILL PIPE

GARDNER-DENVER 800




DRAW-WORKS



Gardner-Denver 800 Draw-works with 342 Parmac Hydromatic Brake Powered by (2) — CAT C-15 Engines
With National 195-80 Torque Converters – 1000 hp




SUBSTRUCTURE & MAST



DSI 142’ Mast, 1,025,000 GNC. 1” 1/4 Line

Pyramid 25’ H Substructure




GENERATOR




(2)- 455 KW AC Generators Powered by (2) Cat 3456 Diesel engines)




MUD PUMPS




((2) FB-1300 Emsco pumps Powered by (2) Cat 399 1290 HP. Engines




ROTATING & TRAVELING EQUIPMENT




National 27 1/2” Rotary Table

Ideco 525 Ton Blocks

Ideco Type LB- 400-Tons Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




11” 10,000 lb. Annular BOP

11” 10,000 lb. Double Gate Bop

11” 10,000 lb. Single Gate

Koomey Model 120-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” & 3” 10,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 10’ x 5’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 850-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     (1) 12,000-gallon Fuel Tank



(2) – Fluid System Linear Shale Shakers

Fluid System Desander (2) – 10” Cones

Fluid System Desilter (10) — 4” Cones




32









 





HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type B Tongs

Pilot ll Automatic Driller

Sure Shot 7o A-1 Survey Instrument

M.D.Totco Type D Weight Indicator




DRILL PIPE & COLLARS




15,000’ 4 1/2” OD 16.60 lb Drill Pipe

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




33









 





RIG 10 – 15,000’ CAPACITY WITH 4 1/2” DRILL PIPE

GARDNER-DENVER 800




DRAW-WORKS



Gardner-Denver 800 Draw-works with 342 Parmac Hydromatic Brake Powered by (2) — CAT C-15 Engines
With National 195-80 Torque Converters – 1000 hp




SUBSTRUCTURE & MAST



DSI 142’ Mast, 950,000 GNC. 1” 1/4 Line

25’ H Substructure




GENERATOR




(2)- 455 KW AC Generators Powered by (2) Cat 3456 Diesel engines)




MUD PUMPS



(1) PZ-11 Triplex GD. Triplex Pumps. Powered by 3512 Cat Engines.

(1) FB-1300 Triplex Chinese Pump. Powered by 3512 Cat Engine with C-300 Torque.




ROTATING & TRAVELING EQUIPMENT




National 27 1/2” Rotary Table

Gardner Denver 400 Ton Block BJ. Hook Shorty

Ideco Type 400-Tons Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




11” 5,000 lb. Annular BOP

11” 10,000 lb. Double Gate Bop

11” 10,000 lb. Single Gate

Koomey Model 120-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” & 3” 10,000 lb. Complete Manifold with Gauges and Chokes



TOP DRIVE




Top Drive Tesco HS 750 / 1100 HP.




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 10’ x 5’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 850-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     (1) 12,000-gallon Fuel Tank



34









 





(2) – Fluid System Linear Shale Shakers

Fluid System Desander (2) — 10” Cones

Fluid System Desilter (10) — 4” Cones




HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type B Tongs

Piolt ll Automatic Driller

Sure Shot 14o A-1 Survey Instrument

M.D.Totco Type D Weight Indicator




DRILL PIPE & COLLARS




15,000’ 4 1/2” OD 16.60 lb Drill Pipe

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




35









 





RIG 11 – 11,000’ CAPACITY WITH 4 1/2” DRILL PIPE

OIME HH550




DRAW-WORKS



Oime HH500 Electric, Driven By 752 Traction Motor, 750 HP.With Parmac. 341 Brake.




SUBSTRUCTURE & MAST



Parco 131’ Mast, 360,000 HL. 1” 1/8 Line

Parco 22’ x 25’ x 35 Substructure Self Elevating




GENERATOR



SCR. System IDM 4 Bay

(3)- Cat D-3508 Generator Set 800 KW.




MUD PUMPS



(1) American PZ. 9, Driven By (1) 752 Traction Motor Triplex

(1) Gardner Denver PZ. 9, Driven By (1) 752 Traction Motor Triplex




ROTATING & TRAVELING EQUIPMENT




Gardner Denver 17.5” Table

Traveling Blocks Emsco 300 Ton.

Hook Web- Wilson. 250 Ton.

Swivel Emsco LB-200

BJ Type B Tongs




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP .

13” 5,000 lb. Double Gate

Model 180-Gallon Automatic Accumulator; 4-Station Air Actuated Remote Control Panel

3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse

400 BBL. Water Tank

(2) Tank Mud System 850 Bbl’s. With (4) 5 x 6 Pumps with Low Pressure System. (3) Agitators.

(2) Swaco Linear Mongoose Shakers.

National (2) Cone Desander

National (12) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT




Pilot II Automatic Driller

Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type D Weight Indicator




36









 





DRILL PIPE & COLLARS




11,000’ 4 1/2 16.60 lb Grade Mixed Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




37









 





RIG 12 – 15,000’ CAPACITY WITH 5” DRILL PIPE

GARDNER-DENVER 800




DRAW-WORKS



Gardner-Denver 800 Draw-works with 342 Parmac Hydromatic Brake Powered by (2) — CAT C-15 Engines
With National 195-80 Torque Converters – 1000 hp




SUBSTRUCTURE & MAST



Brewster 136’ Mast, 650,000 GNC. 1” 1/4 Line

27’ H Substructure




GENERATOR




(2)- 455 KW AC Generators Powered by (2) Cat 3456 Diesel engines)




MUD PUMPS




((2) National 9-P-100 Triplex GD.Triplex Pumps. Powered by 3412 Cat Engines.




ROTATING & TRAVELING EQUIPMENT




Gardner Denver 27 1/2” Rotary Table

Ideco 350 Ton Block BJ. Hook

SL Type 400-Tons Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




13 5/8” 5,000 lb. Annular BOP

13 5/8” 5,000 lb. Double Gate Bop

Koomey Model 120-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” & 3” 3,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 10’ x 6’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 850-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     (1) 12,000-gallon Fuel Tank



(2) – Swaco Linear Shale Shakers

Fluid System Desander (2) – 10” Cones

Fluid System Desilter (10) — 4” Cones




HANDLING TOOLS/AUXILIARY EQUIPMENT



38









 





DB Foley Tongs

Piolt ll Automatic Driller

Sure Shot 14o A-1 Survey Instrument

M.D.Totco Type D Weight Indicator




DRILL PIPE & COLLARS




15,000’ 5” OD 19.50 lb Drill Pipe

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars





39









 








RIG 14 – 12,500’ CAPACITY WITH 5” DRILL PIPE

GARDNER-DENVER 700




DRAW-WORKS



Gardner-Denver 700 Draw-works with 481 Parmac Hydromatic Brake Powered by (2) — CAT C-15 Engines
With National 195-80 Torque Converters – 800 hp




SUBSTRUCTURE & MAST



Pyramid 131 Mast, 550,000 GNC. 1” 1/4 Line

Pyramid 25’ H Substructure




GENERATOR




(2)- 455 KW AC Generators Powered by (2) Cat 3456 Diesel engines)




MUD PUMPS




((2) 750 HP. GD Triplex Powered by 3412 Cat Engines.




ROTATING & TRAVELING EQUIPMENT




National 27 1/2” Rotary Table

Emsco 300 Ton Block BJ. Hook

Ideco Type 300-Tons Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP

13” 5,000 lb. Double Gate Bop

Koomey Model 80-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” & 3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 10’ x 5’ x 40’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal Pumps
Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns – 650-Barrel
Capacity



     (1) - Water Tank – 500-Bbls.



     12,000-gallon Fuel Tank



(2) – Fluid System Linear Shale Shakers

Fluid System Desander (2) – 10” Cones

Fluid System Desilter (10) — 4” Cones




 









 





HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type B Tongs

Piolt ll Automatic Driller

Sure Shot 14o A-1 Survey Instrument

M.D.Totco Type D Weight Indicator




DRILL PIPE & COLLARS




12,500’ 4 1/2” OD 16.60 lb Drill Pipe

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




 









 





RIG 15 – 10,000’ CAPACITY WITH 4 1/2” DRILL PIPE

OILWELL 66




DRAW-WORKS



Oilwell 66 Draw-works with V-80 Parmac Hydromatic Brake, Powered by (2) — Detroit Series 60, 450
HP.




Engines. With C. 195 Oilworks Torque Converters. 700 HP.




SUBSTRUCTURE & MAST



LCM 131’ Mast, 350,000 HL. 1” 1/8 Line

LCM 14’ x 23 x 46’ 4” Substructure




GENERATOR




(2)- 365 KW AC Generators Powered by (2 — Detroit-Series 60 14 Liter 630 Horsepower Engines.)




MUD PUMPS



(1) GD. PZ-8 Triplex Powered by Cat D-398

(2) MZ- 9 Triplex Powered by Cat 3508




ROTATING & TRAVELING EQUIPMENT




Ideco 23.5” Rotary Table

Sowa 250 Ton Block Hook Combination

B-44 Gray 300 Ton Swivel

51/4“ x 42‘ Hex Kelly Varco Drive Bushings




BLOWOUT PREVENTION




10” 3,000 lb. Annular BOP GK.

10” 3,000 lb. Shaffer Type E

Koomy Model 110-Gallon Automatic Accumulator; 5-Station Air Accuated Remote Control Panel

2” & 3” 3,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 650 Bbl. Mud Tanks Complete with (2) — 5” x 6” Electrical Driven Centrifugal Pump Manifold
to Low Pressure System , Mud Guns and Shaker



     (1) Water Tank – 500-Bbls.



     10,000-gallon Fuel Tank



HANDLING TOOLS/AUXILIARY EQUIPMENT



 









 





BJ 48” Type B Tongs

Bear Automatic Driller

Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




10,000’ 4 1/2 16.60 lb Grade Mixed Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




 









 





RIG 16 – 10,000’ CAPACITY WITH 4 1/2” DRILL PIPE

KREMCO K750-T




DRAW-WORKS



KREMCO K750-T Trailer Mounted Portable Unit, Powered by (2) – Cat D-3408 Engines. (2) Allison
Transmission. 22” Hydromatic. 700 HP.




SUBSTRUCTURE & MAST



KREMCO 116’ 350,000# Telescoping Mast. Hydraulic Raising Rams. 1” 1/8 Drilling Line.

KREMCO Slingshot Substructure 19’ 2” High.




GENERATOR




(2)- 275 KW AC Generators Powered by (2 – Cat D-3408 Diesel Engines.)




MUD PUMPS




(2) GD. PZ-9 Triplex Powered by Cat D-3508




ROTATING & TRAVELING EQUIPMENT




Ideco 17.5” Rotary Table

Emsco 250 – Ton Block Hook Combination BJ. Hook

TSM 150 – Ton Swivel

51/4 “ x 40‘ Hex Kelly — Varco Drive Bushings




BLOWOUT PREVENTION




11” 3,000 psi Annular BOP

11” 3,000 psi Shaffer LWS 102”

Model 120-Gallon Automatic Accumulator; 4-Station Air Accuated Remote Control Panel

2” 3,000 psi Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 600 Bbl. Mud Tanks Complete with (2) — 5” x 6” Electrical Driven Centrifugal Pump
Manifolded to Low Pressure System, Mud Guns and (2) Shakers



     (1) Water Tank – 500-Bbls.



     10,000-gallon Fuel Tank



National 10” – 2-cone Desander, 10-cone Desilter




HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type B Tongs




 









 





Bear Automatic Driller

Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




10,000’ 4 1/2 16.60 lb Grade Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




 









 





RIG 17 – 12,000’ CAPACITY WITH 4.5” DRILL PIPE

NATIONAL 55




DRAW-WORKS



National 55 with 46” Parmac Hydromatic Brake Powered by (2) — CAT C-18 Engines With National
C-195-100 Torque Converters – 1000 hp




SUBSTRUCTURE & MAST



LCM 142’ Mast, 750,000 GN. 1” 1/4 Line

LCM 16’ x 48’ Substructure




GENERATOR



(1)- 455 KW AC Generator Powered by (1) Cat 3456 Diesel engines)

(1)- 365 KW AC Generator Powered by (1) Cat C-15




MUD PUMPS




(2) PZ-9 Triplex Powered by (2) 3805Cat Engines.




ROTATING & TRAVELING EQUIPMENT




National RC 27 1/2” Rotary Table

Emsco 500 Ton Block & BJ Hook

National PC-300 Ton Swivel

51/4“ x 42‘ Kelly Varco HD Pin Drive Bushings




BLOWOUT PREVENTION




13” 5,000 lb. Annular BOP

13” 5,000 lb. Double Gate Bop Type E Type 70 Rubbers

88-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

4” X 3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse




     (2) 9’11” x 5’6”x 43’ Mud Tanks Complete with (4) — 5” x 6” Electrical Driven Centrifugal
Pumps Manifolded to Low Pressure System with Electrically Driven Mud Agitators, Mud Guns –
740-Barrel Capacity



     (1) - Water Tank – 500-Bbls.



     (1) -10,000-gallon Fuel Tank



(2) — Swaco Linear Shale Shakers

National Desander (2) — 10” Cones

National Desilter (10) — 4” Cones




 









 





HANDLING TOOLS/AUXILIARY EQUIPMENT




BJ 48” Type DB Tongs

Pilot ll Automatic Driller

Sure Shot 7o A-1 Survey Instrument

M.D. Type D Weight Indicator




DRILL PIPE & COLLARS




12,000’ 4.5” OD 16.60 lb Drill Pipe G

(21) 61/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” x 30’ Drill Collars




 









 





RIG 18 – 11,000’ CAPACITY WITH 4 1/2” DRILL PIPE




MID CONTINENT U-36 AE




DRAW-WORKS



U-36 AE 700 HP. Electric, Driven By (1) 752 Traction Motor. With V80 Parmac Hydromatic.




700 HP.




SUBSTRUCTURE & MAST



Branham131’ Mast, 550,000 GN. 1” 1/8 Line

Pyramid Box on Box Substructure 16’ H




GENERATOR



SCR System IPS (3) Bay, With Allen Bradley MCC.

(3)- Cat D-3412 Generator Set 725 KW.




MUD PUMPS




(2) National 8P-80 Triplex, Driven By (2) 752 Traction Motor




ROTATING & TRAVELING EQUIPMENT




National C- 27.5” Rotary Table

Emsco 250 Ton, Web Wilson 250

National P-300, Swivel




BLOWOUT PREVENTION




13 5/8” 5,000 lb. Annular BOP .

13 5/8” 5,000 lb. Hydril double gate

Koomey Model 120-Gallon Automatic Accumulator; 6-Station Air Actuated Remote Control Panel

3” 5,000 lb. Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER & MUD TANKS




Heated Doghouse

Water Tank 540 BBL.

(2) Tank Mud System 750 Bbl’s. With (3) 5 x 6 Pumps with Low Pressure System. (3) Agitators.

(2) Swaco ALS Linear Shakers.

National (2) Cone Desander

National (10) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT



5 1/4” Kelly Drive 42’

Pilot ll Automatic Driller


 









 






Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type D Weight Indicator




DRILL PIPE & COLLARS




11,000’ 4 1/2” 16.60 lb Grade G Drill Pipe

(21) 6 1/4“ x 21/4“ x 30’ Slick Drill Collars

(2) 8” Drill Collars




 









 





RIG 19 – 12,000’ CAPACITY WITH 4 1/2” DRILL PIPE

OILWELL 76




DRAW-WORKS



Oilwell 76 Single Drum 1000 HP. Driven by (2) CAT C-18 engines with 46” Hydromatic.




SUBSTRUCTURE & MAST



Lee C Moore 136’ Cantilever Mast, 488,000# HL. 1 1/4” Line with Crown–O-Matic

Enclosed Box Substructure 15’ 5” H, 600,000# HL




GENERATOR



(2) Cat 365 KW Generator Sets powered by CAT D3406.

(1) Gardner Denver 1260 CFM Screw Type Air Compressor powered by 30 HP Electric Motor.




MUD PUMPS



(1) Weatherford DP-1000 Triplex

(1) National N-1000 Duplex independent drive by Cat D3508




ROTATING & TRAVELING EQUIPMENT




27 1/2” X 54” Rotary Table

Emsco 250 Ton Block and Hook

National PC-300, 300 Ton Swivel




BLOWOUT PREVENTION




Hydril GK 13 5/8” 3000# Annular BOP.

13 5/8” 3000# double gate

Burnsco 88-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

2” X 3” 3000# Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER, FUEL & MUD TANKS




Heated Top Doghouse

Fuel Tank – 10,000 gal.

Water Tank — 513 bbl.

(2) Tank Mud System 800 bbls with (4) 5” x 6” Centrifugal Pumps with Low Pressure System with (4)

Agitators in each.

(1) 50 bbl pill tank

(2) Swaco ALS Linear Shakers.

National (2) Cone Desander

National (10) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT



 









 





5 1/4” Hex Kelly 46’

Pilot ll Automatic Driller

Sure Shot 7o A-1 Survey Instrument

Martin-Decker Type E Weight Indicator




DRILL PIPE & COLLARS




10,000’ 4 1/2” 16.60# Grade G Drill Pipe, 4 1/2” XH

(12) 6 1/2” x 21/4“ x 30’ Spiral Drill Collars, 4 1/2” XH

(2) 8” Drill Collars




 









 





RIG 20 – 13,000’ CAPACITY WITH 4 1/2” DRILL PIPE

NATIONAL 55




DRAW-WORKS



National 55 Double Drum 1000 HP. Driven by (2) CAT C-18 engines (630 HP each).




SUBSTRUCTURE & MAST



Lee C Moore 133’ Cantilever Mast, 466,000# HL. 1 1/4” Line with Crown–O-Matic

Enclosed Box Substructure 11’ 6” H, 600,000# Setback




GENERATOR



(2) Cat 465 KW Generator Sets powered by CAT 15.

(2) Gardner Denver 1260 CFM Screw Type Air Compressor powered by 30 HP Electric Motor.




MUD PUMPS




     (2) Emsco D-1000 Duplex powered by CAT D3508



ROTATING & TRAVELING EQUIPMENT




27 1/2” X 54” Rotary Table

Baash Ross DBM-442, 250 Ton Block and Hook w/ 42” sheaves grooved for 1 1/4” line

Gray B-44, 500 Ton Swivel




BLOWOUT PREVENTION




Hydril 13 5/8” 5000# Annular BOP.

Cameron 13 5/8” 5000# double gate

Burnsco 88-Gallon Automatic Accumulator; 5-Station Air Actuated Remote Control Panel

2” X 3” 3000# Complete Manifold with Gauges and Chokes




DOGHOUSE, WATER, FUEL & MUD TANKS




Heated Top Doghouse

Fuel Tank – 10,000 gal.

Water Tank — 513 bbl.

(2) Tank Mud System 800 bbls with (2) 5” x 6” Centrifugal Pumps with Low Pressure System with (4)

Mud guns in each.

(1) 50 bbl pill tank

(2) Swaco ALS Linear Shakers.

National (10) Cone Desilter.




HANDLING TOOLS/AUXILIARY EQUIPMENT



5 1/4” Hex Kelly 46’

Pilot ll Automatic Driller


 









 






Sure Shot 7o A-1 Survey Instrument, 12,000’ capacity

Martin-Decker Type E Weight Indicator




DRILL PIPE & COLLARS




10,000’ 4 1/2” 16.60# Grade G Drill Pipe, 4 1/2” XH

(12) 6 1/2” x 21/4“ x 30’ Spiral Drill Collars, 4 1/2” XH

(2) 8” Drill Collars




 









 





SCHEDULE 3.25




BANK ACCOUNTS




Borrower:



First Interstate Bank

104 S. Wolcott

Casper, WY 82601

(307) 235-4201



Community Banks of Colorado

5690 S. DTC Blvd.

Suite 450

Greenwood Village, Colorado 80111

(720) 529-3300




Chapman:



First Interstate Bank

104 S. Wolcott

Casper, WY 82601

(307) 235-4201