exv10w1






Exhibit 10.1




 





EXECUTION COPY




SECOND AMENDED AND RESTATED CREDIT AGREEMENT




among




DELTA PETROLEUM CORPORATION,

as Borrower,




The Financial Institutions Listed on Schedule 1.1 Hereto,

as Banks,




JPMORGAN CHASE BANK, N.A.,

as Administrative Agent,




BANK OF MONTREAL,

as Syndication Agent,




and




U.S. BANK NATIONAL ASSOCIATION,

as Documentation Agent




dated as of

NOVEMBER 3, 2008




J.P. MORGAN SECURITIES INC. and BMO CAPITAL MARKETS,

as Joint Lead Arrangers and Joint Bookrunners




 






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page No.	 
	 
	 	 	 	 	 	 
	Article I
	 	TERMS DEFINED	 	 	2	 
	Section 1.1
	 	Definitions	 	 	2	 
	Section 1.2
	 	Accounting Terms and Determinations	 	 	25	 
	Section 1.3
	 	Petroleum Terms	 	 	25	 
	Section 1.4
	 	Money	 	 	26	 
	 
	 	 	 	 	 	 
	Article II
	 	THE CREDIT	 	 	26	 
	Section 2.1
	 	Commitments	 	 	26	 
	Section 2.2
	 	Method of Borrowing	 	 	29	 
	Section 2.3
	 	Method of Requesting Letters of Credit	 	 	30	 
	Section 2.4
	 	Notes	 	 	31	 
	Section 2.5
	 	Interest Rates; Payments	 	 	31	 
	Section 2.6
	 	Mandatory Prepayments	 	 	33	 
	Section 2.7
	 	Voluntary Prepayments	 	 	33	 
	Section 2.8
	 	Voluntary Reduction of Commitments	 	 	33	 
	Section 2.9
	 	Termination of Commitments; Final Maturity of Revolving Loan	 	 	33	 
	Section 2.10
	 	Voluntary Increase of Total Commitment	 	 	34	 
	Section 2.11
	 	Application of Payments	 	 	34	 
	Section 2.12
	 	Commitment Fee	 	 	34	 
	Section 2.13
	 	Agency and other Fees	 	 	34	 
	 
	 	 	 	 	 	 
	Article III
	 	GENERAL PROVISIONS	 	 	34	 
	Section 3.1
	 	Delivery and Endorsement of Notes	 	 	34	 
	Section 3.2
	 	General Provisions as to Payments	 	 	35	 
	 
	 	 	 	 	 	 
	Article IV
	 	BORROWING BASE AND CONFORMING BORROWING BASE	 	 	36	 
	Section 4.1
	 	Reserve Report; Proposed Borrowing Base	 	 	36	 
	Section 4.2
	 	Scheduled Redeterminations of the
Borrowing Base and Conforming Borrowing Base; Procedures and
Standards 
	 	 	36	 
	Section 4.3
	 	Special Redetermination	 	 	37	 
	Section 4.4
	 	Asset Disposition Adjustment	 	 	38	 
	Section 4.5
	 	Borrowing Base Deficiency	 	 	39	 
	 
	 	 	 	 	 	 
	Article V
	 	COLLATERAL AND GUARANTEES	 	 	40	 
	Section 5.1
	 	Security	 	 	40	 
	Section 5.2
	 	Guarantees	 	 	41	 
	 
	 	 	 	 	 	 
	Article VI
	 	CONDITIONS	 	 	41	 
	Section 6.1
	 	Conditions to Amendment and
Restatement, Initial Borrowing and Participation in Letter of Credit
Exposure
	 	 	41	 
	Section 6.2
	 	Conditions to Each Borrowing and each Letter of Credit	 	 	44	 
	Section 6.3
	 	Materiality of Conditions	 	 	45	 
	Section 6.4
	 	Post-Closing Conditions	 	 	45	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page No.	 
	 
	 	 	 	 	 	 
	Article VII
	 	REPRESENTATIONS AND WARRANTIES	 	 	45	 
	Section 7.1
	 	Corporate Existence and Power	 	 	46	 
	Section 7.2
	 	Credit Party and Governmental Authorization; Contravention	 	 	46	 
	Section 7.3
	 	Binding Effect	 	 	46	 
	Section 7.4
	 	Financial Information	 	 	46	 
	Section 7.5
	 	Litigation	 	 	47	 
	Section 7.6
	 	ERISA	 	 	47	 
	Section 7.7
	 	Taxes and Filing of Tax Returns	 	 	48	 
	Section 7.8
	 	Ownership of Properties Generally	 	 	48	 
	Section 7.9
	 	Mineral Interests	 	 	48	 
	Section 7.10
	 	Licenses, Permits, Etc	 	 	48	 
	Section 7.11
	 	Compliance with Law	 	 	49	 
	Section 7.12
	 	Full Disclosure	 	 	49	 
	Section 7.13
	 	Organizational Structure; Nature of Business	 	 	49	 
	Section 7.14
	 	Environmental Matters	 	 	49	 
	Section 7.15
	 	Burdensome Obligations	 	 	50	 
	Section 7.16
	 	Fiscal Year	 	 	50	 
	Section 7.17
	 	No Default	 	 	50	 
	Section 7.18
	 	Government Regulation	 	 	51	 
	Section 7.19
	 	Insider	 	 	51	 
	Section 7.20
	 	Gas Balancing Agreements and Advance Payment Contracts	 	 	51	 
	Section 7.21
	 	Insurance	 	 	51	 
	 
	 	 	 	 	 	 
	Article VIII
	 	AFFIRMATIVE COVENANTS	 	 	51	 
	Section 8.1
	 	Information	 	 	51	 
	Section 8.2
	 	Business of Credit Parties	 	 	54	 
	Section 8.3
	 	Maintenance of Existence	 	 	54	 
	Section 8.4
	 	Title Data	 	 	54	 
	Section 8.5
	 	Right of Inspection	 	 	54	 
	Section 8.6
	 	Maintenance of Insurance	 	 	54	 
	Section 8.7
	 	Payment of Taxes and Claims	 	 	55	 
	Section 8.8
	 	Compliance with Laws and Documents	 	 	55	 
	Section 8.9
	 	Operation of Properties and Equipment	 	 	55	 
	Section 8.10
	 	Environmental Law Compliance	 	 	56	 
	Section 8.11
	 	ERISA Reporting Requirements	 	 	56	 
	Section 8.12
	 	Additional Documents	 	 	57	 
	Section 8.13
	 	Environmental Review	 	 	57	 
	 
	 	 	 	 	 	 
	Article IX
	 	NEGATIVE COVENANTS	 	 	57	 
	Section 9.1
	 	Incurrence of Debt	 	 	57	 
	Section 9.2
	 	Restricted Payments	 	 	58	 
	Section 9.3
	 	Negative Pledge	 	 	58	 
	Section 9.4
	 	Consolidations and Mergers	 	 	58	 
	Section 9.5
	 	Asset Dispositions	 	 	58	 
	Section 9.6
	 	Amendments to Organizational Documents; Other Material Agreements	 	 	59	 
	Section 9.7
	 	Use of Proceeds	 	 	59	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page No.	 
	 
	 	 	 	 	 	 
	Section 9.8
	 	Investments	 	 	60	 
	Section 9.9
	 	Transactions with Affiliates	 	 	60	 
	Section 9.10
	 	ERISA	 	 	60	 
	Section 9.11
	 	Hedge Transactions	 	 	60	 
	Section 9.12
	 	Fiscal Year	 	 	61	 
	Section 9.13
	 	Change in Business	 	 	61	 
	Section 9.14
	 	Obligations to Unrestricted Subsidiaries	 	 	61	 
	 
	 	 	 	 	 	 
	Article X
	 	FINANCIAL COVENANTS	 	 	61	 
	Section 10.1
	 	Current Ratio	 	 	61	 
	Section 10.2
	 	Consolidated Net Debt to Consolidated EBITDAX	 	 	61	 
	 
	 	 	 	 	 	 
	Article XI
	 	DEFAULTS	 	 	62	 
	Section 11.1
	 	Events of Default	 	 	62	 
	 
	 	 	 	 	 	 
	Article XII
	 	AGENTS	 	 	64	 
	Section 12.1
	 	Appointment; Nature of Relationship	 	 	64	 
	Section 12.2
	 	Powers	 	 	64	 
	Section 12.3
	 	General Immunity	 	 	64	 
	Section 12.4
	 	No Responsibility for Loans, Recitals, etc	 	 	64	 
	Section 12.5
	 	Action on Instructions of Banks	 	 	65	 
	Section 12.6
	 	Employment of Agents and Counsel	 	 	65	 
	Section 12.7
	 	Reliance on Documents; Counsel	 	 	65	 
	Section 12.8
	 	Administrative Agent’s Reimbursement and Indemnification	 	 	65	 
	Section 12.9
	 	Notice of Default	 	 	66	 
	Section 12.10
	 	Rights as a Bank	 	 	66	 
	Section 12.11
	 	Bank Credit Decision	 	 	66	 
	Section 12.12
	 	Successor Administrative Agent	 	 	67	 
	Section 12.13
	 	Delegation to Affiliates	 	 	67	 
	Section 12.14
	 	Execution of Collateral Documents	 	 	68	 
	Section 12.15
	 	Collateral Releases	 	 	68	 
	Section 12.16
	 	Agents	 	 	68	 
	 
	 	 	 	 	 	 
	Article XIII
	 	CHANGE IN CIRCUMSTANCES	 	 	68	 
	Section 13.1
	 	Increased Cost and Reduced Return	 	 	68	 
	Section 13.2
	 	Limitation on Type of Loans	 	 	70	 
	Section 13.3
	 	Illegality	 	 	70	 
	Section 13.4
	 	Treatment of Affected Loans	 	 	70	 
	Section 13.5
	 	Compensation	 	 	71	 
	Section 13.6
	 	Taxes	 	 	71	 
	Section 13.7
	 	Discretion of Banks as to Manner of Funding	 	 	73	 
	 
	 	 	 	 	 	 
	Article XIV
	 	MISCELLANEOUS	 	 	73	 
	Section 14.1
	 	Notices	 	 	73	 
	Section 14.2
	 	No Waivers	 	 	73	 
	Section 14.3
	 	Expenses; Indemnification	 	 	73	 
	Section 14.4
	 	Right of Set-off; Adjustments	 	 	75	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page No.	 
	Section 14.5
	 	Amendments and Waivers	 	 	75	 
	Section 14.6
	 	Survival	 	 	76	 
	Section 14.7
	 	Limitation on Interest	 	 	76	 
	Section 14.8
	 	Invalid Provisions	 	 	77	 
	Section 14.9
	 	Waiver of Consumer Credit Laws	 	 	77	 
	Section 14.10
	 	Assignments and Participations.	 	 	77	 
	Section 14.11
	 	TEXAS LAW	 	 	81	 
	Section 14.12
	 	Consent to Jurisdiction; Waiver of Immunities.	 	 	81	 
	Section 14.13
	 	Counterparts; Effectiveness	 	 	81	 
	Section 14.14
	 	No Third Party Beneficiaries	 	 	82	 
	Section 14.15
	 	COMPLETE AGREEMENT	 	 	82	 
	Section 14.16
	 	WAIVER OF JURY TRIAL	 	 	82	 
	Section 14.17
	 	Confidentiality	 	 	82	 
	Section 14.18
	 	USA Patriot Act	 	 	82	 






 









 






EXHIBITS




	 	 	 
	EXHIBIT A

	 	FORM OF FACILITY GUARANTY
	EXHIBIT B

	 	FORM OF PROMISSORY NOTE
	EXHIBIT C

	 	FORM OF BORROWER PLEDGE AGREEMENT
	EXHIBIT D

	 	FORM OF SUBSIDIARY PLEDGE AGREEMENT
	EXHIBIT E

	 	FORM OF REQUEST FOR BORROWING
	EXHIBIT F

	 	FORM OF REQUEST FOR LETTER OF CREDIT
	EXHIBIT G

	 	FORM OF NOTICE OF CONTINUATION OR CONVERSION
	EXHIBIT H

	 	FORM OF CERTIFICATE OF OWNERSHIP INTERESTS
	EXHIBIT I

	 	FORM OF CERTIFICATE OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
	EXHIBIT J

	 	FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
	EXHIBIT K

	 	FORM OF CERTIFICATE OF EFFECTIVENESS
	EXHIBIT L

	 	AMENDMENT FOR INCREASED OR NEW COMMITMENT






SCHEDULES




	 	 	 
	SCHEDULE 1.1

	 	FINANCIAL INSTITUTIONS
	SCHEDULE 7.5

	 	LITIGATION
	SCHEDULE 7.10

	 	LICENSES, PERMITS, ETC.
	SCHEDULE 7.13

	 	ORGANIZATIONAL STRUCTURE
	SCHEDULE 7.14

	 	ENVIRONMENTAL DISCLOSURE
	SCHEDULE 7.19

	 	INSIDER
	SCHEDULE 9.8

	 	EXISTING INVESTMENTS






 









 






SECOND AMENDED AND RESTATED CREDIT AGREEMENT




     THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is entered into
as of the 3rd day of November, 2008, among DELTA PETROLEUM CORPORATION, a Delaware corporation
(“Borrower”), JPMORGAN CHASE BANK, N.A., as Administrative Agent (“Administrative
Agent”), BANK OF MONTREAL, as Syndication Agent (“Syndication Agent”), U.S. BANK
NATIONAL ASSOCIATION, as Documentation Agent (“Documentation Agent”), and the financial
institutions listed on Schedule 1.1 hereto as Banks (individually a “Bank” and
collectively “Banks”).



WITNESSETH:




     WHEREAS, Borrower, Administrative Agent, and each of the financial institutions named and
defined therein as Banks ( “Existing Banks”) and agents, are parties to that certain
Amended and Restated Credit Agreement dated as of November 17, 2006, pursuant to which Existing
Banks provided certain loans and extensions of credit to Borrower (such Amended and Restated Credit
Agreement, as heretofore amended, the “Existing Credit Agreement” and all Debt arising
pursuant to the Existing Credit Agreement, the “Existing Indebtedness”); and



     WHEREAS, subject to the conditions precedent set forth herein, the parties hereto desire to
amend and restate the Existing Credit Agreement in its entirety in the form of this Agreement, and
Borrower desires to obtain Borrowings (as herein defined) (a) to refinance the indebtedness under
the Existing Credit Agreement, and (b) for other purposes permitted herein; and



     WHEREAS, after giving effect to the amendment and restatement of the Existing Credit Agreement
pursuant to the terms hereof, the Commitment Percentage (as herein defined) of each Bank hereunder
will be as set forth on Schedule 1.1 hereto; and



     WHEREAS, J.P. Morgan Securities Inc. and BMO Capital Markets have been appointed Joint Lead
Arrangers and Joint Bookrunners for the credit facility provided herein.



     NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants
and agreements contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and subject to the satisfaction of each condition
precedent contained in Section 6.1 hereof, the Existing Credit Agreement shall be amended
and restated as of the Closing Date in the form of this Agreement. It is the intention of
Borrower, Administrative Agent and Banks that this Agreement supersedes and replaces the Existing
Credit Agreement in its entirety; provided that, (a) such amendment and restatement
shall operate to renew, amend and modify certain of the rights and obligations of the parties under
the Existing Credit Agreement as provided herein, but shall not act as a novation thereof, and (b)
the Liens securing the Obligations under and as defined in the Existing Credit Agreement shall not
be extinguished, but shall be carried forward and shall secure such obligations and indebtedness as
renewed, amended, restated and modified hereby. The parties hereto further agree as follows:



1









 





ARTICLE I

TERMS DEFINED




     Section 1.1 Definitions. The following terms, as used herein, have the following
meanings:



     “Acquisition Letters of Credit” means, collectively, one or more letters of credit in
the original stated aggregate amount of $300,000,000, issued for the account of Borrower, such
letters of credit to be (a) issued by JPMorgan Chase Bank, N.A., in its individual capacity and not
as Administrative Agent, Letter of Credit Issuer or a Bank, and (b) fully cash collateralized
pursuant to, and in accordance with, the Cash Collateral Agreement.



     “Adjusted Eurodollar Rate” means, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined
by Administrative Agent to be equal to the quotient obtained by dividing (a) the Eurodollar Rate
for such Eurodollar Loan for such Interest Period by (b) 1 minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.



     “Administrative Agent” means JPMorgan Chase Bank, N.A., a national banking
association, in its capacity as administrative agent for Banks hereunder or any successor thereto.



     “Advance Payment Contract” means any contract whereby any Credit Party either (a)
receives or becomes entitled to receive (either directly or indirectly) any payment (an
“Advance Payment”) to be applied toward payment of the purchase price of Hydrocarbons
produced or to be produced from Mineral Interests owned by any Credit Party and which Advance
Payment is, or is to be, paid in advance of actual delivery of such production to or for the
account of the purchaser regardless of such production, or (b) grants an option or right of refusal
to the purchaser to take delivery of such production in lieu of payment, and, in either of the
foregoing instances, the Advance Payment is, or is to be, applied as payment in full for such
production when sold and delivered or is, or is to be, applied as payment for a portion only of the
purchase price thereof or of a percentage or share of such
production; provided that inclusion of
the standard “take or pay” provision in any gas sales or purchase contract or any other similar
contract shall not, in and of itself, constitute such contract as an Advance Payment Contract for
the purposes hereof.



     “Affiliate” means, as to any Person, any Subsidiary of such Person, or any other
Person which, directly or indirectly, controls, is controlled by, or is under common control with,
such Person and, with respect to any Credit Party, means, any director, executive officer, general
partner or limited liability company manager of such Credit Party and any Person who holds ten
percent (10%) or more of the voting stock, partnership interests, membership interests or other
ownership interests of such Credit Party. For the purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled by” and “under common
control with”), as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, membership interests or partnership
interests, or by contract or otherwise.



2









 





     “Agent” means Administrative Agent, Syndication Agent, Documentation Agent, each Joint
Lead Arranger, and each Joint Bookrunner, or any other agent appointed hereunder from time to time,
and “Agents” means Administrative Agent, Syndication Agent, Documentation Agent, Joint Lead
Arrangers, Joint Bookrunners, and any other agent appointed hereunder from time to time,
collectively.



     “Agreement” means this Second Amended and Restated Credit Agreement as the same may
hereafter be modified, amended or supplemented from time to time.



     “Amber” means Amber Resources Company of Colorado, a Delaware corporation.



     “Applicable Environmental Law” means any duly promulgated federal, state or local law,
ordinance or regulation, as well as any order, decree, permit, judgment, injunction, variance,
exemption or waiver issued, enacted, promulgated, approved, or entered thereunder, applicable to
the protection of the environment or public health, the use, handling, transportation, disposal,
discharge or storage of Hazardous Substances, or environmental conditions on, under, or about any
real property owned, leased or operated at any time by any Credit Party or any other party
including, without limitation, soil, groundwater, and indoor and ambient air conditions.



     “Applicable Lending Office” means, for each Bank and for each Type of Revolving Loan,
the “Lending Office” of such Bank (or of an affiliate of such Bank) designated for such Type of
Revolving Loan on the signature pages hereof or such other office of such Bank (or an affiliate of
such Bank) as such Bank may from time to time specify to Administrative Agent and Borrower by
written notice in accordance with the terms hereof as the office by which Revolving Loans of such
Type are to be made and maintained.



     “Applicable Margin” means, on any date, with respect to each Type of Revolving Loan,
an amount determined by reference to the ratio of Outstanding Credit to the Conforming Borrowing
Base on such date in accordance with the table below:



	 	 	 	 	 
	Ratio of Outstanding Credit to	 	Applicable Margin	 	Applicable Margin for
	Conforming Borrowing Base	 	for Eurodollar Loans	 	Base Rate Loans
	3 1.10 to 1
	 	3.500%
	 	2.000%
	> 1 to 1 and < 1.10 to 1
	 	3.000%
	 	1.500%
	3 .90 to 1 and £ 1 to 1
	 	2.500%
	 	1.000%
	3 .75 to 1 and < .90 to 1
	 	2.000%
	 	0.500%
	3 .50 to 1 and < .75 to 1
	 	1.750%
	 	0.250%
	< .50 to 1
	 	1.500%
	 	0%






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



     “Approved Petroleum Engineer” means any reputable firm of independent petroleum
engineers as shall be selected by Borrower and approved by Administrative Agent, such approval not
to be unreasonably withheld.



3









 





     “Asset Disposition” means the sale, assignment, lease, license, transfer, exchange or
other disposition by any Credit Party of all or substantially all of its right, title and interest
in any Borrowing Base Property.



     “Assignment and Acceptance Agreement” has the meaning given such term in Section
14.10(c)(i).



     “Authorized Officer” means, as to any Person, its Chief Executive Officer, its
President, its Chief Financial Officer, its Chief Accounting Officer, any of its Vice Presidents,
its Treasurer or its corporate Secretary.



     “Availability” means, as of any date, the remainder of (a) the Borrowing Base in
effect on such date, minus (b) the Outstanding Credit on such date.



     “Bank” means any financial institution reflected on Schedule 1.1 hereto as
having a Commitment and its successors and permitted Assignees, and “Banks” shall mean all
Banks.



     “Base Rate” means, for any day, the rate per annum equal to the greatest of (a) the
Federal Funds Rate for such day plus one-half of one percent (.5%), (b) the Prime Rate for such day
and (c) the Eurodollar Rate for a one month Interest Period on such day (or if such day is not a
Eurodollar Business Day, the immediately preceding Eurodollar Business Day) plus two and one-half
percent (2.5%), provided that, for the avoidance of doubt, the Eurodollar Rate for any day shall be
based on the rate appearing on the Reuters BBA Libor Rates Page 3750 (or on any successor or
substitute page of such page providing rate quotations comparable to those currently provided on
such page of such page, as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the London interbank
market) at approximately 11:00 a.m. London time on such day. Any change in the Base Rate due to a
change in the Prime Rate, the Federal Funds Rate or the Eurodollar Rate shall be effective
automatically and without notice to Borrower or any Bank on the effective date of such change in
the Prime Rate, Federal Funds Rate or Eurodollar Rate, respectively.



     “Base Rate Loan” means the portion of the principal of the Revolving Loan bearing
interest with reference to the Base Rate.



     “BMO” means BMO Capital Markets.



     “Bonds Company” means DLC, Inc., a Colorado corporation f/k/a the Bonds Company.



     “Borrower” means Delta Petroleum Corporation, a Delaware corporation.



     “Borrower Pledge Agreement” means a Pledge Agreement substantially in the form of
Exhibit C attached hereto (with applicable conforming changes) to be executed by Borrower
pursuant to which Borrower shall pledge to Administrative Agent, for the ratable benefit of Banks,
all of the issued and outstanding Equity owned by Borrower of each Restricted Subsidiary described
therein to secure the Obligations.



     “Borrower’s Knowledge” means the actual knowledge of the Chief Executive Officer,
President, Chief Financial Officer and General Counsel of Borrower.



4









 





     “Borrowing” means any disbursement to Borrower under, or to satisfy the obligations of
any Credit Party under, any of the Loan Papers. Any Borrowing which will constitute a part of the
Base Rate Loan is referred to herein as a “Base Rate Borrowing,” and any Borrowing which
will constitute a Eurodollar Loan, is referred to herein as a “Eurodollar Borrowing.”



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



     “Borrowing Base Deficiency” means, as of any date, the amount, if any, by which the
Outstanding Credit on such date exceeds the Borrowing Base in effect on such date;
provided, that, for purposes of determining the existence and amount of any
Borrowing Base Deficiency, Letter of Credit Exposure will not be deemed to be outstanding to the
extent it is secured by cash in the manner contemplated by Section 2.1(b).



     “Borrowing Base Properties” means all Mineral Interests evaluated by Banks for
purposes of establishing the Borrowing Base and Conforming Borrowing Base.



     “Borrowing Date” means the Eurodollar Business Day or the Domestic Business Day, as
the case may be, upon which the proceeds of any Borrowing are made available to Borrower or to
satisfy any obligation of any Credit Party.



     “Cash Collateral Agreement” means that certain Second Amended and Restated Cash
Collateral Account Agreement, dated as of October 24, 2008, among Borrower, JPMorgan Chase Bank,
N.A., in its individual capacity as letter of credit issuer and secured party, and JPMorgan Chase
Bank, N.A., in its individual capacity as depositary bank, and not as Administrative Agent, Letter
of Credit Issuer or a Bank, as the same may hereafter be modified, amended or supplemented from
time to time.



     “Castle” means Castle Texas Exploration Limited Partnership, a Texas limited
partnership.



     “Certificate of Effectiveness” means a Certificate of Effectiveness in the form of
Exhibit K hereto to be executed by Borrower upon the satisfaction of each of the conditions
precedent contained in Section 6.1 hereof.



     “Certificate of Ownership Interests” means a Certificate of Ownership Interests in the
form of Exhibit H attached hereto to be executed and delivered by an Authorized Officer of
Borrower pursuant to Section 6.1(a)(xiv) hereof.



     “Change of Control” means (a) that, for any reason, (i) any Person or group (as
defined in Sections 13(d)(3) or 14(d)(2) of the Exchange Act) other than Tracinda Corporation, a
Nevada corporation, and its Affiliates shall become the direct or indirect beneficial owner (as
defined in Section 13(d)(3) of the Exchange Act) of greater than thirty percent (30%) of the total
voting power of all classes of capital stock then outstanding of Borrower entitled (without regard
to the occurrence of any contingency) to vote in elections of directors of Borrower, or (ii) any
Credit Party (other than Borrower) shall cease to be a wholly owned direct or indirect Subsidiary
of Borrower, or (b) a “Change of Control” (or similar defined term) as defined in any of the
Permitted Senior Unsecured Debt Documents or any of the Permitted Senior Convertible Debt
Documents.



5









 





     “Closing Date” means the date upon which all of the conditions precedent set forth in
Section 6.1 have been satisfied, which date shall be set forth in the Certificate of
Effectiveness; provided, that, in no event shall such date be later than November
30, 2008.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Commitment” means, with respect to any Bank, the commitment of such Bank to lend its
Commitment Percentage of the Total Commitment to Borrower pursuant to Section 2.1 hereof,
as such Commitment may be terminated or reduced from time to time in accordance with the provisions
hereof. On the Closing Date, the amount of each Bank’s Commitment is the amount set forth opposite
such Bank’s name on Schedule 1.1 hereto; provided, that after giving effect
to any Assignment and Acceptance Agreement, the Commitment of each Bank shall be the amount set
forth in the Register maintained by Administrative Agent pursuant to Section 14.10(c)(iv)
hereof.



     “Commitment Fee Percentage” means one half of one percent (0.500%).



     “Commitment Increase” has the meaning given such term in Section 2.10.



     “Commitment Percentage” means, with respect to each Bank, the Commitment Percentage
for such Bank set forth on Schedule 1.1 hereto; provided, that after giving
effect to any Assignment and Acceptance Agreement, the Commitment Percentage of each Bank shall be
the amount set forth in the Register maintained by Administrative Agent pursuant to Section
14.10(c)(iv) hereof.



     “Conforming Borrowing Base” means at any time an amount determined in accordance with
Article IV based on the Banks’ application of Conforming Credit Criteria.



     “Conforming Credit Criteria” means the credit standards and other criteria customarily
applied by the Banks in the determination of credit limitations for companies similar to the
Borrower.



     “Conforming Date” means the earlier date to occur of (i) the first anniversary of the
Closing Date and (ii) the date upon which both Specified Asset Sales have been consummated.



     “Consolidated Current Assets” means, for any Person at any time, the current assets of
such Person and its Consolidated Subsidiaries at such time, plus, in the case of Borrower, the
Availability at such time, but excluding all restricted cash utilized as collateral to secure the
Acquisition Letters of Credit. For purposes of this definition, any non-cash gains on any Hedge
Transaction for any period of determination shall be excluded from the determination of current
assets of such Person and its Consolidated Subsidiaries.



     “Consolidated Current Liabilities” means, for any Person at any time, the current
liabilities of such Person and its Consolidated Subsidiaries at such time, but, in the case of
Borrower, excluding the current portion (if any) of the outstanding principal balance of the
Revolving Loan and the current portion of deferred Taxes. For purposes of this definition, any
non-cash losses or charges on any Hedge Transaction for any period of determination shall be



6









 







excluded from the determination of current liabilities of such Person and its Consolidated
Subsidiaries.



     “Consolidated EBITDAX” means, for any Person for any period: (a) Consolidated Net
Income of such Person for such period; plus, to the extent deducted in the calculation of
Consolidated Net Income, (b) the sum of (i) income or franchise Taxes paid or accrued; (ii)
Consolidated Net Interest Expense; (iii) amortization, depletion and depreciation expense; (iv) any
non-cash losses or charges on any Hedge Transaction for that period; (v) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business); and (vi) costs and
expenses associated with, and attributable to, oil and gas capital expenditures that are expensed
rather than capitalized; less, to the extent included in the calculation of Consolidated
Net Income, (c) the sum of (i) the income of any Person (other than wholly-owned Subsidiaries of
such Person) unless such income is received by such Person in a cash distribution; (ii) gains or
losses from sales or other dispositions of assets (other than Hydrocarbons produced in the normal
course of business); (iii) any non-cash gains on any Hedge Transaction for that period; (iv)
extraordinary or non-recurring gains, net of extraordinary or non-recurring “cash” losses; and (v)
costs and expenses associated with, and attributable to, oil and gas capital expenditures that are
expensed rather than capitalized. Notwithstanding anything to the contrary contained herein, all
calculations of Consolidated EBITDAX shall be (A) in all respects, acceptable to, and approved by,
Administrative Agent, and (B) for any applicable period of determination during which Borrower has
consummated an acquisition or disposition (to the extent permitted hereunder) of properties or
assets, calculated and determined on a pro forma basis as if such acquisition or disposition was
consummated on the first day of such applicable period.



     “Consolidated Net Debt” means, for any Person for any period, Consolidated Total Debt
(excluding Debt evidenced by the Acquisition Letters of Credit to the extent cash collateralized
pursuant to the Cash Collateral Agreement) of such Person and its Consolidated Subsidiaries
determined on a consolidated basis for such period, less the aggregate amount of cash and cash
equivalents held by such Person and its Consolidated Subsidiaries as of any applicable date of
determination.



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



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



     “Consolidated Subsidiary” or “Consolidated Subsidiaries” means, for any
Person, any Subsidiary or other entity the accounts of which would be consolidated with those of
such Person in its consolidated financial statements; provided, that, for the
purpose of determining Consolidated Current Assets, Consolidated Current Liabilities, Consolidated
EBITDAX, Consolidated Net Income, Consolidated Net Interest Expense and Consolidated Total Debt,
the terms Consolidated Subsidiary and Consolidated Subsidiaries shall be deemed to exclude Bonds
Company, DHS, PGR and CRB.



7









 





     “Consolidated Total Debt” means, for any Person for any period, all Debt of such
Person and its Consolidated Subsidiaries determined on a consolidated basis for such period.



     “Continue,” “Continuation” and “Continued” shall refer to the
continuation pursuant to Section 2.5 hereof and/or Article XIII hereof of a
Eurodollar Loan from one Interest Period to the next Interest Period.



     “Convert,” “Conversion” and “Converted” shall refer to a conversion
pursuant to Section 2.5 and/or Article XIII hereof of all or a portion of one Type
of Revolving Loan into another Type of Revolving Loan.



     “CRB” means CRB Partners, LLC, a Delaware limited liability company.



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



     “Debt” means, for any Person at any time, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) all other indebtedness (including capitalized lease
obligations, other than usual and customary oil and gas leases) of such Person on which interest
charges are customarily paid or accrued, (d) all Guarantees by such Person, (e) the unfunded or
unreimbursed portion of all letters of credit issued for the account of such Person, (f) any amount
owed by such Person representing the deferred purchase price of property or services other than
accounts payable incurred in the ordinary course of business and in accordance with customary trade
terms and which are not more than (90) days past the invoice date, and (g) all liability of such
Person as a general partner of a partnership for obligations of such partnership of the nature
described in (a) through (f) preceding.



     “DEC” means Delta Exploration Company, Inc., a Colorado corporation, which is a
wholly-owned Subsidiary of Borrower.



     “Default” means any condition or event which constitutes an Event of Default or which
with the giving of notice, lapse of time or both would, unless cured or waived, become an Event of
Default.



     “Defaulting Bank” means any Bank that (a) has failed to fund any portion of the
Revolving Loans or participations in Letters of Credit required to be funded by it hereunder
within three Domestic Business Days of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any other Bank any other amount
required to be paid by it hereunder within three Domestic Business Days of the date when due,
unless the subject of a good faith dispute, or (c) has been deemed insolvent or become subject of a
bankruptcy or insolvency proceeding (or whose holding company has been deemed insolvent or become
subject of a bankruptcy or insolvency proceeding).



     “Default Rate” means, in respect of any principal of the Revolving Loan or any other
amount payable by Borrower under any Loan Paper which is not paid when due (whether at stated
maturity, by acceleration, or otherwise), a rate per annum during the period commencing on the due
date until such amount is paid in full equal to the sum of (i) two percent (2%), plus (ii)



8









 







the Applicable Margin for Base Rate Loans, plus (iii) the Base Rate as in effect from time to
time (provided, that if such amount in default is principal of a Eurodollar Borrowing and the due
date is a day other than the last day of an Interest Period therefor, the “Default Rate”
for such principal shall be, for the period from and including the due date and to but excluding
the last day of the Interest period therefor, the sum of (a) two percent (2%), plus (b) the
Applicable Margin for Eurodollar Loans, plus (c) the Eurodollar Rate for such Borrowing for such
Interest Period as provided in Section 2.5 hereof, and thereafter, the rate provided for
above in this definition).



     “Delta Pipeline” means Delta Pipeline, LLC, a Colorado limited liability company.



     “Delta Pipeline Assets” means all of the following assets of Delta Pipeline: the DPL
Tangible Personal Property; all design and engineering plans, specifications and drawings relating
to the DPL Tangible Personal Property; all governmental permits or pending applications for
governmental permits relating to the installation or operation of natural gas gathering equipment
for facilities in the Paradox Basin; all easements and rights of way, or pending applications to
the Bureau of Land Management or other Governmental Authorities, for easements or rights of way
relating to the installation or operation of natural gas gathering equipment or facilities in the
Paradox Basin; and all of Borrower’s rights and obligations under the Facilities Agreement dated as
of January 17, 2007 between Northwest Pipeline GP and Borrower.



     “Delta Risk Management” means Delta Risk Management, LLC, a Colorado limited liability
company.



     “DHS” means DHS Holding Company, a Delaware corporation.



     “Distribution” by any Person, means (a) with respect to any stock issued by such
Person or any partnership, joint venture, limited liability company, membership or other interest
of such Person, the retirement, redemption, purchase, or other acquisition for value of any such
stock or partnership, joint venture, limited liability company, membership or other interest, (b)
the declaration or payment of any dividend or other distribution on or with respect to any stock,
partnership, joint venture, limited liability company, membership or other interest of such Person,
and (c) any other payment by such Person with respect to such stock, partnership, joint venture,
limited liability company, membership or other interest of such Person.



     “Documentation Agent” means U.S. Bank National Association, in its capacity as
Documentation Agent for Banks hereunder or any successor thereto.



     “Domestic Business Day” means any day except a Saturday, Sunday or other day on which
national banks in Chicago, Illinois or Dallas, Texas, are authorized by Law to close.



     “Domestic Lending Office” means, as to each Bank, (a) its office located at its
address identified on Schedule 1.1 hereto as its Domestic Lending Office, (b) its office
located at its address identified on the Register as its Domestic Lending Office, or (c) such other
office as such Bank may hereafter designate as its Domestic Lending Office by notice to Borrower
and Administrative Agent.



9









 





     “DPCA” means DPCA LLC, a Delaware limited liability company.



     “DPL Tangible Personal Property” means all pipes, compression equipment, equipment,
vehicles, furniture, fixtures, and other tangible personal property comprising Delta Pipeline’s
natural gas gathering facilities located in and about the Paradox Basin.



     “Environmental Complaint” means any complaint, summons, citation, notice, directive,
order, claim, litigation or judgment from any federal, state or municipal authority or any other
party against any Credit Party involving (a) a Hazardous Discharge from, onto or about any real
property owned, leased or operated at any time by any Credit Party, (b) a Hazardous Discharge
caused, in whole or in part, by any Credit Party or by any Person acting on behalf of or at the
instruction of any Credit Party, or (c) any violation of any Applicable Environmental Law by any
Credit Party.



     “Equity” means shares of capital stock or a partnership, profits, capital, member or
other equity interest, or options, warrants or any other rights to substitute for or otherwise
acquire the capital stock or a partnership, profits, capital, member or other equity interest of
any Person.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.



     “ERISA Affiliate” means any corporation or trade or business under common control with
any Credit Party as determined under section 4001(a)(14) of ERISA.



     “Eurodollar Business Day” means any Domestic Business Day on which commercial banks
are open for international business (including dealings in dollar deposits) in the applicable
Eurodollar interbank market.



     “Eurodollar Lending Office” means, as to each Bank, (a) its office, branch or
affiliate located at its address identified on Schedule 1.1 hereto as its Eurodollar
Lending Office, (b) its office, branch or affiliate located at its address identified on the
Register as its Eurodollar Lending Office, or (c) such other office, branch or affiliate of such
Bank as it may hereafter designate as its Eurodollar Lending Office by notice to Borrower and
Administrative Agent.



     “Eurodollar Loans” means Revolving Loans that bear interest at rates based upon the
Adjusted Eurodollar Rate.



     “Eurodollar Rate” means, for any Eurodollar Loan for any Interest Period therefor, the
rate appearing on the Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of
such page providing rate quotations comparable to those currently provided on such page of such
page, as determined by the Administrative Agent from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two (2) Eurodollar Business Days prior to the first day of
such Interest Period, and having a maturity equal to such Interest Period; provided,
that, if no such British Bankers’ Association LIBOR rate is available to Administrative
Agent, the applicable Eurodollar Rate for the relevant Interest Period shall instead be the rate
determined by Administrative Agent to be the rate at which JPMorgan or one of its Affiliate banks
offers to place deposits in Dollars with first-class banks in the London interbank market at
approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day



10









 







of such Interest Period, in the appropriate amount of JPMorgan’s relevant Eurodollar Loan and
having a maturity equal to such Interest Period.



     “Events of Default” has the meaning set forth in Section 11.1.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     “Exhibit” refers to an exhibit attached to this Agreement and incorporated herein by
reference, unless specifically provided otherwise.



     “Existing Banks” has the meaning assigned to such term in the recitals hereto.



     “Existing Credit Agreement” has the meaning assigned to such term in the recitals
hereto.



     “Existing Indebtedness” has the meaning assigned to such term in the recitals hereto.



     “Existing Mortgages” means the mortgages, deeds of trust, security agreements,
assignments, pledges, assignments and amendments to mortgages, amendments to mortgages and other
documents, instruments and agreements which establish Liens on certain of Borrower’s and its
Subsidiaries’ oil and gas properties and related assets to secure Borrower’s and its Subsidiaries’
obligations under the Existing Credit Agreement.



     “Existing Reserve Report” means an engineering and economic analysis of the Borrowing
Base Properties prepared effective as of September 1, 2008 by Borrower’s internal engineers.



     “Facility Guaranty” means a Guaranty substantially in the form of Exhibit A
attached hereto to be executed by each Restricted Subsidiary of Borrower in favor of Banks,
pursuant to which such Restricted Subsidiary of Borrower guarantees payment and performance in full
of the Obligations.



     “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business
Day next succeeding such day; provided that (a) if the day for which such rate is
to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (b) if such rate is not so published on such next succeeding
Domestic Business Day, the Federal Funds Rate for any day shall be the average rate charged to
Administrative Agent on such day on such transactions as determined by Administrative Agent.



     “Financial Officer” of any Person means its Chief Financial Officer; provided,
that if no Person serves in such capacity, “Financial Officer” shall mean the
highest ranking executive officer of such Person with responsibility for accounting, financial
reporting, cash management and similar functions.



11









 





     “Fiscal Quarter” means the fiscal quarter of Borrower, ending on the last day of each
March, June, September and December of each year.



     “Fiscal Year” means the fiscal year of Borrower, ending on December 31.



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



     “GAAP” means those generally accepted accounting principles and practices which are
recognized as such by the SEC, the American Institute of Certified Public Accountants acting
through its Accounting Principles Board or by the Financial Accounting Standards Board or through
other appropriate boards or committees thereof and which are consistently applied for all periods
after the Closing Date so as to properly reflect the financial condition, and the results of
operations and changes in financial position, of Borrower and its Consolidated Subsidiaries, except
that any accounting principle or practice (i) required to be changed by the SEC, Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate board or committee
thereof) in order to continue as a generally accepted accounting principle or practice may be so
changed, or (ii) adopted in response to an SEC comment.



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



     “Governmental Authority” means any court or governmental department, commission,
board, bureau, agency, or instrumentality of any nation or of any province, state, commonwealth,
nation, territory, possession, county, parish, or municipality, whether now or hereafter
constituted or existing.



     “Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt
(whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial statement
conditions, by “comfort letter” or other similar undertaking of support or otherwise) or (b)
entered into for the purpose of assuring in any other manner the obligee of such Debt of the
payment thereof or to protect such obligee against loss in respect thereof (in whole or in part),
provided, that the term “Guarantee” shall not include endorsements for
collection or deposit in the ordinary course of business.



     “Hazardous Discharge” means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping of any
Hazardous Substance from or onto any real property owned, leased or operated at any time by any
Credit Party or any real property owned, leased or operated by any other party.



12









 





     “Hazardous Substance” means any pollutant, toxic substance, hazardous waste, compound,
element or chemical that is defined as hazardous, toxic, noxious, dangerous or infectious pursuant
to any Applicable Environmental Law or which is otherwise regulated by any Applicable Environmental
Law or is required to be investigated and/or remediated by or pursuant to any Applicable
Environmental Law.



     “Hedge Agreements” means, collectively, any agreement, instrument, arrangement or
schedule or supplement thereto evidencing any Hedge Transaction.



     “Hedge Transaction” means any financial derivative transaction pursuant to which a
Person hedges risks related to commodity prices, interest rates, currency exchange rates,
securities prices or financial market conditions. Hedge Transactions expressly includes (a)
financial derivative transactions under SFAS 133, (b) financial derivative transactions that do not
qualify as a hedge transaction under SFAS 133 and pursuant to which a Person hedges risks related
to commodity prices, and (c) Oil and Gas Hedge Transactions.



     “Hydrocarbons” means oil, gas, casinghead gas, drip gasolines, natural gasoline,
condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in
conjunction therewith, and all products, by-products and all other substances derived therefrom or
the processing thereof, and all other minerals and substances, including, but not limited to,
sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium,
and any and all other minerals, ores, or substances of value, and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ combustion of coal or
lignite.



     “Immaterial Title Deficiencies” means, with respect to Borrowing Base Properties,
defects or clouds on title, discrepancies in reported net revenue and working interest ownership
percentages and other Liens, defects, discrepancies and similar matters which do not, individually
or in the aggregate, affect Borrowing Base Properties in an amount greater than three percent (3%)
of the Recognized Value of all Borrowing Base Properties.



     “Indirect Subsidiary” has the meaning given such term in the definition of “Subsidiary
Pledge Agreement.”



     “Initial Borrowing Base” means a Borrowing Base in the amount of $295,000,000, which
shall be in effect during the period commencing on the Closing Date and continuing until the first
Redetermination after the Closing Date.



     “Initial Conforming Borrowing Base” means a Conforming Borrowing Base in the amount of
$265,000,000, which shall be in effect during the period commencing on the Closing Date and
continuing until the first Redetermination after the Closing Date.



     “Initial Total Commitment” means a Total Commitment in the amount of $590,000,000,
which shall be in effect during the period commencing on the Closing Date and continuing until the
first Commitment Increase (if any) after the Closing Date.



     “Interest Period” means, with respect to each Eurodollar Borrowing and each
Continuation of Eurodollar Loans and each Conversion of all or part of the Base Rate Loan to



13









 







Eurodollar Loans, the period commencing on the date of such Borrowing, Continuation or
Conversion and ending one (1), two (2), three (3) or, subject to availability, six (6) or twelve
(12) months thereafter, as Borrower may elect in the applicable Request for Borrowing or Notice of
Continuation or Conversion; provided, that:




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




(b) any Interest Period which begins on the last Eurodollar Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall, subject to clause (c)
below, end on the last Eurodollar Business Day of a calendar month;




(c) if any Interest Period includes a date on which any payment of principal of the
Eurodollar Loans which are the subject of such Borrowing, Continuation or Conversion
is required to be made hereunder, but does not end on such date, then (i) the
principal amount of such Eurodollar Loans required to be repaid on such date shall
have an Interest Period ending on such date, and (ii) the remainder of each such
Eurodollar Loans shall have an Interest Period determined as set forth above; and




(d) no Interest Period shall extend past the Termination Date.



     “Investment” means, with respect to any Person, any loan, advance, extension of
credit, capital contribution to, investment in or purchase of the stock or other securities of, or
interests in, any other Person; provided, that, “Investment” shall not
include current customer and trade accounts which are payable in accordance with customary trade
terms.



     “Joint Bookrunner” means each of JPMSI and BMO, in their capacity as joint bookrunner
for the credit facility hereunder or any successor thereto.



     “Joint Lead Arranger” means each of JPMSI and BMO, in their capacity as joint lead
arrangers for the credit facility hereunder or any successor thereto.



     “JPMorgan” means JPMorgan Chase Bank, N.A., a national banking association, in its
capacity as a Bank.



     “JPMSI” means J.P. Morgan Securities Inc.



     “Laws” means all applicable statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of any state, commonwealth, nation, territory, possession, county,
township, parish, municipality or Governmental Authority.



     “Lending Office” means, as to any Bank, its Domestic Lending Office or its Eurodollar
Lending Office, as the context may require.



14









 





     “Letter of Credit Exposure” of any Bank means such Bank’s aggregate participation in
the unfunded portion and the funded but unreimbursed portion of Letters of Credit outstanding at
any time.



     “Letter of Credit Fee” means, with respect to any Letter of Credit issued hereunder, a
fee in an amount equal to the greater of (a) $500, or (b) a percentage of the stated amount of such
Letter of Credit (calculated on a per annum basis based on the stated term of such Letter of
Credit) determined by reference to the ratio of the Outstanding Credit to the Conforming Borrowing
Base in effect on the date such Letter of Credit is issued in accordance with the table below:



	 	 	 
	Ratio of Outstanding Credit to	 	Per Annum Letter of Credit Fee
	Conforming Borrowing Base	 	Percentage
	3 1.10 to 1
	 	3.500%
	3 1 to 1 and < 1.10 to 1
	 	3.000%
	3 .90 to 1 and < 1 to 1
	 	2.500%
	3 .75 to 1 and < .90 to 1
	 	2.000%
	3 .50 to 1 and < .75 to 1
	 	1.750%
	< .50 to 1
	 	1.500%






     “Letter of Credit Fronting Fee” means, with respect to any Letter of Credit issued
hereunder, a fee equal to one eighth of one percent (.125%) per annum of the stated amount of such
Letter of Credit.



     “Letter of Credit Issuer” has the meaning set forth in Section 2.1(b).



     “Letters of Credit” means letters of credit issued for the account of Borrower
pursuant to Section 2.1(b).



     “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest, financing statement or encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Credit Parties shall be deemed to own subject to a Lien any asset
which is acquired or held subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such asset.



     “Loan Papers” means this Agreement, the Notes, each Facility Guaranty which may now or
hereafter be executed, each Borrower Pledge Agreement which may now or hereafter be executed, each
Subsidiary Pledge Agreement which may now or hereafter be executed, the Existing Mortgages
(including all amendments thereto), all Mortgages now or at any time hereafter delivered pursuant
to Section 5.1, all Letters of Credit, the Certificate of Effectiveness and all other
certificates, documents or instruments delivered in connection with this Agreement, as the
foregoing may be amended from time to time.



     “Majority Banks” means, at any time while the Commitments remain in effect, Banks
holding more than fifty percent (50%) of the Total Commitments and, at any time after the
Commitments shall no longer be in effect, Banks holding more than fifty percent (50%) of the



15









 







 Total Commitments in effect immediately prior to the cancellation or other termination thereof,
in any case, after giving effect to any assignments under Section 14.10 from time to
time; provided that the Commitment of, and the portion of the Total Commitments held or
deemed held by, any Defaulting Bank shall be excluded for purposes of making a determination of
Majority Banks.



     “Margin Regulations” means Regulations T, U and X of the Board of Governors of the
Federal Reserve System, as in effect from time to time.



     “Margin Stock” means “margin stock” as defined in Regulation U.



     “Material Adverse Change” means any circumstance or event that has or would reasonably
be expected to have a Material Adverse Effect.



     “Material Adverse Effect” means a material adverse effect on (a) the assets,
liabilities, financial condition or results of operations of Borrower, individually, or the Credit
Parties, taken as a whole, (b) the right or ability of any Credit Party to fully, completely and
timely perform its obligations under the Loan Papers, (c) the validity or enforceability of any
Loan Paper against any Credit Party which is a party thereto, or (d) the validity, perfection or
priority of any material Lien intended to be created under or pursuant to any Loan Paper to secure
the Obligations.



     “Material Agreement” means any material written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such Person is directly or
indirectly bound, or to which any assets of such Person may be subject, which is not cancelable by
such Person upon notice of thirty (30) days or less without liability for further payment other
than nominal penalty and, in the case of the Credit Parties, the term “Material Agreement”
shall expressly include all Permitted Senior Unsecured Debt Documents and all Permitted Senior
Convertible Debt Documents.



     “Material Gas Imbalance” means, with respect to all Gas Balancing Agreements to which
any Credit Party is a party or by which any Mineral Interest owned by any Credit Party is bound, a
net gas imbalance to all such Credit Parties in excess of $500,000 in the aggregate.



     “Maximum Lawful Rate” means, for each Bank, the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest which, at the time in question
would not cause the interest charged on the portion of the Revolving Loan owed to such Bank at such
time to exceed the maximum amount which such Bank would be allowed to contract for, charge, take,
reserve, or receive under applicable Laws after taking into account, to the extent required by
applicable Laws, any and all relevant payments or charges under the Loan Papers. To the extent the
Laws of the State of Texas are applicable for purposes of determining the “Maximum Lawful
Rate,” such term shall mean the “indicated rate ceiling” from time to time in effect under
Chapter 303 of the Texas Finance Code, as amended, substituted for or restated, or, if permitted by
applicable Law and effective upon the giving of the notices required by such Chapter 303 (or
effective upon any other date otherwise specified by applicable Law), the “quarterly ceiling” or
“annualized ceiling” from time to time in effect under such Chapter 303, whichever Administrative
Agent (with the approval of Majority Banks) shall elect to substitute for the “indicated rate
ceiling,” and vice versa, each such substitution to have the effect provided



16









 







in such Chapter 303, and Administrative Agent (with the approval of Majority Banks) shall be entitled to make such election from time to time and one or more times and, without notice to
Borrower, to leave any such substitute rate in effect for subsequent periods in accordance with
such Chapter 303.



     “Maximum Total Commitment Amount” means $600,000,000.



     “Midway Loop Assets” means all of Borrower’s right, title and interest in and to
certain oil and gas leases and related assets owned by Borrower on the Closing Date and located in
the Double A Wells, North Field in Polk and Tyler Counties, Texas.



     “Mineral Interests” means rights, estates, titles, and interests in and to oil and gas
leases and any oil and gas interests, royalty and overriding royalty interest, production payment,
net profits interests, oil and gas fee interests, and other rights therein, including, without
limitation, any reversionary or carried interests relating to the foregoing, together with rights,
titles, and interests created by or arising under the terms of any unitization, communization, and
pooling agreements or arrangements, and all properties, rights and interests covered thereby,
whether arising by contract, by order, or by operation of Laws, which now or hereafter include all
or any part of the foregoing.



     “Monthly Date” means the last day of each calendar month.



     “Mortgages” means all mortgages, deeds of trust, amendments to mortgages, security
agreements, assignments of production, pledge agreements, collateral mortgages, collateral chattel
mortgages, collateral assignments, financing statements and other documents, instruments and
agreements evidencing, creating, perfecting or otherwise establishing the Liens required by
Section 5.1 hereof. All Mortgages shall be in form and substance satisfactory to
Administrative Agent in its sole discretion. The term “Mortgages” shall include, without
limitation, the Existing Mortgages, including, without limitation, any amendments to the Existing
Mortgages.



     “Net Proceeds” means, with respect to any event, (a) the cash proceeds received in
respect of such event including any cash received in respect of any non-cash proceeds (including
any cash payments received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but excluding any
interest payments), but only as and when received, net of (b) the sum of (i) all reasonable fees
and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such
event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to
a sale and leaseback transaction), the amount of all payments required to be made as a result of
such event to repay Debt (other than Revolving Loans) secured by such asset or otherwise subject to
mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) and the amount of any reserves established to fund contingent
liabilities reasonably estimated to be payable, in each case during the year that such event
occurred or the next succeeding year and that are directly attributable to such event (as
determined reasonably and in good faith by a Financial Officer).



17









 





     “Newton Assets” means all of Borrower’s right, title and interest in and to certain
oil and gas leases and related assets owned by Borrower on the Closing Date and located in Newton
County, Texas.



     “Note” means a promissory note of Borrower payable to the order of a Bank, in
substantially the form of Exhibit B hereto, in the amount of such Bank’s Commitment,
evidencing the obligation of Borrower to repay to such Bank its Commitment Percentage of the
Revolving Loan, together with all modifications, extensions, renewals, and rearrangements thereof,
and “Notes” means all of such Notes collectively.



     “Notice of Continuation or Conversion” has the meaning set forth in Section
2.5(c).



     “Obligations” means all present and future indebtedness, obligations and liabilities,
and all renewals and extensions thereof, or any part thereof, of each Credit Party to
Administrative Agent or to any Bank or any Affiliate of any Bank arising pursuant to (a) the Loan
Papers, (b) pursuant to any Hedge Agreement or Hedge Transaction entered into with any Secured
Hedge Provider including any Hedge Agreement in existence prior to the date hereof, but excluding
any additional transactions or confirmations entered into (1) after such Secured Hedge Provider
ceases to be a Bank or an Affiliate of a Bank or (2) after assignment by a Secured Hedge Provider
to another Secured Hedge Provider that is not a Bank or an Affiliate of a Bank and (c) each and any
of the following bank services provided by any Bank or any Affiliate of any Bank to a Credit Party:
(i) commercial credit cards, (ii) stored value cards, (iii) treasury management services
(including, without limitation, controlled disbursement, automated clearinghouse transactions,
return items, overdrafts and interstate depository network services), and all interest accrued on
any of the indebtedness, obligations and liabilities arising pursuant to clauses (a), (b) and/or
(c) above in this definition, and costs, expenses, and attorneys’ fees incurred in the enforcement
or collection of any of the indebtedness, obligations and liabilities arising pursuant to clauses
(a), (b) and/or (c) above in this definition, regardless of whether such indebtedness, obligations
and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several
or joint and several.



     “Oil & Gas Hedge Transaction” means a Hedge Transaction pursuant to which any Person
hedges the price to be received by it for future production of Hydrocarbons.



     “Outstanding Credit” means, on any date, the sum of (a) the aggregate outstanding
Letter of Credit Exposure on such date including the Letter of Credit Exposure attributable to
Letters of Credit to be issued on such date, plus (b) the aggregate outstanding principal balance
of the Revolving Loan on such date, including the amount of any Borrowing to be made on such date.



     “Participant” has the meaning given such term in Section 14.10(b).



     “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any
or all of its functions under ERISA.



     “Permitted Encumbrances” means with respect to any asset:




(a) Liens securing the Obligations;



18









 






(b) minor defects in title which do not secure the payment of money and otherwise
have no material adverse effect on the value or the operation of the subject
property, and for the purposes of this Agreement, a minor defect in title
shall include, but not be limited to, easements, rights-of-way, servitudes, permits,
surface leases and other similar rights in respect of surface operations, and
easements for pipelines, streets, alleys, highways, telephone lines, power lines,
railways and other easements and rights-of-way, on, over or in respect of any of the
properties of any Credit Party that are customarily granted in the oil and gas
industry;




(c) inchoate statutory or operators’ Liens securing obligations for labor, services,
materials and supplies furnished to Mineral Interests which are not more than sixty
(60) days delinquent (except to the extent permitted by Section 8.7);




(d) mechanic’s, materialmen’s, warehouseman’s, journeyman’s and carrier’s Liens and
other similar Liens arising by operation of Law in the ordinary course of business
which are not more than sixty (60) days delinquent (except to the extent permitted
by Section 8.7);




(e) Liens for Taxes or assessments not yet due or not yet delinquent, or, if
delinquent, that are being contested in good faith in the normal course of business
by appropriate action, as permitted by Section 8.7;




(f) lease burdens payable to third parties which are deducted in the calculation of
discounted present value in the Reserve Report including, without limitation, any
royalty, overriding royalty, net profits interest, production payment, carried
interest or reversionary working interest;




(g) Liens, charges and encumbrances upon Borrower’s assets, other than Borrowing
Base Properties, which in the aggregate, do not have a value in excess of
$1,000,000;




(h) until the Acquisition Letters of Credit are cancelled, terminated and/or
released, the Lien encumbering the Collateral (as defined in the Cash Collateral
Agreement) granted by Borrower to JPMorgan Chase Bank, N.A., as collateral agent
under the Cash Collateral Agreement, and not as Administrative Agent, Letter of
Credit Issuer or a Bank, pursuant to the terms of the Cash Collateral Agreement; and




(i) Liens on real estate (but specifically no Borrowing Base Properties, Mineral
Interests or other collateral of Banks or Administrative Agent) securing the Debt
described in Section 9.1(h).



     “Permitted Investments” means (a) readily marketable direct obligations of the United
States of America (or investments in mutual funds or similar funds which invest solely in such
obligations), (b) fully insured demand or time deposits and certificates of deposit with maturities
of one year or less of any commercial bank operating in the United States having capital and
surplus in excess of $500,000,000, (c) commercial paper of a domestic issuer if at the time of



19









 







purchase such paper is rated in one of the two highest ratings categories of Standard and Poor’s
Corporation or Moody’s Investors Service, (d) Investments by any Credit Party in a Subsidiary of
Borrower that has provided a Facility Guaranty and the Equity of which has been pledged to Administrative Agent pursuant to a Borrower Pledge Agreement or a Subsidiary Pledge Agreement,
(e) Investments in Amber, Bonds Company, PGR and CRB existing on the Closing Date and described on
Schedule 9.8 attached hereto, (f) Investments in entities formed solely to acquire surface
properties associated with oil and gas assets of a Credit Party, (g) Investments in DHS in an
aggregate amount outstanding at any time not to exceed $71,000,000 (measured on a cost basis), (h)
provided no Default, Event of Default or Borrowing Base Deficiency exists on the date of any such
Investment, and no Default, Event of Default or Borrowing Base Deficiency would result therefrom,
Investments in Collbran Valley Gas Gathering, LLC in an aggregate amount outstanding at any time
not to exceed $10,000,000 (measured on a cost basis), and (i) other Investments; provided,
that, the aggregate amount of all other Investments made pursuant to this clause (i)
outstanding at any time shall not exceed $25,000,000 (measured on a cost basis).



     “Permitted Senior Convertible Debt” means senior unsecured convertible Debt of
Borrower resulting from the issue of Borrower’s 3.75% Convertible Senior Notes due 2037 in an
outstanding principal amount of not greater than $115,000,000, which Debt is evidenced and governed
by the Permitted Senior Convertible Debt Indenture and related documentation containing customary
terms and conditions, including, without limitation, covenants and events of default for senior
unsecured convertible notes of like tenor and amount. Borrower’s senior unsecured convertible
notes described in this definition shall be convertible into shares of Borrower’s common stock but
shall not be considered capital stock under this Agreement.



     “Permitted Senior Convertible Debt Documents” means, collectively, the Permitted
Senior Convertible Debt Indenture, all other indentures, all convertible notes, all guarantees of
such notes and all other agreements, documents or instruments issued, given, executed and/or
delivered in connection with, evidencing and/or otherwise pertaining to, the Permitted Senior
Convertible Debt, each of which shall be satisfactory to the Administrative Agent in its sole
reasonable discretion.



     “Permitted Senior Convertible Debt Indenture” means that certain Indenture dated as of
April 25, 2007, among the Borrower, the subsidiary guarantors party thereto and U.S. Bank National
Association, as trustee.



     “Permitted Senior Unsecured Debt” means senior unsecured Debt of Borrower resulting
from the issuance by Borrower of its 7% Senior Notes due 2015 in an original aggregate principal
amount of $150,000,000 under that certain Indenture dated as of March 15, 2005 among Borrower, the
Subsidiary guarantors party thereto and U.S. Bank National Association, as Trustee.



     “Permitted Senior Unsecured Debt Documents” means, collectively, all indentures,
promissory notes, Guarantees or other documents or instruments issued or given in connection with,
evidencing and/or otherwise pertaining to, the Permitted Senior Unsecured Debt.



20









 





     “Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a trust or any other entity or organization, including a Government
Authority.



     “PGR” means PGR Partners, LLC, a Colorado limited liability company.



     “Piper” mean Piper Petroleum Company, a Colorado corporation, which is a wholly-owned
Subsidiary of Borrower.



     “Plan” means (i) with respect to a Credit Party, an employee benefit plan within the
meaning of section 3(3) of ERISA, and any other similar plan, policy or arrangement, including an
employment contract, whether formal or informal and whether legally binding or not, under which any
Credit Party has any current or future obligation or liability or under which any present or former
employee of any Credit Party, or such present or former employee’s dependents or beneficiaries, has
any current or future right to benefits resulting from the present or former employee’s employment
relationship with any Credit Party, and (ii) with respect to an ERISA Affiliate, a plan described
in clause (i) preceding if, and only if, such plan is subject to Title IV of ERISA.



     “Prepayment Event” means, at any time on or following the Closing Date but prior to
the Conforming Date, (a) any sale, transfer or other disposition (including pursuant to a sale and
leaseback transaction) of any property or asset of any Credit Party permitted by Section
9.5 (other than (i) dispositions of inventory or obsolete or worn-out property in the ordinary
course of business and (ii) dispositions of the Delta Pipeline Assets), (b) the issuance by the
Borrower of any Equity, or (c) the incurrence by any Credit Party of Debt permitted by Section
9.1(i).



     “Prime Rate” means the per annum rate of interest established from time to time by
JPMorgan or its parent as its prime rate, which rate may not be the lowest rate of interest charged
by Administrative Agent to its customers.



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



     “Proved Nonproducing Mineral Interests” means all Mineral Interests which constitute
proved developed nonproducing reserves.



     “Proved Producing Mineral Interests” means all Mineral Interests which constitute
proved developed producing reserves.



     “Proved Undeveloped Mineral Interests” means all Mineral Interests which constitute
proved undeveloped reserves.



     “Purchasers” has the meaning given such term in Section 14.10(c).



     “Quarterly Date” means the last day of each March, June, September and December.



     “Recognized Value” means, with respect to all Proved Mineral Interests, the portion of
the Borrowing Base or Conforming Borrowing Base which JPMorgan attributes to such Proved Mineral
Interests for purposes of the most recent redetermination of the Borrowing Base or



21









 







Conforming Borrowing Base pursuant to Article IV hereof (or for purposes of determining the Initial
Borrowing Base and the Initial Conforming Borrowing Base in the event no such redetermination has
occurred), based upon the discounted present value of the estimated net cash flow to be realized
from the production of Hydrocarbons from all such Proved Mineral Interests.



     “Redetermination” means any Scheduled Redetermination, Special Redetermination, or
other redetermination of the Borrowing Base and the Conforming Borrowing Base pursuant to
Section 4.4. Notwithstanding anything to the contrary contained herein, no redetermination
of the Borrowing Base or Conforming Borrowing Base pursuant to Section 4.4 shall be deemed
or construed to be a Special Redetermination.



     “Redetermination Date” means (a) with respect to any Scheduled Redetermination,
February 1, 2009 and thereafter, each May 1 and November 1, commencing May 1, 2009, (b) with
respect to any Special Redetermination, the first day of the first month which is not less than
twenty (20) Domestic Business Days following the date of a request for a Special Redetermination,
and (c) with respect to any redetermination of the Borrowing Base and the Conforming Borrowing Base
pursuant to Section 4.4, the date of the consummation of any applicable Asset Disposition.
The Closing Date shall also constitute a Redetermination Date for purposes of this Agreement.



     “Register” has the meaning given such term in Section 14.10(c)(iv).



     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 221, as in effect from time to time.



     “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 221, as in effect from time to time.



     “Request for Borrowing” has the meaning set forth in Section 2.2(a).



     “Request for Letter of Credit” has the meaning set forth in Section 2.2(a).



     “Required Banks” means, at any time while the Commitments remain in effect, Banks
holding not less than sixty-six and two-thirds percent (66-2/3%) of the Total Commitments and, at
any time after the Commitments shall no longer be in effect, Banks holding not less than sixty-six
and two-thirds percent (66-2/3%) of the Total Commitments in effect immediately prior to the
cancellation or other termination thereof, in any case, after giving effect to any assignments
under Section 14.10 from time to time; provided that the Commitment of, and the
portion of the Total Commitments held or deemed held by, any Defaulting Bank shall be excluded for
purposes of making a determination of Required Banks.



     “Required Reserve Value” means Proved Mineral Interests that have a Recognized Value
of not less than eighty percent (80%) or, at any time when the Borrowing Base exceeds the
Conforming Borrowing Base, ninety percent (90%) of the Recognized Value of all Proved Mineral
Interests held by Borrower and its Subsidiaries and included in the Borrowing Base or Conforming
Borrowing Base.



22









 





     “Reserve Report” means an unsuperseded engineering analysis of the Mineral Interests
owned by Borrower, in form and substance reasonably acceptable to Administrative Agent, prepared in
accordance with customary and prudent practices in the petroleum engineering industry and Financial
Accounting Standards Board Statement 69. Each Reserve Report required to be delivered by March 15
of each year pursuant to Section 4.1 shall be prepared by the Approved Petroleum Engineer.
Each other Reserve Report shall be prepared by either (i) the Approved Petroleum Engineer, or (ii) Borrower’s in-house staff, and shall include a detailed
reconciliation from the most recently delivered Reserve Report prepared by the Approved Petroleum
Engineer. Notwithstanding the foregoing, in connection with any Special Redetermination requested
by Borrower, the Reserve Report shall be in form and scope mutually acceptable to Borrower and
Administrative Agent. Until superseded, the Existing Reserve Report shall be considered the
Reserve Report.



     “Reserve Requirement” means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or emergency reserves) are
required to be maintained under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against
in the case of Eurodollar Loans, “Eurocurrency liabilities” (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the Adjusted Eurodollar Rate is to be
determined, or (ii) any category of extensions of credit or other assets which include Eurodollar
Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective
date of any change in the Reserve Requirement.



     “Restricted Payment” means, with respect to any Person, (a) any Distribution by such
Person, (b) any capital contribution, loan or advance (other than a Permitted Investment) by any
Credit Party to any Unrestricted Subsidiary, (c) the issuance of a Guarantee by any Credit Party
with respect to any Debt or other obligation of any Unrestricted Subsidiary, other than Guarantees
of (i) Permitted Senior Unsecured Debt permitted by Section 9.1(d) hereof, and (ii)
Permitted Senior Convertible Debt permitted by Section 9.1(f) hereof, (d) the retirement,
redemption, defeasance, repurchase or prepayment prior to scheduled maturity by such Person or any
Affiliate of such Person of any Debt of such Person, (e) the retirement, redemption or payment by
Borrower or any Affiliate of Borrower of any part of the principal of the Permitted Senior
Unsecured Debt at any time prior to the termination of all Commitments and the payment and
performance in full of the Obligations (other than inchoate indemnification obligations arising
under Section 14.3 hereof), or (f) the retirement, redemption or payment by Borrower or any
Affiliate of Borrower of any part of the principal of the Permitted Senior Convertible Debt at any
time prior to the termination of all Commitments and the payment and performance in full of the
Obligations (other than inchoate indemnification obligations arising under Section 14.3
hereof).



     “Restricted Subsidiary” means, as of the Closing Date, Castle, DEC, DPCA, Delta
Pipeline, Delta Risk Management and Piper, and shall also mean any other Subsidiary of Borrower
which Borrower thereafter designates as a “Restricted Subsidiary;” provided, that,
no Subsidiary of Borrower will be a Restricted Subsidiary unless (a) one hundred percent (100%) of
its issued and outstanding Equity has been pledged to Administrative Agent to secure the



23









 







Obligations pursuant to a Borrower Pledge Agreement or a Subsidiary Pledge Agreement, and (b) it
has executed a Facility Guaranty.



     “Revolving Loan” means the revolving credit loan in an amount outstanding at any time
not to exceed the lesser of (i) the Borrowing Base then in effect, and (ii) the amount of (a) the
Total Commitment then in effect less (b) the amount of the Letter Credit Exposure then outstanding to be made by Banks to Borrower in accordance with Section 2.1 hereof.
The Revolving Loan may be comprised of the Base Rate Loan and one or more Eurodollar Loans as
Borrower may select in a Request for Borrowing or a Notice of Continuation or Conversion.



     “Rolling Period” means any period of four (4) consecutive Fiscal Quarters ending on
the last day of any applicable Fiscal Quarter.



     “Schedule” means a “schedule” attached to this Agreement and incorporated herein by
reference, unless specifically indicated otherwise.



     “Scheduled Redetermination” means any Redetermination of the Borrowing Base and the
Conforming Borrowing Base pursuant to Section 4.2.



     “SEC” means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.



     “Section” refers to a “section” or “subsection” of this Agreement unless specifically
indicated otherwise.



     “Secured Hedge Provider” means any (a) Person that is a party to a Hedge Agreement
with the Borrower or any of its Restricted Subsidiaries that entered into such Hedge Agreement
before or while such Person was a Bank or an Affiliate of a Bank, whether or not such Person at any
time ceases to be a Bank or an Affiliate of a Bank, as the case may be, or (b) assignee of any
Person described in clause (a) above so long as such assignee is a Bank or an Affiliate of a Bank.



     “Special Redetermination” means any Redetermination of the Borrowing Base and the
Conforming Borrowing Base pursuant to Section 4.3.



     “Specified Asset Sales” means the sale, assignment, lease, license, transfer, exchange
or other disposition by Borrower or any Restricted Subsidiary of all or substantially all of its
right, title and interest in the Midway Loop Assets and/or the Newton Assets.



     “Subsidiary” means, for any Person, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions (including that of a general
partner) are at the time directly or indirectly owned, collectively, by such Person and any
Subsidiaries of such Person. The term “Subsidiary” shall include Subsidiaries of
Subsidiaries (and so on).



     “Subsidiary Pledge Agreement” means a Pledge Agreement substantially in the form of
Exhibit D attached hereto (with applicable conforming changes) to be executed by each
existing and/or future Restricted Subsidiary of Borrower to the extent such Restricted Subsidiary
owns any outstanding Equity of any other Restricted Subsidiary of Borrower (for purposes of this



24









 







definition and Section 5.1(d) hereof, such Restricted Subsidiary is referred to herein and
therein as an “Indirect Restricted Subsidiary”), pursuant to which such Indirect Restricted
Subsidiary shall pledge to Administrative Agent, for the ratable benefit of Banks, all of the
issued and outstanding Equity owned by such Indirect Restricted Subsidiary of each Restricted
Subsidiary of such Indirect Restricted Subsidiary described therein to secure the Obligations.



     “Syndication Agent” means Bank of Montreal in its capacity as Syndication Agent for
Banks hereunder or any successor thereto.



     “Taxes” means all taxes, assessments, filing or other fees, levies, imposts, duties,
deductions, withholdings, stamp taxes, capital transaction taxes, foreign exchange taxes or other
charges, or other charges of any nature whatsoever, from time to time or at any time imposed by Law
or any Governmental Authority. “Tax” means any one of the foregoing.



     “Termination Date” means November 3, 2011.



     “Total Commitment” means the Commitments of all Banks in an initial aggregate amount
of $590,000,000, as such amount may be reduced or increased from time to time pursuant to the terms
hereof; provided, that the Total Commitment shall never exceed the Maximum Total
Commitment Amount.



     “Transferee” has the meaning given such term in Section 14.10(d).



     “Type” means, with reference to a Revolving Loan, the characterization of such
Revolving Loan as the Base Rate Loan or a Eurodollar Loan based on the method by which the accrual
of interest on such Revolving Loan is calculated.



     “Unrestricted Subsidiary” means any Subsidiary of Borrower which is not a Restricted
Subsidiary and shall include, as of the Closing Date, Amber, DHS, Bonds Company, CRB and PGR.



     Section 1.2 Accounting Terms and Determinations. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder shall be expressed
in U.S. dollars and shall be prepared in accordance with GAAP, applied on a basis consistent with
the most recent audited consolidated financial statements of Borrower and its Consolidated
Subsidiaries delivered to Banks except for changes concurred in by Borrower’s independent certified
public accountants and which are disclosed to Administrative Agent on the next date on which
financial statements are required to be delivered to Banks pursuant to Section 8.1(a) or
Section 8.1(b); provided, that, unless Majority Banks shall otherwise agree
in writing, no such change shall modify or affect the manner in which compliance with the covenants
contained in Article X are computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.



     Section 1.3 Petroleum Terms. As used herein, the terms “proved reserves,” “proved
developed reserves,” “proved developed producing reserves,” “proved developed nonproducing
reserves,” and “proved undeveloped reserves” have the meaning given such



25









 







terms from time to time and at the time in question by the Society of Petroleum Engineers of the American Institute of
Mining Engineers.



     Section 1.4 Money. Unless expressly stipulated otherwise, all references herein to
“dollars,” “money,” “funds,” “payments,” “prepayments” or similar financial or monetary terms, are
references to currency of the United States of America.



ARTICLE II

THE CREDIT




     Section 2.1 Commitments.



          (a) Each Bank severally agrees, subject to Section 2.1(c), Section 6.1 and
Section 6.2 and the other terms and conditions set forth in this Agreement, to lend to
Borrower from time to time prior to the Termination Date amounts requested by Borrower not to
exceed in the aggregate at any one time outstanding, the amount of such Bank’s Commitment reduced
by an amount equal to the sum of (i) such Bank’s Letter of Credit Exposure plus (ii) such Bank’s
Commitment Percentage of the outstanding principal balance of the Revolving Loan. Each Borrowing
shall be (A) in an aggregate principal amount of $1,000,000 or any larger integral multiple of
$100,000 (except that any Base Rate Borrowing may be in an amount equal to the Availability at such
time), and (B) made from the Banks ratably in accordance with their respective Commitment
Percentages. Subject to the foregoing limitations and the other provisions of this Agreement,
prior to the Termination Date Borrower may borrow under this Section 2.1(a), repay amounts
borrowed and request new Borrowings to be made under this Section 2.1(a). The Total
Commitment as of the Closing Date is the Initial Total Commitment.



          (b) Administrative Agent, or such Bank designated by Administrative Agent which (without
obligation to do so) consents to the same (“Letter of Credit Issuer”) will, from time to
time prior to the date which is five (5) Domestic Business Days prior to the Termination Date, upon
request by Borrower, issue Letters of Credit for the account of Borrower or any Restricted
Subsidiary designated by Borrower, so long as (i) the sum of (A) the total Letter of Credit
Exposure then existing, and (B) the amount of the requested Letter of Credit does not exceed
$30,000,000, and (ii) Borrower would be entitled to a Borrowing under Section 2.1(a) and
Section 2.1(c) in the amount of the requested Letter of Credit. Not less than three (3)
Domestic Business Days prior to the requested date of issuance of any such Letter of Credit,
Borrower (and any Restricted Subsidiary for whose account such Letter of Credit is being issued)
shall execute and deliver to Letter of Credit Issuer, Letter of Credit Issuer’s customary letter of
credit application. Each Letter of Credit shall be in the minimum amount of $10,000 and shall be
in form and substance acceptable to Letter of Credit Issuer. No Letter of Credit shall have an
expiration date later than the earlier of (1) the Termination Date, or (2) one (1) year from the
date of issuance (or, in the case of any renewal or extension thereof, one (1) year after such
renewal or extension). Upon the date of issuance of a Letter of Credit, Letter of Credit Issuer
shall be deemed to have sold to each other Bank, and each other Bank shall be deemed to have
unconditionally and irrevocably purchased from Letter of Credit Issuer, a non recourse
participation in the related Letter of Credit and Letter of Credit Exposure equal to such Bank’s
Commitment Percentage of such Letter of Credit and Letter of Credit Exposure. Upon request of any
Bank, but not less often than quarterly, Administrative Agent shall provide notice to each



26









 







Bank by telephone, teletransmission or telex setting forth each Letter of Credit issued and outstanding
pursuant to the terms hereof and specifying the beneficiary and expiration date of each such Letter
of Credit, each Bank’s percentage of each such Letter of Credit and the actual dollar amount of
each Bank’s participation held by Letter of Credit Issuer thereof for such Bank’s account and risk.
At the time of issuance of each Letter of Credit, Borrower shall pay to Administrative Agent in
respect of such Letter of Credit (a) the applicable Letter of Credit Fee, and (b) the applicable
Letter of Credit Fronting Fee. Administrative Agent shall distribute the Letter of Credit Fee payable upon the issuance of each Letter of Credit to Banks in accordance
with their respective Commitment Percentages, and Administrative Agent shall distribute the Letter
of Credit Fronting Fee to Letter of Credit Issuer for its own account. Any (y) material amendment
or modification, or (z) renewal or extension of any Letter of Credit shall be deemed to be the
issuance of a new Letter of Credit for purposes of this Section 2.1(b). Notwithstanding
anything to the contrary contained herein, (i) Borrower shall pay to Letter of Credit Issuer in
connection with the issuance of each Letter of Credit and/or any amendment or modification of any
nature to any existing Letter of Credit, Letter of Credit Issuer’s usual and customary fees for the
issuance of, amendments or modifications to, and processing of, Letters of Credit and (ii) the
Letter of Credit Issuer shall not at any time be obligated to issue, amend, renew or extend any
Letter of Credit if any Bank is at such time a Defaulting Bank hereunder, unless the Letter of
Credit Issuer has entered into satisfactory arrangements with the Borrower or such Bank to
eliminate Letter of Credit Issuer’s risk with respect to such Bank.



     Immediately upon the occurrence of an Event of Default and the acceleration of the Obligations
hereunder, and also on the date which is five (5) Domestic Business Days prior to the Termination
Date, Borrower shall deposit with Administrative Agent cash in such amounts as Administrative Agent
may request, up to a maximum amount equal to the aggregate existing Letter of Credit Exposure of
all Banks; provided, that, in the case of any of the Events of Default specified in
Section 11.1(g) or Section 11.1(h), an amount equal to the aggregate existing
Letter of Credit Exposure of all Banks shall be due and payable without any notice to Borrower or
any other act by Administrative Agent or any Bank. Any amounts so deposited shall be held by
Administrative Agent for the ratable benefit of all Banks as security for the outstanding Letter of
Credit Exposure and the other Obligations, and Borrower will, in connection therewith, execute and
deliver such security agreements in form and substance satisfactory to Administrative Agent which
Administrative Agent may, in its discretion, require. As drafts or demands for payment are
presented under any Letter of Credit, Administrative Agent shall apply such cash to satisfy such
drafts or demands. When all Letters of Credit have expired and the Obligations have been repaid in
full (and no Bank has any obligation to lend or issue Letters of Credit hereunder) or such Event of
Default has been cured to the satisfaction of Majority Banks, Administrative Agent shall release to
Borrower any remaining cash deposited under this Section 2.1(b). Whenever Borrower is
required to make deposits under this Section 2.1(b) and fails to do so on the day such
deposit is due, Administrative Agent or any Bank may, without notice to Borrower, make such deposit
(whether by application of proceeds of any collateral for the Obligations, by transfers from other
accounts maintained with any Bank or otherwise) using any funds then available to any Bank of any
Credit Party, any guarantor or any other party liable for repayment of the Obligations.



     Notwithstanding anything to the contrary contained herein, Borrower hereby agrees to reimburse
each Letter of Credit Issuer immediately upon demand by such Letter of Credit Issuer,



27









 







and inimmediately available funds, for any payment or disbursement made by such Letter of Credit Issuer
under any Letter of Credit issued by it. Payment shall be made by Borrower with interest on the
amount so paid or disbursed by Letter of Credit Issuer from and including the date payment is made
under any Letter of Credit to and including the date of payment, at the lesser of (i) the Maximum
Lawful Rate, or (ii) the Default Rate. The obligations of Borrower under this paragraph will
continue until all Letters of Credit have expired and all reimbursement obligations with respect thereto have been paid in full by Borrower and until all other Obligations shall
have been paid in full.



     Borrower shall be obligated to reimburse Letter of Credit Issuer upon demand for all amounts
paid under Letters of Credit as set forth in the immediately preceding paragraph hereof;
provided, however, if Borrower for any reason fails to reimburse Letter of Credit
Issuer in full upon demand, Banks shall reimburse Letter of Credit Issuer in accordance with each
Banks’ Commitment Percentage for amounts due and unpaid from Borrower as set forth hereinbelow;
provided, however, that no such reimbursement made by Banks shall discharge Borrower’s obligations
to reimburse Letter of Credit Issuer. All reimbursement amounts payable by any Bank under this
Section 2.1(b) shall include interest thereon at the Federal Funds Rate, from the date of
the payment of such amounts by Letter of Credit Issuer to the date of reimbursement by such Bank.
No Bank shall be liable for the performance or nonperformance of the obligations of any other Bank
under this paragraph. The reimbursement obligations of Banks under this paragraph shall continue
after the Termination Date and shall survive termination of this Agreement and the other Loan
Papers.



     Borrower shall indemnify and hold Administrative Agent, Letter of Credit Issuer and each Bank,
and their respective officers, directors, representatives and employees harmless from loss for any
claim, demand or liability which may be asserted against any or such indemnified party in
connection with actions taken under Letters of Credit or in connection therewith (including losses
resulting from the negligence of any or such indemnified party), and shall pay each indemnified
party for reasonable fees of attorneys and legal costs paid or incurred by each indemnified party
in connection with any matter related to Letters of Credit, except for losses and liabilities
incurred as a direct result of the gross negligence or willful misconduct of such indemnified
party, IT BEING THE EXPRESS INTENTION OF THE PARTIES THAT EACH INDEMNIFIED PARTY SHALL BE
INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE. If Borrower for any reason fails
to indemnify or pay Administrative Agent or Letter of Credit Issuer as set forth herein in full,
Banks shall indemnify and pay such indemnified party upon demand, in accordance with each Bank’s
Commitment Percentage of such amounts due and unpaid from Borrower; provided,
however, that, no such payment made by Banks shall discharge Borrower’s obligation
to indemnify or pay such indemnified party in accordance with the terms hereof. The provisions of
this paragraph shall survive the termination of this Agreement.



     Neither Administrative Agent nor any other Letter of Credit Issuer makes any representation or
warranty, nor assumes any responsibility with respect to the validity, legality, sufficiency or
enforceability of any letter of credit application executed and delivered in connection with any
Letter of Credit issued hereunder or any document relative thereto or to the collectibility
thereunder. Neither Administrative Agent nor any other Letter of Credit Issuer assumes any
responsibility for the financial condition of Borrower or for the performance of any



28









 







obligation of Borrower. Administrative Agent and each other Letter of Credit Issuer may use its discretion with
respect to exercising or refraining from exercising any rights, or taking or refraining from taking
any action which may be vested in it or which it may be entitled to take or assert with respect to
any Letter of Credit or any letter of credit application. FURTHERMORE, EXCEPT AS SET FORTH HEREIN,
NEITHER ADMINISTRATIVE AGENT NOR ANY OTHER LETTER OF CREDIT ISSUER SHALL BE UNDER ANY LIABILITY TO
ANY BANK, WITH RESPECT TO ANYTHING ADMINISTRATIVE AGENT OR ANY SUCH LETTER OF CREDIT ISSUER MAY DO
OR REFRAIN FROM DOING IN THE EXERCISE OF ITS JUDGMENT, THE SOLE LIABILITY AND RESPONSIBILITY OF
ADMINISTRATIVE AGENT AND SUCH LETTER OF CREDIT ISSUER BEING TO HANDLE EACH BANK’S SHARE ON AS
FAVORABLE A BASIS AS ADMINISTRATIVE AGENT OR SUCH LETTER OF CREDIT ISSUER HANDLES ITS OWN SHARE.
NEITHER ADMINISTRATIVE AGENT NOR ANY OTHER LETTER OF CREDIT ISSUER SHALL HAVE ANY DUTIES OR
RESPONSIBILITIES EXCEPT THOSE EXPRESSLY SET FORTH HEREIN AND THOSE DUTIES AND LIABILITIES SHALL BE
SUBJECT TO THE LIMITATIONS AND QUALIFICATIONS SET FORTH HEREIN. FURTHERMORE, NEITHER
ADMINISTRATIVE AGENT, ANY LETTER OF CREDIT ISSUER, NOR ANY OF THEIR DIRECTORS, OFFICERS, OR
EMPLOYEES SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED (WHETHER OR NOT SUCH ACTION TAKEN OR
OMITTED IS EXPRESSLY SET FORTH HEREIN) UNDER OR IN CONNECTION HEREWITH OR UNDER ANY OTHER
INSTRUMENT OR DOCUMENT IN CONNECTION HEREWITH, EXCEPT FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Neither Administrative Agent nor any other Letter of Credit Issuer shall incur any liability to any
Bank, Borrower, or any Affiliate of any Bank or Borrower, in acting upon any notice, document,
order, consent, certificate, warrant or other instrument reasonably believed by Administrative
Agent or such Letter of Credit Issuer to be genuine or authentic and to be signed by the proper
party.



          (c) No Bank will be obligated to lend to Borrower hereunder or incur Letter of Credit
Exposure, and Borrower shall not be entitled to borrow hereunder or obtain Letters of Credit
hereunder, in an amount which would cause (i) such Bank’s Commitment Percentage of the Outstanding
Credit to exceed its Commitment Percentage of the existing Borrowing Base, or (ii) the Outstanding
Credit to exceed the Borrowing Base then in effect. No Bank shall be obligated to fund Borrowings
hereunder and Borrower shall not be entitled to Borrowings hereunder during the existence of a
Borrowing Base Deficiency. Nothing in this Section 2.1(c) shall be deemed to limit any
Bank’s obligation to reimburse any Letter of Credit Issuer with respect to its participation in
Letters of Credit as a result of the drawing under any Letter of Credit pursuant to Section
2.1(b).




     Section 2.2 Method of Borrowing.



          (a) In order to request any Borrowing under Section 2.1, Borrower shall hand deliver,
telex or telecopy to Administrative Agent a duly completed Request for Borrowing (herein so called)
prior to 11:00 a.m. (Chicago, Illinois time), (i) on the Borrowing Date specified for a proposed
Base Rate Borrowing, and (ii) at least three (3) Eurodollar Business Days before the Borrowing Date
of a proposed Eurodollar Borrowing. Each such Request for Borrowing shall be substantially in the
form of Exhibit E attached hereto, and shall specify:




29









 









          (i) the Borrowing Date of such Borrowing, which shall be a Domestic Business Day in the
case of a Base Rate Borrowing or a Eurodollar Business Day in the case of a Eurodollar
Borrowing;




          (ii) the aggregate amount of such Borrowing;




          (iii) whether such Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing;
and




          (iv) in the case of a Eurodollar Borrowing, the duration of the Interest Period
applicable thereto, subject to the provisions of the definition of Interest Period.



          (b) Upon receipt of a Request for Borrowing, Administrative Agent shall promptly notify each
Bank of the contents thereof and the amount of the Borrowing to be loaned by such Bank pursuant
thereto, and such Request for Borrowing shall not thereafter be revocable by Borrower.



          (c) Not later than 12:00 noon (Chicago, Illinois time) on the date of each Borrowing, each
Bank shall make available its Commitment Percentage of such Borrowing, in Federal or other funds
immediately available in Chicago, Illinois to Administrative Agent at its address set forth on
Schedule 1.1 hereto. Unless Administrative Agent determines that any applicable condition
specified in Section 6.2 has not been satisfied, Administrative Agent will make the funds
so received from Banks available to Borrower at Administrative Agent’s aforesaid address.



     Section 2.3 Method of Requesting Letters of Credit.



          (a) In order to request any Letter of Credit hereunder, Borrower shall hand deliver, telex or
telecopy to Administrative Agent a duly completed Request for Letter of Credit (herein so called)
prior to 12:00 noon (Chicago, Illinois time) at least three (3) Domestic Business Days before the
date specified for issuance of such Letter of Credit. Each Request for Letter of Credit shall be
substantially in the form of Exhibit F attached hereto, shall be accompanied by the
applicable Letter of Credit Issuer’s duly completed and executed letter of credit application and
agreement and shall specify:




          (i) the requested date for issuance of such Letter of Credit;




          (ii) the terms of such requested Letter of Credit, including the name and address of
the beneficiary, the stated amount, the expiration date and the conditions under which
drafts under such Letter of Credit are to be available; and




          (iii) the purpose of such Letter of Credit.



          (b) Upon receipt of a Request for Letter of Credit, Administrative Agent shall promptly notify
each Bank and the proposed Letter of Credit Issuer of the contents thereof, including the amount of
the requested Letter of Credit, and such Request for Letter of Credit shall not thereafter be
revocable by Borrower.



30









 





          (c) No later than 12:00 noon (Chicago, Illinois time) on the date each Letter of Credit is
requested to be issued, unless Administrative Agent or the applicable Letter of Credit Issuer
determines that any applicable condition precedent set forth in Section 6.2 hereof has not
been satisfied, Administrative Agent or such other applicable Letter of Credit Issuer will issue
and deliver such Letter of Credit pursuant to the instructions of Borrower.



     Section 2.4 Notes. Any Bank may request that its Commitment Percentage of the
Revolving Loan be evidenced by a single Note payable to the order of such Bank in an amount equal
to such Bank’s Commitment.



     Section 2.5 Interest Rates; Payments.



          (a) The principal amount of the Base Rate Loan outstanding from day to day shall bear interest
at a rate per annum equal to the sum of (i) the Applicable Margin plus (ii) the applicable Base
Rate in effect from day to day; provided that in no event shall the rate charged hereunder or under
the Notes exceed the Maximum Lawful Rate. Interest on the Base Rate Loan shall be payable as it
accrues on each Quarterly Date, and on the Termination Date.



          (b) The principal amount of each Eurodollar Loan outstanding from day to day shall bear
interest for the Interest Period applicable thereto at a rate per annum equal to the sum of (i) the
Applicable Margin plus (ii) the applicable Adjusted Eurodollar
Rate; provided that in no event
shall the rate charged hereunder or under the Notes exceed the Maximum Lawful Rate. Interest on
any portion of the principal of each Eurodollar Loan subject to an Interest Period of one (1), two
(2) or three (3) months shall be payable on the last day of the Interest Period applicable thereto.
Interest on any portion of the principal of each Eurodollar Loan subject to an Interest Period of
six (6) or twelve (12) months shall be payable on the last day of the Interest Period applicable
thereto and on each Quarterly Date.



          (c) So long as no Default or Event of Default shall be continuing, subject to the provisions
of this Section 2.5, Borrower shall have the option of having all or any portion of the
principal outstanding under the Revolving Loan be a Base Rate Loan or one (1) or more Eurodollar
Loans, which shall bear interest at rates determined by reference to the Base Rate and the Adjusted
Eurodollar Rate, respectively; provided, that each Eurodollar Loan shall be in a
minimum amount of $2,000,000 and shall be in an amount which is an integral multiple of $500,000.
Prior to the termination of each Interest Period with respect to each Eurodollar Loan, Borrower
shall give written notice (a “Notice of Continuation or Conversion”) in the form of
Exhibit G attached hereto to Administrative Agent of the Type of Loan which shall be
applicable to the principal of such Eurodollar Loan upon the expiration of such Interest Period.
Such Notice of Continuation or Conversion shall be given to Administrative Agent at least one (1)
Domestic Business Day, in the case of a Base Rate Loan selection and three (3) Eurodollar Business
Days, in the case of a Eurodollar Loan selection, prior to the termination of the Interest Period
then expiring. If Borrower shall specify a Eurodollar Loan, such Notice of Continuation or
Conversion shall also specify the length of the succeeding Interest Period (subject to the
provisions of the definition of such term) selected by Borrower. Each Notice of Continuation or
Conversion shall be irrevocable and effective upon notification thereof to Administrative Agent.
If the required Notice of Continuation or Conversion shall not have been timely received by
Administrative Agent, Borrower shall be deemed to have elected that the principal of the



31









 







Eurodollar Loan subject to the Interest Period then expiring be Converted to the Base Rate Loan upon the
expiration of such Interest Period and Borrower will be deemed to have given Administrative Agent
notice of such election. Subject to the limitations set forth in this Section 2.5(c) on
the amount and number of Eurodollar Loans, Borrower shall have the right to Convert all or any part
of the Base Rate Loan to a Eurodollar Loan by giving Administrative Agent a Notice of Continuation
or Conversion of such election at least three (3) Eurodollar Business Days prior to the date on which Borrower elects to make such Conversion (a “Conversion
Date”). The Conversion Date selected by Borrower shall be a Eurodollar Business Day.
Notwithstanding anything in this Section 2.5 to the contrary, no portion of the principal
of the Base Rate Loan may be Converted to a Eurodollar Loan and no Eurodollar Loan may be Continued
as such when any Default or Event of Default has occurred and is continuing, but each such
Eurodollar Loan shall be automatically Converted to the Base Rate Loan on the last day of each
applicable Interest Period. Borrower shall not be permitted to have more than five (5) Eurodollar
Loans in effect at any time.



          (d) Notwithstanding anything to the contrary set forth in Section 2.5(a) or
Section 2.5(b) above, after the occurrence of an Event of Default, interest shall accrue on
the outstanding principal balance of the Revolving Loan, and to the extent permitted by Law, on the
past due but unpaid interest on the Revolving Loan and all other past due Obligations from the
period from and including the occurrence of such Event of Default to but excluding the date the
same is remedied at a rate per annum equal to the lesser of (i) the Default Rate, and (ii) the
Maximum Lawful Rate.



          (e) Administrative Agent shall determine each interest rate applicable to the Revolving Loan
in accordance with the terms hereof. Administrative Agent shall promptly notify Borrower and Banks
by telex, telecopy or cable of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.



          (f) Notwithstanding the foregoing, if at any time the rate of interest calculated with
reference to the Base Rate or the Eurodollar Rate hereunder (the “contract rate”) is
limited to the Maximum Lawful Rate, any subsequent reductions in the contract rate shall not reduce
the rate of interest on the Revolving Loan below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have accrued if the contract rate had at
all times been in effect. In the event that at maturity (stated or by acceleration), or at final
payment of any Revolving Loan, the total amount of interest paid or accrued on such Revolving Loan
is less than the amount of interest which would have accrued if the contract rate had at all times
been in effect with respect thereto, then at such time, to the extent permitted by law, Borrower
shall pay to Bank that made such Revolving Loan an amount equal to the difference between (i) the
lesser of the amount of interest which would have accrued if the contract rate had at all times
been in effect and the amount of interest which would have accrued if the Maximum Lawful Rate had
at all times been in effect, and (ii) the amount of interest actually paid on such Revolving Loan.



          (g) Interest payable hereunder on each Eurodollar Loan shall be computed based on the number
of actual days elapsed assuming that each calendar year consisted of 360 days. Interest payable
hereunder on the Base Rate Loan shall be computed based on the actual



32









 







number of days elapsed assuming that each calendar year consisted of 365 days (or 366 days in a leap year).



     Section 2.6 Mandatory Prepayments.



          (a) Upon the occurrence of any Borrowing Base Deficiency, Borrower shall make the mandatory
prepayments of the Revolving Loan required by Section 4.5 hereof.



          (b) At any time that Borrower becomes obligated to prepay all or part of the Permitted Senior
Unsecured Debt or Permitted Senior Convertible Debt, Borrower shall, prior to any repayment of the
Permitted Senior Unsecured Debt and/or Permitted Senior Convertible Debt, prepay the Revolving
Loans and reduce the Commitments in full.



          (c) In the event and on each occasion that any Net Proceeds are received by or on behalf of
any Credit Party in respect of any Prepayment Event, the Borrower shall, promptly (and in any event
within five days) after such Net Proceeds are received by any Credit Party, prepay the Obligations
in an aggregate amount equal to (x) in the case of a prepayment event described in clause (b) of
the definition of the term “Prepayment Event”, 50% of such Net Proceeds and (y) in the case
of all other Prepayment Events, 100% of such Net Proceeds. In connection with any mandatory
prepayment as required under this Section 2.6(c), there shall also be a corresponding
automatic reduction in the Borrowing Base, without the need for any additional Bank approval, in
the amount of such required prepayment; provided, that, (i) no reduction in the Borrowing Base
pursuant to this Section 2.6(c) shall reduce the Borrowing Base to an amount less than the
then existing Conforming Borrowing Base and (ii) there shall be no reduction in the Borrowing Base
pursuant to this Section 2.6(c) in connection with the Specified Asset Sales. For the
avoidance of doubt, any reductions in the Borrowing Base arising in connection with the Specified
Asset Sales are set forth in Section 4.4(b) hereof.



     Section 2.7 Voluntary Prepayments. Borrower may, subject to Section 13.5 and
the other provisions of this Agreement, prepay the principal of the Revolving Loan in whole or in
part. Any partial prepayment shall be in a minimum amount of $1,000,000 and shall be in an
integral multiple of $100,000.



     Section 2.8 Voluntary Reduction of Commitments. Borrower may, by notice to
Administrative Agent three (3) Domestic Business Days prior to the effective date of any such
reduction, reduce the Total Commitment (and thereby reduce the Commitment of each Bank ratably) in
amounts not less than $10,000,000 and in an amount which is an integral multiple of $10,000,000 or,
if less, the remaining amount of the Commitments. On the effective date of any such reduction,
Borrower shall, to the extent required as a result of such reduction, make a principal payment on
the Revolving Loan in an amount sufficient to cause the principal balance of the Revolving Loan
then outstanding to be equal to or less than the Total Commitment as thereby reduced.
Notwithstanding the foregoing, Borrower shall not be permitted to voluntarily reduce the Total
Commitment to an amount less than the aggregate Letter of Credit Exposure of all Banks.



     Section 2.9 Termination of Commitments; Final Maturity of Revolving Loan. The Total
Commitment (and the Commitment of each Bank) shall terminate, and the entire



33









 







outstanding principal balance of the Revolving Loan, all interest accrued thereon, all accrued but unpaid fees hereunder
and all other outstanding Obligations shall be due and payable in full on the Termination Date.



     Section 2.10 Voluntary Increase of Total Commitment. So long as no Default or Event
of Default has occurred and is continuing, or will result therefrom, and so long as no Borrowing
Base Deficiency exists, Borrower shall have the right to increase the Total Commitment by
increasing the existing Commitments and/or obtaining additional Commitments (the amount of such increase is herein called the “Commitment Increase”), either from
(a) one or more of the Banks, or (b) another financial institution; provided, that
(i) Borrower shall have notified Administrative Agent (which shall promptly deliver a copy to each
Bank) in writing of the amount of the Commitment Increase, (ii) Administrative Agent and Letter of
Credit Issuer shall have approved any new Bank (such approval not to be unreasonably withheld),
(iii) any such new Bank shall have assumed all of the rights and obligations of a “Bank” hereunder,
(iv) the procedure described in Section 14.10(f) shall have been complied with, and (v)
after giving effect to the Commitment Increase, the Total Commitment shall not exceed the Maximum
Total Commitment Amount. Notwithstanding anything to the contrary contained herein, the Commitment
of any Bank may not be increased without the prior written consent of such Bank.



     Section 2.11 Application of Payments. Each repayment pursuant to Section 2.6,
Section 2.7, Section 2.8, Section 2.9, and Section 4.5 shall be
made together with accrued interest on the amount repaid to the date of payment, and shall be
applied in accordance with Section 3.2 and the other provisions of this Agreement.



     Section 2.12 Commitment Fee. On the Termination Date, on each Quarterly Date prior to
the Termination Date, and, in the event the Commitments are terminated in their entirety prior to
the Termination Date, on the date of such termination, Borrower shall pay to Administrative Agent,
for the ratable benefit of each Bank based on each Bank’s Commitment Percentage, a commitment fee
equal to the Commitment Fee Percentage in effect from day to day (applied on a per annum basis and
computed on the basis of actual days elapsed and as if each calendar year consisted of 365 days (or
366 days in a leap year)) of the average daily Availability for the Fiscal Quarter (or portion
thereof) ending on the date such payment is due.



     Section 2.13 Agency and other Fees. Borrower shall pay to Administrative Agent and
its Affiliates such other fees and amounts as Borrower shall be required to pay to Administrative
Agent and its Affiliates from time to time pursuant to any separate agreement between Borrower and
Administrative Agent or such Affiliates. Such fees and other amounts shall be retained by
Administrative Agent and its Affiliates, and no Bank (other than JPMorgan) shall have any interest
therein. Administrative Agent may disburse any fees paid to Administrative Agent and its
Affiliates pursuant to this Section 2.13 in any manner Administrative Agent desires in its
sole discretion.



ARTICLE III

GENERAL PROVISIONS




     Section 3.1 Delivery and Endorsement of Notes. On the Closing Date, Administrative
Agent shall deliver to each Bank that is requesting a Note the Note payable to



34









 







such Bank. Each Bank may endorse (and prior to any transfer of its Note shall endorse) on the schedules attached
and forming a part thereof appropriate notations to evidence the date and amount of its Commitment
Percentage of each Borrowing, the Interest Period applicable thereto, and the date and amount of
each payment of principal made by Borrower with respect thereto;
provided that the failure by any
Bank to so endorse its Note shall not affect the liability of Borrower for the repayment of all
amounts outstanding under such Note together with interest thereon. Each Bank is hereby
irrevocably authorized by Borrower to endorse its Note and to attach to and make a part of any such
Note a continuation of any such schedule as required.



     Section 3.2 General Provisions as to Payments.



          (a) Borrower shall make each payment of principal of, and interest on, the Revolving Loan, and
all fees payable hereunder shall be paid, not later than 12:00 noon (Chicago, Illinois time) on the
date when due, in Federal or other funds immediately available in Chicago, Illinois, to
Administrative Agent at its address set forth on Schedule 1.1 hereto, without defense,
set-off, deduction or counterclaim. Administrative Agent will promptly (and if such payment is
received by Administrative Agent by 10:00 a.m. (Chicago, Illinois time), and otherwise if
reasonably possible, on the same Domestic Business Day) distribute to each Bank its Commitment
Percentage of each such payment received by Administrative Agent for the account of Banks.
Whenever any payment of principal of, or interest on, the Base Rate Loan or of fees shall be due on
a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, any
portion of any Eurodollar Loan shall be due on a day which is not a Eurodollar Business Day, the
date for payment thereof shall be extended to the next succeeding Eurodollar Business Day (subject
to the provisions of the definition of Interest Period). If the date for any payment of principal
is extended by operation of Law or otherwise, interest thereon shall be payable for such extended
time. Borrower hereby authorizes Administrative Agent to charge from time to time against
Borrower’s accounts with Administrative Agent any amount then due.



          (b) Prior to the occurrence of an Event of Default, all principal payments received by Banks
with respect to the Revolving Loan shall be applied first to Eurodollar Loans outstanding with
Interest Periods ending on the date of such payment, then to the Base Rate Loan, and then to
Eurodollar Loans next maturing until such principal payment is fully applied.



          (c) After the occurrence of an Event of Default, all amounts collected or received by
Administrative Agent or any Bank shall be applied first to the payment of all proper costs incurred
by Administrative Agent in connection with the collection thereof (including reasonable expenses
and disbursements of Administrative Agent), second to the payment of all proper costs incurred by
Banks in connection with the collection thereof (including reasonable expenses and disbursements of
Banks), third to the reimbursement of any advances made by Banks to effect performance of any
unperformed covenants of any Credit Party under any of the Loan Papers, fourth to the payment of
any unpaid fees required pursuant to Section 2.13, fifth to the payment of any unpaid fees
required pursuant to Section 2.1(b) and Section 2.12, sixth, to the payment of all
accrued but unpaid interest, seventh, to the payment to each Bank of its Commitment Percentage of
the outstanding principal of the Revolving Loan and to satisfy all obligations and liabilities then
due under Hedge Agreements with each such Bank (and/or its



35









 







Affiliates), such payments to be made pro rata to each Bank (and/or its Affiliates) owed such Obligations in proportion to all such
payments owed to all Banks (and/or their Affiliates) in respect of such Obligations, and eighth to
establish the deposits required in Section 2.1(b). All payments received by a Bank after
the occurrence of an Event of Default for application to the principal of the Revolving Loan shall
be applied by such Bank in the manner provided in Section 3.2(b).



          (d) Notwithstanding anything to the contrary contained in this Agreement, if any Bank shall
fail to make any payment required to be made by it hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the account of such Bank to
satisfy such Bank’s obligations hereunder until all such unsatisfied obligations are fully paid.



ARTICLE IV

BORROWING BASE AND CONFORMING BORROWING BASE




     Section 4.1 Reserve Report; Proposed Borrowing Base. The aggregate amount of credit
available to Borrower under this Agreement shall be limited by a Borrowing Base (herein so called)
which shall be determined by Banks at the times and in accordance with the standards and procedures
set forth in this Article IV. As soon as available and in any event by March 15, and
August 31 of each year, commencing March 15, 2009, Borrower shall deliver to Administrative Agent
and each Bank a Reserve Report prepared as of the immediately preceding December 31 and June 30,
respectively. In addition to the foregoing, the Borrower shall deliver to Administrative Agent and
each Bank a Reserve Report as of November 30, 2008 (to be furnished by January 1, 2009), which
Reserve Report may be prepared by Borrower’s in-house staff, and shall include a detailed
reconciliation from the most recently delivered Reserve Report prepared by the Approved Petroleum
Engineer. Simultaneously with the delivery to Administrative Agent and each Bank of each Reserve
Report, Borrower shall notify Administrative Agent and each Bank of the amount of the Borrowing
Base which Borrower requests become effective on the next Redetermination Date (or such date
promptly following such Redetermination Date as Majority Banks shall elect).



     Section 4.2 Scheduled Redeterminations of the Borrowing Base and Conforming Borrowing
Base; Procedures and Standards. Based in part on the Reserve Reports made available to Banks
pursuant to Section 4.1, Banks shall redetermine the Borrowing Base and the Conforming
Borrowing Base on or prior to the next Redetermination Date (or such date promptly thereafter as
reasonably possible based on the engineering and other information available to Banks). Any
Borrowing Base or Conforming Borrowing Base which becomes effective as a result of any
Redetermination of the Borrowing Base or the Conforming Borrowing Base shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Borrowing Base requested by
Borrower pursuant to Section 4.1 or Section 4.3 (as applicable), (b) such Borrowing
Base shall not exceed the Total Commitment then in effect, (c) to the extent such Borrowing Base or
Conforming Borrowing Base represents an increase from the Borrowing Base or the Conforming
Borrowing Base, as applicable, in effect prior



36









 







to such Redetermination, such Borrowing Base or Conforming Borrowing Base shall be approved by all Banks, and (d) to the extent such Borrowing Base
or Conforming Borrowing Base represents a decrease in the Borrowing Base or the Conforming
Borrowing Base, as applicable, in effect prior to such Redetermination, or a reaffirmation of such
prior Borrowing Base or Conforming Borrowing Base, as applicable, such Borrowing Base or Conforming
Borrowing Base shall be approved by Required Banks. Each Redetermination shall be made by Banks in
their sole discretion. Without limiting such discretion, Borrower acknowledges and agrees that
Banks (i) may make such assumptions regarding appropriate existing and projected pricing for
Hydrocarbons as they deem appropriate in their sole discretion, (ii) may make such assumptions
regarding projected rates and quantities of future production of Hydrocarbons from the Mineral
Interests owned by Borrower as they deem appropriate in their sole discretion, (iii) may consider
the projected cash requirements of the Credit Parties, (iv) are not required to consider any asset other than Proved Mineral Interests owned by Borrower which are subject to first and prior
Liens in favor of Administrative Agent for the ratable benefit of Banks to the extent required by
Section 5.1 hereof, and (v) may make such other assumptions, considerations and exclusions
as Banks deem appropriate in the exercise of their sole discretion. It is further acknowledged and
agreed that each Bank may consider such other credit factors as it deems appropriate in the
exercise of its sole discretion and shall have no obligation in connection with any Redetermination
to approve any increase from the Borrowing Base or the Conforming Borrowing Base in effect prior to
such Redetermination. Promptly following any Redetermination of the Borrowing Base or the
Conforming Borrowing Base, Administrative Agent shall notify Borrower of the amount of the
Borrowing Base and the Conforming Borrowing Base as redetermined, which Borrowing Base and the
Conforming Borrowing Base shall be effective as of the date specified in such notice, and shall
remain in effect for all purposes of this Agreement until the next Redetermination. From the
Closing Date until the Conforming Date, the Banks may, in their sole discretion, establish a
Borrowing Base which is higher than the Borrowing Base that would otherwise be in effect if the
Banks determined the Borrowing Base based on each Bank’s Conforming Credit Criteria. At the time
of each Scheduled Redetermination and Special Redetermination, the Banks shall also determine what
the Borrowing Base would be if they applied Conforming Credit Criteria (which result would be the
Conforming Borrowing Base). If the Banks do not determine a Conforming Borrowing Base, the
Borrowing Base as redetermined and/or established shall also be the Conforming Borrowing Base for
purposes of this Agreement. From and after the Conforming Date, the Borrowing Base will be an
amount equal to the Conforming Borrowing Base.



     Section 4.3 Special Redetermination.



          (a) In addition to Scheduled Redeterminations and the other Redeterminations provided for in
this Article IV, Borrower and Majority Banks shall each be permitted to request a Special
Redetermination of the Borrowing Base and the Conforming Borrowing Base once in each period between
Scheduled Redeterminations. Any request by Majority Banks pursuant to this Section 4.3(a)
shall be submitted to Administrative Agent and Borrower. Any request by Borrower pursuant to this
Section 4.3(a) shall be submitted to Administrative Agent and each Bank and at the time of
such request Borrower shall (i) deliver to Administrative Agent and each Bank a Reserve Report, and
(ii) also notify Administrative Agent and each Bank of the Borrowing Base requested by Borrower in
connection with such Special Redetermination.



          (b) Except as provided in Section 4.3(c) below, any Special Redetermination shall be
made by Banks in accordance with the procedures and standards set forth in Section 4.2;
provided, that, no Reserve Report will be required to be delivered to
Administrative Agent and



37









 







Banks in connection with any Special Redetermination requested by Majority Banks pursuant to Section 4.3(a) above.



          (c) Notwithstanding anything to the contrary contained herein, if the Total Commitment is
increased to $600,000,000 pursuant to a Commitment Increase prior to the first Scheduled
Redetermination after the Closing Date, the Borrowing Base shall be increased to $300,000,000
contemporaneously with such Commitment Increase, which Borrowing Base shall remain in effect until
the first Redetermination to occur thereafter. The Special Redetermination described in this Section 4.3(c) shall not be deemed to be one of the Special
Redeterminations permitted for each of Borrower and Majority Banks between Scheduled
Redeterminations.



     Section 4.4 Asset Disposition Adjustment. In addition to the other Redeterminations
provided for in this Article IV, (a) Required Banks shall be permitted to redetermine the
Borrowing Base and the Conforming Borrowing Base in connection with, and simultaneously with, the
consummation of an Asset Disposition described in the proviso of Section 9.5(c), and reduce
the (i) Borrowing Base by an amount equal to the Borrowing Base value of the Borrowing Base
Properties which are the subject of such Asset Disposition (which shall be the Borrowing Base value
assigned thereto by Administrative Agent and approved by Required Banks) and (ii) Conforming
Borrowing Base by an amount so that the ratio of the as-adjusted Borrowing Base to the
previously-existing Borrowing Base is equal to the ratio of the as-adjusted Conforming Borrowing
Base to the previously-existing Conforming Borrowing Base. In the event Required Banks elect to
redetermine the Borrowing Base and the Conforming Borrowing Base in accordance with this
Section 4.4, Administrative Agent shall notify Borrower promptly, but in any event no less
than one (1) Domestic Business Day prior to the consummation of the Asset Disposition, of the
amount of the Borrowing Base and the Conforming Borrowing Base as redetermined, which Borrowing
Base and Conforming Borrowing Base shall be effective as of the date specified in such notice, and
shall remain in effect for all purposes of this Agreement until the next Redetermination.
Notwithstanding anything to the contrary contained herein, Borrower agrees that any such
Redetermination pursuant to this Section 4.4 shall not be construed or deemed to be a
Special Redetermination hereunder; and



          (b) the Borrowing Base and the Conforming Borrowing Base shall be redetermined in connection
with, and simultaneously with, the consummation of a Specified Asset Sale as follows: (i)(A) in the
event the sale of the Midway Loop Assets occurs prior to the sale of the Newton Assets, the
Conforming Borrowing Base will be automatically reduced to be $220,000,000 and the Borrowing Base
will be automatically reduced to be $245,000,000 (in each case without the need for any additional
Bank approval), (B) in the event the sale of the Newton Assets occurs prior to the sale of the
Midway Loop Assets, the Conforming Borrowing Base will be automatically reduced to be $240,000,000
and the Borrowing Base will be automatically reduced to be $270,000,000 (in each case without the
need for any additional Bank approval); provided, that, if either Specified Asset Sale is
consummated prior to February 1, 2009, Borrower shall have the right to request an additional
Redetermination upon the closing of the first Specified Asset Sale to occur, and (ii) upon the
completion of both Specified Asset Sales, the Conforming Borrowing Base and the Borrowing Base will
each be automatically reduced to be $195,000,000 (without the need for any additional Bank
approval); provided, that, if both Specified Asset Sales are consummated prior to February 1, 2009,
Borrower shall have the right to request an additional Redetermination upon the closing of the
second such sale to occur



38









 







(which right to request an additional Redetermination shall be in addition to Borrower’s right to request an additional Redetermination set forth in clause (i) of
Section 4.4(b)); and



          (c) prior to the Conforming Date, the Borrowing Base shall be automatically reduced in
connection with any Prepayment Event, without the need for any additional Bank approval, as set
forth in Section 2.6(c) hereof.



     Notwithstanding anything to the contrary contained in Section 4.4(b), if, immediately
prior to a Specified Asset Sale, the Borrowing Base or Conforming Borrowing Base is lower than the
applicable amounts to which Section 4.4(b) requires the Borrowing Base and the Conforming
Borrowing Base be reduced in connection with a Specified Asset Sale, there shall be no adjustment
to the Borrowing Base or the Conforming Borrowing Base, as applicable, pursuant to Section
4.4(b).



     Section 4.5 Borrowing Base Deficiency. To the extent a Borrowing Base Deficiency
exists after giving effect to any Redetermination (other than in connection with a Redetermination
pursuant to Section 4.4 hereof), Borrower shall, within ten (10) days following notice
thereof from Administrative Agent, provide written notice (the “Election Notice”) to
Administrative Agent stating the action which Borrower proposes to take to remedy such Borrowing
Base Deficiency, and Borrower shall thereafter, at its option, either (a) within thirty (30) days
following the delivery of the Election Notice, make a prepayment or prepayments of principal on the
Revolving Loan in an amount sufficient to eliminate such Borrowing Base Deficiency, and if such
Borrowing Base Deficiency cannot be eliminated pursuant to this Section 4.5 by prepayment
of the Revolving Loan in full (as a result of outstanding Letter of Credit Exposure), Borrower
shall also at such time deposit with Administrative Agent sufficient cash to be held by
Administrative Agent to secure outstanding Letter of Credit Exposure in the manner contemplated by
Section 2.1(b) as necessary to eliminate such Borrowing Base Deficiency, (b) eliminate such
Borrowing Base Deficiency by making three (3) consecutive mandatory prepayments of principal on the
Revolving Loan, each of which shall be in the amount of one-third (1/3rd) of the amount of such
Borrowing Base Deficiency, commencing on the first Monthly Date following the delivery of the
Election Notice, and continuing on each Monthly Date thereafter, (c) within ninety (90) days
following the delivery of the Election Notice, submit (and pledge as collateral pursuant to
Article V hereof) additional oil and gas properties owned by Borrower and its Subsidiaries
for consideration in connection with the determination of the Borrowing Base and the Conforming
Borrowing Base which Administrative Agent and Banks deem sufficient in their sole discretion to
eliminate such Borrowing Base Deficiency, or (d) eliminate such Borrowing Base Deficiency through a
combination of prepayments on the Revolving Loan and submission of additional oil and gas
properties for inclusion in the Borrowing Base and the Conforming Borrowing Base as set forth in
subclauses (a) and (c) above. Notwithstanding the foregoing, upon any Redetermination of the
Borrowing Base or Conforming Borrowing Base pursuant to Section 4.4 hereof which results in
a Borrowing Base Deficiency (or increase in an existing Borrowing Base Deficiency), Borrower shall,
within one (1) Domestic Business Day of such Redetermination, make a mandatory prepayment of
principal on the Revolving Loan in an amount sufficient to eliminate such Borrowing Base
Deficiency.



39









 





ARTICLE V

COLLATERAL AND GUARANTEES




     Section 5.1 Security.



          (a) The Obligations shall be secured by first and prior Liens (subject only to Permitted
Encumbrances) covering and encumbering (i) the Required Reserve Value of all Borrowing Base
Properties, together with all related assets and interests, including, without limitation, all
operating equipment, accounts, inventory, contract rights and all products, proceeds and other interests relating to the ownership, operation and/or production of such
Borrowing Base Properties, and (ii) all of the issued and outstanding Equity owned by Borrower and
each Restricted Subsidiary of each Restricted Subsidiary. On the Closing Date, Borrower shall (A)
deliver to Administrative Agent for the ratable benefit of each Bank, the Mortgages (including,
without limitation, amendments to the Existing Mortgages) in form and substance acceptable to
Administrative Agent and duly executed by Borrower and/or its Subsidiaries, together with such
other assignments, conveyances, amendments, agreements and other writings, including, without
limitation, UCC-1 and UCC-3 financing statements (each duly authorized and executed, as applicable)
as Administrative Agent shall deem necessary or appropriate to grant, evidence and perfect first
and prior Liens (subject only to Permitted Encumbrances) in all Borrowing Base Properties and other
interests of Borrower required by this Section 5.1(a), (B) execute and deliver to
Administrative Agent (1) a Borrower Pledge Agreement, and (2) such UCC-1 and UCC-3 financing
statements as Administrative Agent shall request to fully evidence and perfect the Liens created by
such Borrower Pledge Agreement, and (C) deliver to Administrative Agent the certificate(s)
evidencing the issued and outstanding Equity of each existing Subsidiary of Borrower, duly endorsed
or accompanied by appropriate blank stock powers. Borrower hereby authorizes Administrative Agent,
and its agents, successors and assigns, to file any and all necessary financing statements under
the Uniform Commercial Code, assignments or continuation statements as necessary from time to time
(in Administrative Agent’s discretion) to perfect (or continue perfection of) the Liens granted
pursuant to the Loan Papers.



          (b) On or before each Redetermination Date after the Closing Date and at such other times as
Administrative Agent or Majority Banks shall request or as otherwise required hereunder, including,
without limitation, pursuant to Section 4.5 hereof, Borrower and its Restricted
Subsidiaries shall execute and deliver to Administrative Agent, for the ratable benefit of each
Bank, Mortgages in form and substance acceptable to Administrative Agent and duly executed by
Borrower and any such Restricted Subsidiary (as applicable) together with such other assignments,
conveyances, amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed) as Administrative Agent shall deem
necessary or appropriate to grant, evidence and perfect the Liens required by Section
5.1(a) preceding with respect to Borrowing Base Properties acquired by Borrower and its
Restricted Subsidiaries subsequent to the last date on which Borrower or any such Restricted
Subsidiary was required to execute and deliver Mortgages pursuant to this Section 5.1(b),
or which, for any other reason are not the subject of valid, enforceable, perfected first priority
Liens (subject only to Permitted Encumbrances) in favor of Administrative Agent for the ratable
benefit of Banks.



40









 





          (c) At any time Borrower or any of its Subsidiaries is required to execute and deliver
Mortgages and/or Assignments and Amendments to Mortgages to Administrative Agent pursuant to this
Section 5.1, Borrower shall also deliver to Administrative Agent such opinions of counsel
(including, if so requested, title opinions addressed to Administrative Agent) and other evidence
of title as Administrative Agent shall deem necessary or appropriate to verify (i) Borrower’s or
such Subsidiary’s title to the Required Reserve Value of the Proved Mineral Interests which are
subject to such Mortgages, and (ii) the validity and perfection of the Liens created by such
Mortgages and such other matters regarding such Mortgages as Administrative Agent shall reasonably
request.



          (d) To the extent required or contemplated by the terms of Section 5.1(a)(ii),
Borrower or any Indirect Restricted Subsidiary (as applicable) shall execute and deliver to
Administrative Agent a Borrower Pledge Agreement or a Subsidiary Pledge Agreement (as applicable)
together with (i) all certificates (or other evidence acceptable to Administrative Agent)
evidencing the issued and outstanding Equity of any such Restricted Subsidiary of every class owned
by Borrower or such Indirect Restricted Subsidiary (as applicable) which shall be duly endorsed or
accompanied by stock powers executed in blank (as applicable), and (ii) such UCC-1 financing
statements as Administrative Agent shall deem necessary or appropriate to grant, evidence and
perfect the Liens required by Section 5.1(a)(ii) in the issued and outstanding Equity of
each such Restricted Subsidiary.



     Section 5.2 Guarantees. Payment and performance of the Obligations shall be fully
guaranteed by each Restricted Subsidiary pursuant to a Facility Guaranty, and Borrower shall cause
any such applicable Restricted Subsidiary to execute and deliver to Administrative Agent such
Facility Guaranty.



ARTICLE VI

CONDITIONS




     Section 6.1 Conditions to Amendment and Restatement, Initial Borrowing and Participation
in Letter of Credit Exposure. The amendment and restatement of the Existing Credit Agreement
on the terms set forth herein, and the obligation of each Bank to loan its Commitment Percentage of
the initial Borrowing hereunder and the obligation of Administrative Agent to issue (or cause
another Bank to issue) any Letter of Credit issued hereunder is subject to the satisfaction of each
of the following conditions:



          (a) Closing Deliveries. Administrative Agent shall have received each of the
following documents, instruments and agreements, each of which shall be in form and substance and
executed in such counterparts as shall be acceptable to Administrative Agent and each Bank and each
of which shall, unless otherwise indicated, be dated the Closing Date:




          (i) a Note payable to the order of each Bank requesting a Note, each in the amount of
such Bank’s Commitment, duly executed by Borrower;




          (ii) the Mortgages (including any amendments to the Existing Mortgages) to be executed
on the Closing Date pursuant to Section 5.1(a), duly executed and delivered by
Borrower and each Subsidiary of Borrower (as applicable), together



41









 







with such other assignments, conveyances, amendments, agreements and other writings, including, without
limitation, UCC-1 financing statements, tax affidavits and applicable department of revenue
documentation, in form and substance satisfactory to Administrative Agent, creating first
and prior Liens in all Borrowing Base Properties (subject only to Permitted Encumbrances);




          (iii) Facility Guarantees duly executed by each existing Restricted Subsidiary of
Borrower;




          (iv) a Borrower Pledge Agreement duly executed by Borrower together with (A)
certificates evidencing one hundred percent (100%) of the issued and outstanding Equity of each existing Restricted Subsidiary of Borrower of every class
(all certificates delivered pursuant to this Section 6.1(a)(iv) shall be duly
endorsed or accompanied by duly executed blank stock powers), and (B) such financing
statements (duly authorized) as Administrative Agent shall request to perfect the Liens
granted pursuant to such Borrower Pledge Agreement;




          (v) such financing statements (including, without limitation, the financing statements
referenced in subclauses (ii) and (iv) above) in form and substance acceptable to
Administrative Agent (duly authorized) as Administrative Agent shall specify to fully
evidence and perfect all Liens contemplated by the Loan Papers, all of which shall be filed
of record in such jurisdictions as Administrative Agent shall require in its sole
discretion;




          (vi) a copy of the articles or certificate of incorporation, certificate of
organization, or comparable charter documents, and all amendments thereto, of each Credit
Party accompanied by a certificate that such copy is true, correct and complete, and dated
within twenty (20) days of the Closing Date (or within such other period as acceptable to
Administrative Agent), issued by the appropriate Governmental Authority of the jurisdiction
of incorporation of each such Credit Party, and accompanied by a certificate of the
Secretary or comparable Authorized Officer of each such Credit Party that such copy is true,
correct and complete on the Closing Date;




          (vii) a copy of the bylaws, regulations or comparable charter documents, and all
amendments thereto, of each Credit Party accompanied by a certificate of the Secretary or
comparable Authorized Officer of each such Credit Party that such copy is true, correct and
complete as of Closing Date;




          (viii) certain certificates and other documents issued by the appropriate Governmental
Authorities of such jurisdictions as Administrative Agent has requested relating to the
existence of each Credit Party and to the effect that each such Credit Party is in good
standing with respect to the payment of franchise and similar Taxes and is duly qualified to
transact business in such jurisdictions;




          (ix) a certificate of incumbency of all officers of each Credit Party who will be
authorized to execute or attest to any Loan Paper, dated the Closing Date, executed by the
Secretary or comparable Authorized Officer of each such Credit Party;



42









 






          (x) copies of resolutions or comparable authorizations approving the Loan Papers and
authorizing the transactions contemplated by this Agreement and the other Loan Papers, duly
adopted by the Board of Directors (or comparable authority) of each Credit Party accompanied
by certificates of the Secretary or comparable officer of each such Credit Party that such
copies are true and correct copies of resolutions duly adopted at a meeting of or (if
permitted by applicable Law and, if required by such Law, by the bylaws or comparable
charter documents of each such Credit Party, as applicable) by the unanimous written consent
of the Board of Directors (or comparable authority) of each such Credit Party, as
applicable, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not been amended, modified,
or revoked in any respect, and are in full force and effect as of the Closing Date;




          (xi) an opinion of Davis Graham & Stubbs LLP, counsel to Borrower, dated the Closing
Date, favorably opining as to the enforceability of each of the Loan Papers and otherwise in
form and substance satisfactory to Administrative Agent and Banks;




          (xii) such opinions of local counsel as Administrative Agent shall require in each
jurisdiction where Mortgages will be filed, each dated the Closing Date, favorably opining
as to the enforceability of the applicable Mortgages in each applicable jurisdiction and
otherwise in form and substance satisfactory to Administrative Agent and Banks;




          (xiii) a certificate signed by an Authorized Officer of Borrower stating that (A) the
representations and warranties contained in this Agreement and the other Loan Papers are
true and correct in all respects, and (B) no Default or Event of Default has occurred and is
continuing;




          (xiv) a Certificate of Ownership Interests signed by an Authorized Officer of Borrower
in the form of Exhibit H attached hereto;




          (xv) copies of or access to all reports in Borrower’s files (or otherwise reasonably
available to Borrower) pertaining to Borrower’s Mineral Interests and operations, which
report(s) shall not reflect the existence of facts or circumstances which would constitute a
material violation of any Applicable Environmental Law or which are likely to result in a
material liability to any Credit Party;




          (xvi) certificates from Borrower’s insurance broker setting forth the insurance
maintained by Borrower and stating that such insurance is in full force and effect, and
which certificates shall evidence that such insurance complies with the requirements of
Section 8.6;




          (xvii) counterparts from each party hereto (in such number as may be requested by the
Administrative Agent) of this Agreement signed on behalf of such party; and




          (xviii) the Existing Reserve Report.



43









 





          (b) Title Review. Administrative Agent or its counsel shall have completed a review
of title to the Required Reserve Value of all Borrowing Base Properties and such review shall not
have revealed any condition or circumstance which would reflect that the representations and
warranties contained in Section 7.8 and Section 7.9 hereof are inaccurate in any
respect.



          (c) No Material Adverse Change. No Material Adverse Change shall have occurred since
December 31, 2007.



          (d) No Legal Prohibition. The transactions contemplated by this Agreement shall be
permitted by applicable Law and regulation and shall not subject any Agent or any Bank to any
material adverse change in its assets, liabilities, financial condition, operations or prospects or
subject any Credit Party to a Material Adverse Change.



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



          (f) Closing Fees. Borrower shall have paid to Administrative Agent for the ratable
benefit of each Bank, and shall have paid to Administrative Agent and its Affiliates (for its own
account), the fees to be paid on the Closing Date pursuant to Section 2.13.



          (g) Environmental Condition. The Administrative Agent shall be reasonably satisfied
with the environmental condition of the Borrowing Base Properties.



          (h) Existing Indebtedness. The Existing Indebtedness shall have been (or will be)
refinanced with the initial Borrowing hereunder on the Closing Date.



          (i) Other Matters. All matters related to this Agreement, the other Loan Papers, and
the Credit Parties shall be acceptable to each Bank in its sole discretion, and each Credit Party
shall have delivered to Administrative Agent and each Bank such evidence as they shall request to
substantiate any matters related to this Agreement and the other Loan Papers as Administrative
Agent or any Bank shall request.



     Upon satisfaction of each of the conditions set forth in this Section 6.1, Borrower
shall execute the Certificate of Effectiveness. Upon the execution and delivery of the Certificate
of Effectiveness and the satisfaction of each of the conditions set forth in this Section
6.1, the Existing Credit Agreement shall automatically and completely be amended and restated
on the terms set forth herein without necessity of any other action on the part of any Bank, any
Agent or Borrower. Until execution and delivery of the Certificate of Effectiveness and the
satisfaction of each of the conditions set forth in this Section 6.1, the Existing Credit
Agreement shall remain in full force and effect in accordance with its terms.



     Section 6.2 Conditions to Each Borrowing and each Letter of Credit. The obligation of
each Bank to loan its Commitment Percentage of each Borrowing and the obligation of any Letter of
Credit Issuer to issue, extend, amend or renew any Letter of Credit on the date such Letter of
Credit is to be issued, extended, amended or renewed is subject to the further satisfaction of the
following conditions:



44









 





          (a) timely receipt by Administrative Agent of a Request for Borrowing or a Request for Letter
of Credit (as applicable);



          (b) immediately before and after giving effect to such Borrowing or issuance of such Letter of
Credit, no Default or Event of Default shall have occurred and be continuing and the funding of
such Borrowing or the issuance of the requested Letter of Credit (as applicable) shall not cause a
Default or Event of Default;



          (c) the representations and warranties of each Credit Party contained in this Agreement and
the other Loan Papers shall be true and correct on and as of the date of such Borrowing or issuance
of such Letter of Credit (as applicable);



          (d) the amount of the requested Borrowing or the amount of the requested Letter of Credit (as
applicable) shall not exceed the Availability;



          (e) no Material Adverse Change shall have occurred since December 31, 2007; and



          (f) the funding of such Borrowing or the issuance of such Letter of Credit (as applicable)
shall be permitted by applicable Law.



     The funding of each Borrowing and the issuance of each Letter of Credit hereunder shall be
deemed to be a representation and warranty by Borrower on the date of such Borrowing and the date
of issuance of each Letter of Credit as to the facts specified in Section 6.2(b) through
Section 6.2(f).



     Section 6.3 Materiality of Conditions. Each condition precedent herein is material to
the transactions contemplated herein, and time is of the essence in respect of each thereof.



     Section 6.4 Post-Closing Conditions. As soon as practicable, but in any event within
twenty (20) Business Days after the date hereof, the Borrower shall deliver, or cause to be
delivered, to the Administrative Agent or its counsel, each document, instrument or agreement, and
take each action, or cause to be taken each action, necessary to allow the Administrative Agent or
its counsel to complete a review of title to the Required Reserve Value of all Borrowing Base
Properties and such review shall not have revealed any condition or circumstance which would
reflect that the representations and warranties contained in Section 7.8 and Section
7.9 hereof are inaccurate in any respect. Notwithstanding any provision of this Agreement, any
failure to satisfy the conditions set forth in this Section 6.4 shall constitute an
immediate Event of Default without further notice to Borrower.



ARTICLE VII

REPRESENTATIONS AND WARRANTIES




     Borrower represents and warrants to Administrative Agent and each Bank that each of the
following statements is true and correct on the date hereof, will be true and correct on the
Closing Date, and will be true and correct on the occasion of each Borrowing and the issuance of
each Letter of Credit:



45









 





     Section 7.1 Corporate Existence and Power. Each Credit Party (a) is a corporation,
partnership or limited liability company duly incorporated or organized (as applicable), validly
existing and in good standing under the Laws of its jurisdiction of incorporation or organization,
(b) has all corporate, partnership or limited liability company power (as applicable) and all
material governmental licenses, authorizations, consents and approvals required to carry on its
businesses as now conducted and as proposed to be conducted, and (c) is duly qualified to transact
business as a foreign corporation, partnership or limited liability company (as applicable) in each jurisdiction where a failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.



     Section 7.2 Credit Party and Governmental Authorization; Contravention. The
execution, delivery and performance of this Agreement and the other Loan Papers by each Credit
Party (to the extent each Credit Party is a party to this Agreement and such Loan Papers) are
within such Credit Party’s corporate, partnership or limited liability company powers (as
applicable), when executed will be duly authorized by all necessary corporate, partnership or
limited liability company action (as applicable), require no action by or in respect of, or filing
with, any Governmental Authority (except for filings and recordings to perfect Liens granted
pursuant to such Loan Papers) and do not contravene, or constitute a default under, any provision
of (a) applicable Law (including, without limitation, the Margin Regulations), (b) the articles or
certificate of incorporation, bylaws, regulations, partnership agreement or comparable charter
documents of any Credit Party, or (c) any agreement, judgment, injunction, order, decree or other
instrument binding upon any Credit Party or result in the creation or imposition of any Lien on any
asset of any Credit Party other than the Liens securing the Obligations.



     Section 7.3 Binding Effect. This Agreement constitutes a valid and binding agreement
of Borrower; the other Loan Papers when executed and delivered in accordance with this Agreement,
will constitute valid and binding obligations of each Credit Party executing the same; and each
Loan Paper is, or when executed and delivered, will be, enforceable against each Credit Party which
executes the same in accordance with its terms except as (a) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance or similar
Laws affecting creditors rights generally, and (b) the availability of equitable remedies may be
limited by equitable principles of general applicability.



     Section 7.4 Financial Information.



          (a) The most recent annual audited consolidated balance sheet of Borrower and the related
consolidated statements of operations and cash flows for the Fiscal Year then ended, copies of
which have been delivered to each Bank, present fairly, in all material respects, in conformity
with GAAP, the consolidated financial position of Borrower as of the end of such Fiscal Year and
its consolidated results of operations and cash flows for such Fiscal Year.



          (b) The most recent quarterly unaudited consolidated balance sheet of Borrower delivered to
Banks, and the related unaudited consolidated statements of operations and cash flows for the
portion of Borrower’s Fiscal Year then ended, present fairly, in all material respects, in
conformity with GAAP applied on a basis consistent with the financial statements referred to in
Section 7.4(a), the consolidated financial position of Borrower as of



46









 







such date and its consolidated results of operations and cash flows for such portion of Borrower’s Fiscal Year.



          (c) Since the date of Borrower’s most recent annual and quarterly consolidated balance sheet
and consolidated statements of operations and cash flow delivered to Banks, there has been no
material adverse change in the assets, liabilities, financial position, results of operations or
prospects of Borrower, individually, or the Credit Parties, taken as a whole.



     Section 7.5 Litigation. Except for matters disclosed on Schedule 7.5 attached
hereto, there is no action, suit or proceeding pending against, or to the knowledge of any Credit
Party, threatened against any Credit Party before any Governmental Authority in which there is a
reasonable possibility of an adverse decision which could reasonably be expected to have a Material
Adverse Effect or which could in any manner draw into question the validity of the Loan Papers.



     Section 7.6 ERISA. No Credit Party maintains or has ever maintained or been obligated
to contribute to any Plan covered by Title IV of ERISA or subject to the funding requirements of
section 412 of the Code or section 302 of ERISA. Each Plan maintained by any Credit Party or any
ERISA Affiliate of any Credit Party is in compliance in all material respects with all applicable
Laws. Except in such instances where an omission or failure would not have a Material Adverse
Effect, (a) all returns, reports and notices required to be filed with any regulatory agency with
respect to any Plan have been filed timely, and (b) no Credit Party nor any ERISA Affiliate of any
Credit Party has failed to make any contribution or pay any amount due or owing as required by the
terms of any Plan. There are no pending or, to the best of Borrower’s knowledge, threatened
claims, lawsuits, investigations or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and no Credit Party nor any ERISA Affiliate of any Credit
Party has knowledge of any threatened litigation or claims against, the assets of any Plan or its
related trust or against any fiduciary of a Plan with respect to the operation of such Plan that
are likely to result in liability of any Credit Party having a Material Adverse Effect. Except in
such instances where an omission or failure would not have a Material Adverse Effect, each Plan
that is intended to be “qualified” within the meaning of section 401(a) of the Code is, and has
been during the period from its adoption to date, so qualified, both as to form and operation and
all necessary governmental approvals have been or will be timely obtained, and additionally, such
Plan is either a prototype plan entitled to rely on the opinion letter issued by the Internal
Revenue Service as to the qualified status of such Plan under section 401(a) of the Code to the
extent provided in Revenue Procedure 2005-15, or such Plan has been determined by the Internal
Revenue Service to be so qualified. No Credit Party nor any ERISA Affiliate of any Credit Party
has engaged in any prohibited transactions, within the meaning of section 406 of ERISA or section
4975 of the Code, in connection with any Plan which would result in liability of any Credit Party
having a Material Adverse Effect. No Credit Party maintains or contributes to any Plan that
provides a post-employment health benefit, other than a benefit required under section 601 of
ERISA, or maintains or contributes to a Plan that provides health benefits that is not fully funded
except where the failure to fully fund such Plan could not reasonably be expected to have a
Material Adverse Effect. No Credit Party maintains, has established or has ever participated in a
multiple employer welfare benefit arrangement within the meaning of section 3(40)(A) of ERISA.



47









 





     Section 7.7 Taxes and Filing of Tax Returns. Each Credit Party has filed all material
tax returns required to have been filed and has paid all Taxes shown to be due and payable on such
returns, including interest and penalties, and all other Taxes which are payable by such party, to
the extent the same have become due and payable, other than Taxes with respect to which a failure
to pay would not have a Material Adverse Effect. No Credit Party knows of any proposed material
Tax assessment against it and all material Tax liabilities of each Credit Party are adequately
provided for. No income tax liability of any Credit Party has been asserted by the Internal Revenue Service or other Governmental Authority for Taxes in excess
of those already paid.



     Section 7.8 Ownership of Properties Generally. Except for Immaterial Title
Deficiencies, each Credit Party has good and defensible title to all material properties and assets
purported to be owned by it, including, without limitation, all assets reflected in the balance
sheets referred to in Section 7.4(a) and Section 7.4(b) and all assets which are
used by the Credit Parties in the operation of their respective businesses, and none of such
properties or assets is subject to any Lien other than Permitted Encumbrances.



     Section 7.9 Mineral Interests. Borrower has good and defensible title to all Mineral
Interests described in the Reserve Report, including, without limitation, all Borrowing Base
Properties, free and clear of all Liens except Permitted Encumbrances and Immaterial Title
Deficiencies. With the exception of Immaterial Title Deficiencies, all such Mineral Interests are
valid, subsisting, and in full force and effect, and all rentals, royalties, and other amounts due
and payable in respect thereof have been duly paid, except those being contested in good faith.
Without regard to any consent or non-consent provisions of any joint operating agreement covering
any of Borrower’s Proved Mineral Interests, and with the exception of Immaterial Title
Deficiencies, Borrower’s share of (a) the costs for each Proved Mineral Interest described in the
Reserve Report is not greater than the decimal fraction set forth in the Reserve Report, before and
after payout, as the case may be, and described therein by the respective designations “working
interests,” “WI,” “gross working interest,” “GWI,” or similar terms, and (b) production from,
allocated to, or attributed to each such Proved Mineral Interest is not less than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case may be, and
described therein by the designations “net revenue interest,” “NRI,” or similar terms. In all
material respects, each well drilled in respect of each Proved Producing Mineral Interest described
in the Reserve Report (y) is capable of, and is presently, producing Hydrocarbons in paying
quantities, and Borrower is currently receiving payments for its share of production, with no funds
in respect of any thereof being presently held in suspense, other than any such funds being held in
suspense pending delivery of appropriate division orders, and (z) has been drilled, bottomed,
completed, and operated in material compliance with all applicable Laws and no such well which is
currently producing Hydrocarbons is subject to any penalty in production by reason of such well
having produced in excess of its allowable production.



     Section 7.10 Licenses, Permits, Etc. Except as disclosed on Schedule 7.10
attached hereto, each Credit Party possesses such valid franchises, certificates of convenience and
necessity, operating rights, licenses, permits, consents, authorizations, exemptions and orders of
Governmental Authorities, as are necessary to carry on its business as now conducted and as
proposed to be conducted, except to the extent a failure to obtain or maintain any such item would
not have a Material Adverse Effect.



48









 





     Section 7.11 Compliance with Law. The business and operations of each Credit Party
have been and are being conducted in accordance with all applicable Laws other than violations of
Laws which do not (either individually or collectively) have a Material Adverse Effect.



     Section 7.12 Full Disclosure. All information heretofore furnished by each Credit
Party to Administrative Agent or any Bank for purposes of or in connection with this Agreement, any Loan Paper or any transaction contemplated hereby or thereby is, and all such information
hereafter furnished by or on behalf of any Credit Party to Administrative Agent or any Bank will,
when taken as a whole, be, true, complete and accurate in every material respect. The Credit
Parties have disclosed or have caused to be disclosed to Banks in writing any and all facts which
could reasonably be expected to result in a Material Adverse Change.



     Section 7.13 Organizational Structure; Nature of Business. As of the Closing Date,
(a) Borrower has no direct, wholly-owned Subsidiaries, other than Castle, DPCA, DEC, Bonds Company,
Delta Pipeline, Delta Risk Management and Piper, (b) Borrower, Castle, DPCA, DEC and Piper are
primarily engaged in the business of acquiring, exploring, developing and operating Mineral
Interests and the production, processing and marketing of Hydrocarbons therefrom and related
activities, (c) Borrower owns approximately (i) ninety-two percent (92%) of the issued and
outstanding Equity of Amber, (ii) seventy-four percent (74%) of the issued and outstanding Equity
of PGR, and (iii) fifty-six percent (56%) of the issued and outstanding Equity of CRB, (d) Amber
has no assets other than a right to receive a portion of the proceeds from certain litigation
against the Federal Government relative to offshore California, (e) PGR is engaged in the
exploration and development of Mineral Interests, (f) CRB has rights in certain Mineral Interests,
(g) Borrower owns fifty percent (50.0%) of the issued and outstanding Equity of DHS, (h) DHS is
engaged in the drilling business, (i) Borrower is the general partner of Castle, and (j) Bonds
Company owns a ranch in the State of Colorado which provides access to certain adjacent Mineral
Interests in which one or more Credit Parties has an interest. Schedule 7.13 attached
hereto accurately reflects (i) the jurisdiction of incorporation or organization of each Credit
Party, (ii) each jurisdiction in which each Credit Party is qualified to transact business as a
foreign corporation, foreign partnership or foreign limited liability company, (iii) the
authorized, issued and outstanding Equity of each Credit Party, and (iv) all outstanding warrants,
options, subscription rights, convertible securities or other rights to purchase Equity of each
Credit Party.



     Section 7.14 Environmental Matters. Except for matters disclosed on Schedule
7.14 attached hereto, no operation conducted by any Credit Party and no real or personal
property now or previously owned or leased by any Credit Party (including, without limitation, any
Credit Party’s Mineral Interests) and no operations conducted thereon by a Credit Party, and to any
Credit Parties’ knowledge, no operations of any other Person or any prior owner, lessee or operator
of any such properties, is or has been in violation of any Applicable Environmental Law other than
violations which neither individually nor in the aggregate will have a Material Adverse Effect.
Except for matters disclosed on Schedule 7.14 attached hereto, no Credit Party, nor any
such property nor operation is the subject of any existing, pending or, to any Credit Party’s
knowledge, threatened Environmental Complaint which could, individually or in the aggregate, have a
Material Adverse Effect. All notices, permits, licenses, and functionally equivalent
authorizations, required to be obtained or filed under Applicable Environmental Laws in connection
with the ownership of each tract of real property or operations of any Credit Party



49









 







thereon and each item of personal property owned, leased or operated by any Credit Party, including, without
limitation, notices, licenses, permits and authorizations required in connection with any past or
present treatment, storage, disposal, or release of Hazardous Substances into the environment, have
been duly obtained or filed except to the extent the failure to obtain or file such notices,
licenses, permits and authorizations would not have a Material Adverse Effect. All Hazardous
Substances generated at each tract of real property owned, leased or operated by any Credit Party have been transported, treated, and disposed of only by carriers and/or
facilities maintaining valid permits under RCRA (as hereinafter defined) and/or other Applicable
Environmental Laws for the conduct of such activities to the extent that RCRA and/or such other
Applicable Environmental Laws applied to such Hazardous Substances and their transport, treatment
and disposal, except in such cases where the failure to obtain such permits would not, individually
or in the aggregate, have a Material Adverse Effect. Except for matters disclosed on Schedule
7.14 attached hereto, and matters which were not subject to enforcement under Federal, State or
local guidance or policy, there have been no Hazardous Discharges in excess of applicable reporting
quantities or which were not otherwise authorized by any permit license or functionally equivalent
authorization, which were not in compliance with Applicable Environmental Laws other than Hazardous
Discharges which would not, individually or in the aggregate, have a Material Adverse Effect.
Except for matters disclosed on Schedule 7.14 attached hereto, no Credit Party has any
contingent liability in connection with any such Hazardous Discharge which could reasonably be
expected to have a Material Adverse Effect. As used in this Section 7.14, the term
“RCRA” shall mean the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980, the Solid Waste Recovery Act of 1976, as amended by the Solid Waste
Disposal Act of 1980, and the Hazardous and Solid Waste Amendments of 1984, as the same may be
further amended and in effect from time to time, as such Act existed and applied at the time of the
treatment, transport, storage, disposal or discharge at issue.



     Section 7.15 Burdensome Obligations. No Credit Party, nor any of the properties of
any Credit Party, is, to Borrower’s Knowledge, subject to any Law or any pending or threatened
change of Law or subject to any restriction under its articles (or certificate) of incorporation,
bylaws, regulations, partnership agreement or comparable charter documents or under any agreement
or instrument to which any Credit Party or by which any Credit Party or any of their properties may
be subject or bound, which is so unusual or burdensome as to be likely in the foreseeable future to
have a Material Adverse Effect. Without limiting the foregoing, no Credit Party is a party to or
bound by any agreement (other than the Loan Papers and other than pursuant to the Permitted Senior
Unsecured Debt Documents and/or the Permitted Senior Convertible Debt Documents) or subject to any
order of any Governmental Authority which prohibits or restricts in any way the right of such
Credit Party or any Restricted Subsidiary to make Distributions.



     Section 7.16 Fiscal Year. Borrower’s Fiscal Year is January 1 through December 31.



     Section 7.17 No Default. Neither a Default nor an Event of Default has occurred or
will exist after giving effect to the transactions contemplated by this Agreement or the other Loan
Papers.



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     Section 7.18 Government Regulation. No Credit Party is subject to regulation under
the Federal Power Act, the Interstate Commerce Act (as any of the preceding acts have been
amended), the Investment Company Act of 1940 or any other Law which regulates the incurring by such
Credit Party of Debt, including, but not limited to Laws relating to common contract carriers or
the sale of electricity, gas, steam, water or other public utility services.



     Section 7.19 Insider. Except as disclosed on Schedule 7.19 attached hereto,
no Credit Party is, and no Person having “control” (as that term is defined in 12 U.S.C. section
375(b) or regulations promulgated thereunder) of any Credit Party is an “executive officer,”
“director” or “shareholder” of any Bank or any bank holding company of which any Bank is a
Subsidiary or of any Subsidiary of such bank holding company.



     Section 7.20 Gas Balancing Agreements and Advance Payment Contracts. On the date of
this Agreement, (a) there is no Material Gas Imbalance, and (b) the aggregate amount of all Advance
Payments received by any Credit Party under Advance Payment Contracts which have not been satisfied
by delivery of production does not exceed $500,000.



     Section 7.21 Insurance. The Borrower has, and has caused all of its Restricted
Subsidiaries to have (a) all insurance policies sufficient for the compliance by each of them with
all material Laws and all Material Agreements and (b) insurance coverage in at least amounts and
against such risk (including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar business for the
assets and operations of the Credit Parties. The Administrative Agent and the Banks have been
named as additional insureds in respect of such liability policies and the Administrative Agent has
been named as loss payee with respect to property loss insurance.



ARTICLE VIII

AFFIRMATIVE COVENANTS




     Borrower covenants and agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under any Revolving Loan
remains unpaid or any Letter of Credit remains outstanding:



     Section 8.1 Information. Borrower will deliver, or cause to be delivered, to each
Bank:



          (a) as soon as available and in any event within ninety (90) days (or such shorter time as
required to be filed with the SEC) after the end of each Fiscal Year, consolidated balance sheets
of Borrower as of the end of such Fiscal Year and the related consolidated statements of income and
statements of cash flow for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all reported by Borrower in accordance with GAAP and audited
by a firm of independent public accountants of nationally recognized standing and reasonably
acceptable to Administrative Agent;



          (b) as soon as available and in any event within forty-five (45) days (or such shorter time as
required to be filed with the SEC) after the end of each of the first three (3) Fiscal Quarters of
each Fiscal Year, consolidated balance sheets of Borrower as of the end of such Fiscal Quarter and
the related consolidated statements of income and statements of cash flow for



51









 







such quarter and for the portion of Borrower’s Fiscal Year ended at the end of such Fiscal Quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the corresponding
portion of Borrower’s previous Fiscal Year; all financial statements delivered pursuant to this
Section 8.1(b) shall be certified as to fairness of presentation, GAAP (except for the absence of footnotes and normal year end adjustments) and consistency by a
Financial Officer of Borrower;



          (c) simultaneously with the delivery of each set of financial statements referred to in
Section 8.1(a) and Section 8.1(b), a certificate of the principal executive and
Financial Officer of Borrower in the form of Exhibit I attached hereto, (i) setting forth
in reasonable detail the calculations required to establish whether Borrower was in compliance with
the requirements of Article X on the date of such financial statements, (ii) stating
whether there exists on the date of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which Borrower is taking or proposes to take with
respect thereto, (iii) stating whether or not such financial statements fairly reflect in all
material respects the results of operations and financial condition of Borrower as of the date of
the delivery of such financial statements and for the period covered thereby, (iv) setting forth
(A) whether as of such date there is a Material Gas Imbalance and, if so, setting forth the amount
of net gas imbalances under Gas Balancing Agreements to which Borrower is a party or by which any
Mineral Interests owned by Borrower is bound, and (B) the aggregate amount of all Advance Payments
received under Advance Payment Contracts to which Borrower is a party or by which any Mineral
Interests owned by Borrower is bound which have not been satisfied by delivery of production, if
any, (v) setting forth a summary of the Hedge Transactions to which Borrower is a party on such
date, (vi) setting forth in reasonable detail (A) the amount of any proceeds received in connection
with any Equity issuance described in the proviso in clause (g) of the definition of “Permitted
Investments,” (B) the amount and specific application of any such proceeds since the delivery of
the last certificate to be provided pursuant to this Section 8.1(c), and (C) the
designation and proposed use of any such unutilized proceeds by Borrower, (vii) stating as of such
date whether Borrower is in compliance with the terms of clause (f) of the definition of “Permitted
Investment,” and (viii) setting forth the other information described in Exhibit I attached
hereto;



          (d) promptly upon the filing thereof, copies of all final registration statements, post
effective amendments thereto and annual, quarterly or special reports which any Credit Party shall
have filed with the SEC; provided, however, that so long as Borrower is subject to
the reporting requirements of either Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended, and is timely filing reports with the SEC on its Electronic Data Gathering
Analysis and Retrieval System, it is not required to furnish such reports or statements to each
Bank unless any Bank specifically requests copies of such reports or statements be furnished to
such Bank;



          (e) promptly upon receipt of same, any notice or other information received by any Credit
Party indicating (i) any potential, actual or alleged non-compliance with or violation of the
requirements of any Applicable Environmental Law which could reasonably be expected to result in
liability to any Credit Party for fines, clean up or any other remediation obligations or any other
liability in excess of $5,000,000 in the aggregate; (ii) any threatened Hazardous Discharge which
Hazardous Discharge would impose on any Credit Party a duty to report to a Governmental Authority
or to pay cleanup costs or to take remedial action under any



52









 







Applicable Environmental Law which could reasonably be expected to result in liability to any Credit Party for fines, clean up and
other remediation obligations or any other liability in excess of $5,000,000 in the aggregate; or
(iii) the existence of any Lien arising under any Applicable Environmental Law securing any
obligation to pay fines, clean up or other remediation costs or
any other liability in excess of $5,000,000 in the aggregate. Without limiting the foregoing,
each Credit Party shall provide to Banks promptly upon receipt of same by any Credit Party copies
of all environmental consultants or engineers reports received by any Credit Party which would
render the representation and warranty contained in Section 7.14 untrue or inaccurate in
any respect;



          (f) in the event any notification is provided to any Bank or Administrative Agent pursuant to
Section 8.1(e) hereof or Administrative Agent or any Bank otherwise learns of any event or
condition under which any such notice would be required, then, upon request of Majority Banks,
Borrower shall within thirty (30) days of such request, cause to be furnished to Administrative
Agent and each Bank a report by an environmental consulting firm reasonably acceptable to
Administrative Agent and Majority Banks, stating that a review of such event, condition or
circumstance has been undertaken (the scope of which shall be acceptable to Administrative Agent
and Majority Banks) and detailing the findings, conclusions and recommendations of such consultant.
Borrower shall bear all expenses and costs associated with such review and updates thereof;



          (g) promptly after any Authorized Officer of any Credit Party becoming aware of the occurrence
of any Default, a certificate of an Authorized Officer of Borrower setting forth the details
thereof and the action which Borrower is taking or proposes to take with respect thereto;



          (h) no later than March 15 and August 31 of each year, commencing March 15, 2009, reports of
production volumes, revenue, expenses and product prices for all Borrowing Base Properties for the
periods of six (6) months ending the preceding December 31 and June 30, respectively. Such reports
shall be prepared on an accrual basis and shall be reported on a field by field basis;



          (i) promptly notify Banks of any Material Adverse Change;



          (j) promptly notify Banks of any material litigation involving any Credit Party;



          (k) promptly notify Banks of any change in Borrower’s Fiscal Year from that reflected in
Section 7.16 hereof;



          (l) from time to time such additional information regarding the financial position or business
of any Credit Party as Administrative Agent, at the request of any Bank, may reasonably request;
and



          (m) promptly after such delivery or receipt, copies of any financial or other report or notice
delivered to, or received from, (i) any holders of Permitted Senior Unsecured Debt, or (ii) any
holders of Permitted Senior Convertible Debt, which report or notice has not been delivered to
Banks hereunder; and



53









 





          (n) promptly upon the entering into of any Oil and Gas Hedge Transaction, a certificate of the
principal Financial Officer of Borrower, (i) setting forth in reasonable detail the calculations
required to establish whether Borrower is in compliance with the requirements of Section 9.11 hereof as of the date of such certificate and after giving effect to such
Oil and Gas Hedge Transaction, and (ii) setting forth a summary of the Oil and Gas Hedge
Transactions to which Borrower is a party as of the date of such certificate.



     Section 8.2 Business of Credit Parties. The primary business of the Credit Parties
will be (and will continue to be) the acquisition, exploration, development and operation of
Mineral Interests and the production, processing and marketing of Hydrocarbons therefrom and
related activities.



     Section 8.3 Maintenance of Existence. Borrower shall, and shall cause each other
Credit Party to, at all times (a) maintain its corporate, partnership or limited liability company
existence in its state of incorporation or organization, and (b) maintain its good standing and
qualification to transact business in all jurisdictions where the failure to maintain good standing
or qualification to transact business could have a Material Adverse Effect.



     Section 8.4 Title Data. In addition to the title information required by Section
5.1(c) and Section 6.1(b) hereof, Borrower shall, upon the reasonable request of
Majority Banks, cause to be delivered to Administrative Agent such title opinions and other
information regarding title to Mineral Interests owned by Borrower as are appropriate to determine
the status thereof.



     Section 8.5 Right of Inspection. Borrower will permit, and will cause each other
Credit Party to permit, any officer, employee or agent of Administrative Agent to visit and inspect
any of the assets of any Credit Party, examine each Credit Party’s books of record and accounts,
take copies and extracts therefrom, and discuss the affairs, finances and accounts of each Credit
Party with such Credit Party’s officers, accountants and auditors, at reasonable times upon at
least one (1) Domestic Business Day’s advance notice to Borrower, all at the expense of Borrower.



     Section 8.6 Maintenance of Insurance. Borrower will, and will cause each other Credit
Party to, at all times maintain or cause to be maintained insurance covering such risks as are
customarily carried by businesses similarly situated, including, without limitation, the following:
(a) workers’ compensation insurance; (b) employer’s liability insurance; (c) comprehensive general
public liability and property damage insurance; (d) insurance against (other than losses or damage
to property owned by Borrower which is self insured) losses customarily insured against as a result
of damage by fire, lightning, hail, tornado, explosion and other similar risk; and (e)
comprehensive automobile liability insurance. All loss payable clauses or provisions in all
policies of insurance maintained by any Credit Party pursuant to this Section 8.6 shall be
endorsed in favor of and made payable to Administrative Agent for the ratable benefit of Banks, as
their interests may appear. Administrative Agent shall, during the continuance of an Event of
Default, have the right, for the ratable benefit of Banks, to collect, and Borrower hereby assigns
to Administrative Agent for the ratable benefit of Banks (and hereby agrees to cause each other
Credit Party to assign), any and all monies that may become payable under any such policies of
insurance by reason of damage, loss or destruction of any of property which stands as security for
the Obligations or any part thereof, and Administrative



54









 







Agent may, during the continuance of an
Event of Default, at its election, either apply for the ratable benefit of Banks all or any part of
the sums so collected toward payment of the Obligations, whether or not such Obligations are then due and payable, in such manner as
Administrative Agent may elect or release same to the applicable Credit Party.



     Section 8.7 Payment of Taxes and Claims. Borrower will, and will cause each other
Credit Party to, pay (a) all Taxes imposed upon it or any of its assets or with respect to any of
its franchises, business, income or profits before any material penalty or interest accrues
thereon, and (b) all material claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by Law have or might
become a Lien (other than a Permitted Encumbrance) on any of its assets; provided,
however, no payment of Taxes or claims shall be required if (i) the amount, applicability
or validity thereof is currently being contested in good faith by appropriate action promptly
initiated and diligently conducted in accordance with good business practices and no material part
of the property or assets of Borrower, and no part of the assets of any Subsidiary of Borrower
which would be material to Borrower, is subject to any pending levy or execution, (ii) Borrower,
and any Subsidiary of Borrower, as and to the extent required in accordance with GAAP, shall have
set aside on their books reserves (segregated to the extent required by GAAP) deemed by them to be
adequate with respect thereto, and (iii) Borrower has notified Administrative Agent of such
circumstances, in detail reasonably satisfactory to Administrative Agent.



     Section 8.8 Compliance with Laws and Documents. Borrower will, and will cause each
other Credit Party to, comply with all Laws, their respective certificates (or articles) of
incorporation, bylaws, regulations and similar organizational documents and all Material Agreements
to which any Credit Party is a party, if a violation, alone or when combined with all other such
violations, could reasonably be expected to have a Material Adverse Effect.



     Section 8.9 Operation of Properties and Equipment.



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



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



          (c) Borrower will, and will cause each other Credit Party to, at all times maintain, preserve
and keep all operating equipment used with respect to its Mineral Interests in proper repair,
working order and condition, and make all necessary or appropriate repairs, renewals, replacements,
additions and improvements thereto so that the efficiency of such operating equipment shall at all
times be properly preserved and maintained, except where such



55









 







failure to comply could not reasonably be expected to have a Material Adverse Effect; provided, further that, no item
of operating equipment need be so repaired, renewed, replaced, added to or improved, if Borrower shall in good faith determine that such action is not necessary or
desirable for the continued efficient and profitable operation of the business of such Credit
Party.



     Section 8.10 Environmental Law Compliance. Except to the extent a failure to comply
could not reasonably be expected to have a Material Adverse Effect, Borrower will, and will cause
each other Credit Party to, comply with all Applicable Environmental Laws, including, without
limitation, (a) all licensing, permitting, notification and functionally equivalent requirements of
Applicable Environmental Laws, and (b) all provisions of all Applicable Environmental Laws
regarding storage, discharge, release, transportation, treatment and disposal of Hazardous
Substances. Borrower will, and will cause each other Credit Party to, promptly pay and discharge
when due all legal debts, claims, liabilities and obligations with respect to any clean-up or
remediation measures necessary to comply with Applicable Environmental Laws.



     Section 8.11 ERISA Reporting Requirements. Borrower shall furnish, or cause to be
furnished, to Administrative Agent:



          (a) promptly and in any event (i) within thirty (30) days after Borrower or any ERISA
Affiliate receives notice from any regulatory agency of the commencement of an audit, investigation
or similar proceeding with respect to a Plan, and (ii) within ten (10) days after Borrower or any
ERISA Affiliate contacts the Internal Revenue Service for the purpose of participation in a closing
agreement or any employee plans compliance resolution system submission with respect to a Plan
which could reasonably be expected to have a Material Adverse Effect or knows or has reason to know
that any event with respect to any Plan of Borrower or any ERISA Affiliate has occurred that is
reasonably believed by Borrower to potentially have a Material Adverse Effect, a written notice
describing such event and describing what action is being taken or is proposed to be taken with
respect thereto, together with a copy of any notice of such event that is given to the PBGC;



          (b) promptly and in any event within thirty (30) days after the receipt by Borrower of a
request therefor by a Bank, copies of any annual and other report (including Schedule B
thereto) with respect to a Plan filed by Borrower or any ERISA Affiliate with the United States
Department of Labor, the Internal Revenue Service or the PBGC;



          (c) notification within thirty (30) days of the effective date thereof of any material
increases in the benefits, or material change in the funding method, of any existing Plan which is
not a multiemployer plan (as defined in section 4001(a)(3) of ERISA), or the establishment of any
material new Plans, or the commencement of contributions to any Plan to which Borrower or any ERISA
Affiliate was not previously contributing; and



          (d) promptly after receipt of written notice of commencement thereof, notice of all (i) claims
made by participants or beneficiaries with respect to any Plan, and (ii) actions, suits and
proceedings before any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting Borrower or any ERISA Affiliate with



56









 







respect to any Plan, except those which, in the aggregate, if adversely determined could not reasonably be
expected to have a Material Adverse Effect.



     Section 8.12 Additional Documents. Borrower will, and will cause each other Credit
Party to, cure promptly any defects in the creation and issuance of each requested Note, and the
execution and delivery of this Agreement and the other Loan Papers and, at Borrower’s expense,
Borrower shall promptly and duly execute and deliver to each Bank, and cause each other Credit
Party to promptly and duly execute and deliver to each Bank, upon reasonable request, all such
other and further documents, agreements and instruments in compliance with or accomplishment of the
covenants and agreements of the Credit Parties in this Agreement and the other Loan Papers as may
be reasonably necessary or appropriate in connection therewith.



     Section 8.13 Environmental Review. Borrower shall deliver to Administrative Agent
prior to the completion by any Credit Party of any material acquisition of Mineral Interests or
related assets, other than an acquisition of additional interests in Mineral Interests in which a
Credit Party previously held an interest, any report or reports (including, without limitation, any
Phase I environmental reports) obtained by Borrower in the course of such acquisition setting forth
the results of any environmental review of such Mineral Interests and related assets.
Additionally, if requested by Administrative Agent or Majority Banks in writing in connection with
any such material acquisition, and not otherwise obtained by Borrower and delivered to
Administrative Agent in accordance with the foregoing provisions of this Section 8.13,
Borrower shall deliver to Administrative Agent, within forty-five (45) days of Administrative
Agent’s or Majority Banks’ written request, a report or reports related to any such material
acquisition which shall be in form, scope and detail appropriate for a Phase I environmental report
and reasonably acceptable to Administrative Agent from environmental engineering firms reasonably
acceptable to Administrative Agent, and which shall set forth the results of a Phase I
environmental review of the Mineral Interests and related assets which are the subject of such
material acquisition. All of the reports delivered to Administrative Agent pursuant to this
Section 8.13 shall not reflect the existence of facts or circumstances which would
constitute a material violation of any Applicable Environmental Law or which are likely to have a
Material Adverse Effect. Any such reports shall be confidential and subject to the requirements of
Section 14.17.



ARTICLE IX

NEGATIVE COVENANTS




     Borrower agrees that, so long as any Bank has any commitment to lend or participate in Letter
of Credit Exposure hereunder or any amount payable under any Revolving Loan remains unpaid or any
Letter of Credit remains outstanding:



     Section 9.1 Incurrence of Debt. Borrower will not, nor will Borrower permit any other
Credit Party to, incur, become or remain liable for any Debt other than (a) the Obligations, (b)
payables incurred in the ordinary course of business (other than in connection with a loan or
lending transaction) that are not more than sixty (60) days past due, from the date of invoice or
demand, except such payables being contested in good faith in accordance with Section 8.7
hereof, (c) Permitted Senior Unsecured Debt, (d) Guarantees of Permitted Senior Unsecured Debt, (e)
Permitted Senior Convertible Debt, (f) Guarantees of Permitted Senior Convertible



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Debt, (g) Debt evidenced by the Acquisition Letters of Credit, (h) non-recourse Debt incurred for the acquisition
of surface rights with respect to ranch land in an aggregate amount not to exceed $20,000,000, and
which Debt is secured only by such surface rights in such ranch land, and no Mineral Interests or other property of any Credit Party nor any other collateral of Banks or
Administrative Agent shall be provided by any Credit Party to secure such Debt; provided, that,
such Debt (and the documentation evidencing same) is subject to Administrative Agent’s prior
written approval of the terms and conditions thereof, and (i) other unsecured Debt in an aggregate
amount outstanding at any time not to exceed $25,000,000.



     Section 9.2 Restricted Payments. Borrower will not, nor will Borrower permit any
other Credit Party to, directly or indirectly, declare or pay, or incur any liability to declare or
pay, any Restricted Payment; provided, that (a) any Subsidiary of Borrower may make
Distributions to Borrower, (b) any Credit Party may make Distributions to any other Credit Party
that has provided a Facility Guaranty, and all of the Equity of which owned by Borrower or any
Indirect Restricted Subsidiary has been pledged to Administrative Agent pursuant to a Borrower
Pledge Agreement or a Subsidiary Pledge Agreement (as applicable), and (c) for purposes of clarity,
regularly scheduled payments of interest made under, and pursuant to the terms of, the Permitted
Senior Convertible Debt shall not be deemed “Restricted Payments” hereunder.



     Section 9.3 Negative Pledge. Borrower will not, nor will Borrower permit any other
Credit Party to, create, assume or suffer to exist any Lien on any of their respective assets,
other than Permitted Encumbrances.



     Section 9.4 Consolidations and Mergers. Borrower will not, nor will Borrower permit
any other Credit Party to, consolidate or merge with or into any other Person; provided,
that, so long as no Default or Event of Default exists or will result, Borrower or any
Restricted Subsidiary may merge or consolidate with any other Person so long as Borrower or such
Restricted Subsidiary is the surviving Person and, in the case of a Restricted Subsidiary, a wholly
owned Subsidiary of Borrower.



     Section 9.5 Asset Dispositions. Borrower will not, nor will Borrower permit any other
Credit Party to, sell, lease, transfer, abandon or otherwise dispose of any asset other than (a)
the sale in the ordinary course of business of Hydrocarbons produced from Borrower’s Mineral
Interests, (b) the Specified Asset Sales, and (c) the sale, lease, transfer, abandonment, exchange
or other disposition of other assets; provided, that, no sale, lease, transfer,
abandonment, exchange or other disposition by Borrower or any of its Subsidiaries of Borrowing Base
Properties with an aggregate value (which, in the case of assets consisting of Mineral Interests,
shall be the Recognized Value of such Mineral Interests and, in the case of any exchange, shall be
the net value or net Recognized Value realized or resulting from such exchange) in any period
between Scheduled Redeterminations (for purposes of this clause (c) the Closing Date will be deemed
to be a Scheduled Redetermination) in excess of five percent (5%) of the Borrowing Base then in
effect shall be permitted pursuant to this clause (c) unless each of the following conditions is
satisfied: (i) Borrower shall have provided Administrative Agent with not less than ten (10)
Domestic Business Days written notice of such sale, lease, transfer, abandonment, exchange or other
disposition, which notice shall include a specific description of the assets to be sold, leased,
transferred, abandoned, exchanged or otherwise disposed, (ii) any Redetermination of the Borrowing
Base and Conforming Borrowing Base pursuant to Section



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4.4 hereof shall have occurred, (iii) all mandatory prepayments required by Section 2.6 in connection with such sale,
lease, transfer, abandonment, exchange or other disposition are made concurrently with the closing
thereof, (iv) no Borrowing Base Deficiency will exist after consummation of such sale, lease, transfer, abandonment, exchange or other disposition (and
application of the proceeds thereof to the mandatory prepayments required by Section 2.6),
and (v) no Default has occurred which is continuing. In no event will Borrower sell, transfer or
dispose of any Equity in any Restricted Subsidiary nor will any Credit Party (other than Borrower)
issue or sell any Equity or any option, warrant or other right to acquire such Equity or security
convertible into such Equity to any Person other than a Credit Party which is directly or
indirectly wholly-owned by a Credit Party.



     Section 9.6 Amendments to Organizational Documents; Other Material Agreements.
Borrower will not, nor will Borrower permit any other Credit Party to, enter into or permit any
modification or amendment of, or waive any material right or obligation of any Person under, (a)
its certificate or articles of incorporation, bylaws, partnership agreement, regulations or other
organizational documents, other than amendments, modifications and waivers which will not,
individually or in the aggregate, have a Material Adverse Effect, (b) the Permitted Senior
Unsecured Debt Documents, other than amendments, modifications and waivers the effect of which
would not (i) make the terms of any Permitted Senior Unsecured Debt materially more onerous to
Borrower or any of its affiliates, (ii) subject Borrower or any of its affiliates to any additional
material obligation, (iii) increase the principal of, or rate of interest on, any Permitted Senior
Unsecured Debt, (iv) accelerate the date fixed for any payment of principal or interest on any
Permitted Senior Unsecured Debt, or (v) increase the percentage of holders of such Permitted Senior
Unsecured Debt required for any such amendment, modification or waiver from the percentage required
on the date of issuance of such Permitted Senior Unsecured Debt, or (c) the Permitted Senior
Convertible Debt Documents, other than amendments, modifications and waivers the effect of which
would not (i) make the terms of any Permitted Senior Convertible Debt materially more onerous to
Borrower or any of its affiliates, (ii) subject Borrower or any of its affiliates to any additional
material obligation, (iii) increase the principal of, or rate of interest on, any Permitted Senior
Convertible Debt, (iv) accelerate the date fixed for any payment of principal or interest on any
Permitted Senior Convertible Debt, or (v) increase the percentage of holders of such Permitted
Senior Convertible Debt required for any such amendment, modification or waiver from the percentage
required on the date of issuance of such Permitted Senior Convertible Debt.



     Section 9.7 Use of Proceeds. The proceeds of Borrowings will not be used for any
purpose other than (a) working capital, (b) to finance the acquisition, exploration and development
of Mineral Interests and related assets and activities, (c) for general corporate purposes, and (d)
to refinance the Existing Indebtedness. None of such proceeds (including, without limitation,
proceeds of Letters of Credit issued hereunder) will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, and
none of such proceeds will be used in violation of applicable Law (including, without limitation,
the Margin Regulations). Letters of Credit will be issued hereunder only for the purpose of
securing bids, tenders, bonds, contracts and other obligations entered into in the ordinary course
of Borrower’s business, and otherwise to guaranty payment and performance in accordance with the
ordinary practice of Borrower’s business. Without limiting the foregoing, (i) the proceeds of
Borrowings will not be used to repay or prepay all or



59









 







any portion of the Permitted Senior Convertible Debt, and (ii) no Letters of Credit will be issued hereunder for the purpose of or
providing credit enhancement with respect to any Debt or equity security of any Credit Party or to secure any Credit Party’s obligations with respect to Hedge
Transactions entered into with a Person which is not a Bank or an Affiliate of such Bank.



     Section 9.8 Investments. Borrower will not, nor will Borrower permit any other Credit
Party to, directly or indirectly, make or have outstanding any Investment other than Permitted
Investments.



     Section 9.9 Transactions with Affiliates. Borrower will not, nor will Borrower permit
any other Credit Party to, engage in any transaction with an Affiliate unless such transaction is
as favorable to such party as could be obtained in an arm’s length transaction with an unaffiliated
Person in accordance with prevailing industry customs and practices.



     Section 9.10 ERISA. Except in such instances where there would not be a Material
Adverse Effect, Borrower will not, nor will Borrower permit any other Credit Party to (a) take any
action or fail to take any action which would result in a violation of ERISA, the Code or other
Laws applicable to the Plans maintained or contributed to by it or any ERISA Affiliate, or (b)
modify the term of, or the funding obligations or contribution requirements under any existing
Plan, establish a new Plan, or become obligated or incur any liability under a Plan that is not
maintained or contributed to by Borrower or any ERISA Affiliate as of the Closing Date.



     Section 9.11 Hedge Transactions. (a) Borrower will not, nor will Borrower permit any
other Credit Party to, enter into any Oil and Gas Hedge Transactions (which Oil and Gas Hedge
Transactions shall not have a tenor of greater than thirty-six (36) months, in each case measured
from the date (a “Measurement Date”) any such Oil and Gas Hedge Transaction is entered
into) which would cause the amount of (i) oil which is the subject of Oil and Gas Hedge
Transactions in existence at such time to exceed (A) for the period commencing on the applicable
Measurement Date and continuing through and including the date which is twelve (12) months
thereafter (the “Initial Measurement Period”), seventy percent (70%) of Borrower’s
anticipated production of oil from Proved Mineral Interests (as reflected in the most recent Reserve Report delivered to Administrative Agent pursuant to Section 4.1 hereof), (B) for
the period commencing on the day immediately following the end of the Initial Measurement Period
and continuing through and including the date which is twelve months thereafter (the “Second
Measurement Period”), fifty percent (50%) of Borrower’s anticipated production of oil from
Proved Mineral Interests (as reflected in the most recent Reserve Report delivered to
Administrative Agent pursuant to Section 4.1 hereof), and (C) for the period commencing on
the day immediately following the end of the Second Measurement Period and continuing through and
including the date which is twelve (12) months thereafter (the “Third Measurement Period”),
eighty percent (80%) of Borrower’s anticipated production of oil from Proved Producing Mineral
Interests (as reflected in the most recent Reserve Report delivered to Administrative Agent pursuant to Section 4.1 hereof), and (ii) gas which is the subject of Oil and Gas Hedge
Transactions in existence at such time to exceed (A) for the Initial Measurement Period, seventy
percent (70%) of Borrower’s anticipated production of gas from Proved Mineral Interests (as
reflected in the most recent Reserve Report delivered to Administrative Agent pursuant to
Section 4.1 hereof), (B) for the Second Measurement Period, fifty percent (50%) of
Borrower’s anticipated production of gas from Proved Mineral Interests (as reflected in the most



60









 








recent Reserve Report delivered to Administrative Agent pursuant to Section 4.1 hereof),
and (C) for the Third Measurement Period, eighty percent (80%) of Borrower’s anticipated production
of gas from Proved Producing Mineral Interests (as reflected in the most recent Reserve Report
delivered to Administrative Agent pursuant to Section 4.1 hereof). Promptly upon entering
into any Oil and Gas Hedge Transaction, Borrower shall provide to each Bank the certificate
required by Section 8.1(n) hereof.



          (b) Borrower will not, nor will Borrower permit any other Credit Party to, permit its (i)
production of oil during any calendar month to be less than the aggregate amount of oil which is
the subject of Oil and Gas Hedge Transactions during such calendar month, or (ii) production of gas
during any calendar month to be less than the aggregate amount of gas which is the subject of Oil
and Gas Hedge Transactions during such month.



     In addition to the requirements otherwise contained in this Agreement with respect to the
delivery of Reserve Reports, Borrower shall, promptly following the request of Administrative
Agent, deliver a quarterly Reserve Report to Administrative Agent evidencing that Borrower is in
compliance with the terms and provisions of this Section 9.11.



     Section 9.12 Fiscal Year. Borrower will not, nor will Borrower permit any other
Credit Party to, change its Fiscal Year.



     Section 9.13 Change in Business. Borrower will not, nor will Borrower permit any
other Credit Party to, engage in any type of business other than the businesses engaged in by such
parties on the date hereof as described in Section 7.13 or Section 8.2 hereof.



     Section 9.14 Obligations to Unrestricted Subsidiaries. Borrower will not, nor will
Borrower permit any other Credit Party to, incur any liability, Debt or obligation to any
Unrestricted Subsidiary of any nature, or have any liability (whether by operation of law or
otherwise) for any liability, Debt or obligation of any Unrestricted Subsidiary.



ARTICLE X

FINANCIAL COVENANTS




     Borrower agrees that so long as any Bank has any commitment to lend or participate in Letter
of Credit Exposure hereunder or any amount payable under any Revolving Loan remains unpaid or any
Letter of Credit remains outstanding:



     Section 10.1 Current Ratio. As of the end of each Fiscal Quarter, commencing with the
Fiscal Quarter ending December 31, 2008, Borrower will not permit its ratio of Consolidated Current
Assets to Consolidated Current Liabilities to be less than 1.0 to 1.0.



     Section 10.2 Consolidated Net Debt to Consolidated EBITDAX. Commencing with the
Fiscal Quarter ending December 31, 2008, Borrower will not permit, as of the last day of any Fiscal
Quarter, its ratio of Consolidated Net Debt (for the Fiscal Quarter ending on such date) to
Consolidated EBITDAX (for each Rolling Period ending on such date) to be greater than (a) 4.50 to
1.0 for the Rolling Period ending on December 31, 2008, (b) 4.25 to 1.0 for the Rolling Period
ending on March 31, 2009, (c) 4.00 to 1.0 for the Rolling Period ending on June 30, 2009, (d)



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3.75 to 1.0 for the Rolling Period ending on September 30, 2009, and (e) 3.50 to 1.0 for the Rolling
Period ending on December 31, 2009 and for each Rolling Period thereafter.



ARTICLE XI

DEFAULTS




     Section 11.1 Events of Default. If one or more of the following events (collectively
“Events of Default” and individually an “Event of Default”) shall have occurred and
be continuing:



          (a) Borrower shall fail to pay when due any principal on any Revolving Loan;



          (b) Borrower shall fail to pay when due accrued interest on any Revolving Loan or any fees or
any other amount payable hereunder and such failure shall continue for a period of three (3) days
following the due date;



          (c) Borrower shall fail to observe or perform any covenant or agreement contained in
Section 4.5, Section 8.1, Section 8.2, Section 8.3, Section
8.6, Article IX or Article X of this Agreement;



          (d) any Credit Party shall fail to observe or perform any covenant or agreement contained in
this Agreement or the other Loan Papers (other than those referenced in Section 11.1(a),
Section 11.1(b) and Section 11.1(c)) and such failure continues for a period of
thirty (30) days after the earlier of (i) the date any Authorized Officer of any Credit Party
acquires knowledge of such failure, or (ii) written notice of such failure has been given to any
Credit Party by Administrative Agent or any Bank;



          (e) any representation, warranty, certification or statement made or deemed to have been made
by any Credit Party in any certificate, financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any material respect when made;



          (f) any Credit Party shall fail to make any payment when due on any Debt of such Person in a
principal amount equal to or greater than $5,000,000, and such default shall continue for thirty
(30) days, or any other event or condition shall occur which (i) results in the acceleration of the
maturity of any such Debt, or (ii) entitles the holder of such Debt to accelerate the maturity
thereof;



          (g) any Credit Party shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate, partnership or limited liability company action to authorize any of the
foregoing;



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          (h) an involuntary case or other proceeding shall be commenced against any Credit Party
seeking liquidation, reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief shall be entered
against any Credit Party under the federal bankruptcy Laws as now or hereafter in effect;



          (i) one (1) or more final judgments or orders for the payment of money aggregating in excess
of $5,000,000 shall be rendered against any Credit Party and such judgment or order shall continue
unsatisfied and unstayed for thirty (30) days;



          (j) (i) any event occurs with respect to any Plan or Plans pursuant to which any Credit Party
incurs a liability due and owing at the time of such event, without existing funding therefor, for
benefit payments under such Plan or Plans in excess of $1,000,000; or (ii) any Credit Party, any
ERISA Affiliate, or any other “party-in-interest” or “disqualified person,” as such terms are
defined in section 3(14) of ERISA and section 4975(e)(2) of the Code, shall engage in transactions
which in the aggregate result in a direct or indirect liability to any Credit Party or any ERISA
Affiliate in excess of $1,000,000 under section 409 or 502 of ERISA or section 4975 of the Code
which either (A) results in a Lien on any Credit Party’s assets which is not a Permitted
Encumbrance, or (B) continues unsatisfied for a period of thirty (30) days after any Authorized
Officer of any Credit Party first acquires knowledge of such liability;



          (k) a Change of Control shall occur;



          (l) this Agreement or any other Loan Paper shall cease to be in full force and effect or shall
be declared null and void or the validity or enforceability thereof shall be contested or
challenged by any Credit Party, or any Credit Party shall deny that it has any further liability or
obligation under any of the Loan Papers, or any Lien created by the Loan Papers shall for any
reason (other than the release thereof in accordance with the Loan Papers) cease to be a valid,
first priority, perfected Lien (subject to Permitted Encumbrances) upon any of the Proved Mineral
Interests purported to be covered thereby, except as a result of any action or inaction of
Administrative Agent or Banks; or



          (m) in addition to, and not in limitation of, the provisions contained in clause (f) above, a
default or event of default shall occur under any Permitted Senior Unsecured Debt Document or any
Permitted Senior Convertible Debt Document, which such default or event of default shall not be
remedied prior to the expiration of any applicable period of grace or cure under the applicable
Permitted Senior Unsecured Debt Document, or Permitted Senior Convertible Debt Document;


then, and in every such event, Administrative Agent shall without presentment, notice or demand
(unless expressly provided for herein) of any kind (including, without limitation, notice of
intention to accelerate and acceleration), all of which are hereby waived, (a) if requested by
Majority Banks, terminate the Commitments and they shall thereupon terminate, and (b) if requested
by Majority Banks, take such other actions as may be permitted by the Loan Papers including,
declaring the Obligations (together with accrued interest thereon) to be, and the


63









 






Obligations
shall thereupon become, immediately due and payable; provided
that, in the case of any of the Events of
Default specified in Section 11.1(g) or Section 11.1(h), without any notice to any
Credit Party or any other act by Administrative Agent or Banks, the Commitments shall thereupon
terminate and the Obligations (together with accrued interest thereon) shall become
immediately due and payable.




ARTICLE XII

AGENTS




     Section 12.1 Appointment; Nature of Relationship. JPMorgan Chase Bank, N.A. is hereby
appointed by each of the Banks as its contractual representative and Administrative Agent hereunder
and under each other Loan Paper, and each Bank irrevocably authorizes Administrative Agent to act
as the contractual representative of such Bank with the rights and duties expressly set forth
herein and in the other Loan Papers. Administrative Agent agrees to act as such contractual
representative and Administrative Agent upon the express conditions contained in this Article
XII. Notwithstanding the use of the defined term “Administrative Agent,” it is
expressly understood and agreed that Administrative Agent shall not have any fiduciary
responsibilities to any Bank by reason of this Agreement or any other Loan Paper and that
Administrative Agent is merely acting as the contractual representative of the Banks with only
those duties as are expressly set forth in this Agreement and the other Loan Papers. In its
capacity as the Banks’ contractual representative, Administrative Agent (a) does not hereby assume
any fiduciary duties to any of the Banks, (b) is a “representative” of the Banks within the meaning
of the term “secured party” as defined in the Illinois Uniform Commercial Code, and (c) is acting
as an independent contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Papers. Each of the Banks hereby agree not to assert
any claim against Administrative Agent on any theory of liability for breach of fiduciary duty, any
and all of which claims each Bank hereby waives.



     Section 12.2 Powers. Administrative Agent shall have and may exercise such powers
under the Loan Papers as are specifically delegated to Administrative Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. Administrative Agent
shall have no implied duties to the Banks, or any obligation to the Banks to take any action
thereunder except any action specifically provided by the Loan Papers to be taken by Administrative
Agent.



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



     Section 12.4 No Responsibility for Loans, Recitals, etc. Neither Administrative Agent
nor any of its directors, officers, agents or employees shall be responsible for or have any duty
to ascertain, inquire into, or verify (a) any statement, warranty or representation made in
connection with any Loan Paper or any Borrowing hereunder; (b) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Paper, including, without



64









 







limitation, any agreement by an obligor to furnish information directly to each Bank; (c) the satisfaction of
any condition specified in Article VI, except receipt of items required to be delivered
solely to Administrative Agent; (d) the existence or possible existence of any Default or Event of Default; (e) the validity, enforceability, effectiveness, sufficiency or
genuineness of any Loan Paper or any other instrument or writing furnished in connection therewith;
(f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (g) the financial condition of Borrower or any guarantor of any of the Obligations or
of any of Borrower’s or any such guarantor’s respective Subsidiaries. Administrative Agent shall
have no duty to disclose to the Banks information that is not required to be furnished by Borrower
to Administrative Agent at such time, but is voluntarily furnished by Borrower to JPMorgan (either
in its capacity as Administrative Agent or in its individual capacity). Except as expressly set
forth herein, Administrative Agent shall not have any duty to disclose, and shall not be liable for
the failure to disclose, any information relating to any Credit Party that is communicated to or
obtained by it or any of its Affiliates.



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



     Section 12.6 Employment of Agents and Counsel. Administrative Agent may execute any
of its duties as Administrative Agent hereunder and under any other Loan Paper by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the Banks, except as to
money or securities received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Administrative Agent shall
be entitled to advice of counsel concerning the contractual arrangement between Administrative
Agent and the Banks and all matters pertaining to Administrative Agent’s duties hereunder and under
any other Loan Paper.



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



     Section 12.8 Administrative Agent’s Reimbursement and Indemnification. Banks agree to
reimburse and indemnify Administrative Agent ratably in proportion to their respective Commitments
(or, if the Commitments have been terminated, in proportion to their Commitments immediately prior
to such termination) (a) for any amounts not reimbursed by Borrower for which Administrative Agent
is entitled to reimbursement by Borrower under the



65









 







Loan Papers, (b) for any other expenses incurred by Administrative Agent on behalf of the Banks, in connection with the preparation, execution,
delivery, administration and enforcement of the Loan Papers (including, without limitation, for any
expenses incurred by Administrative Agent in connection with any dispute between Administrative Agent and any Bank or between two
or more of the Banks) and (c) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or
arising out of the Loan Papers or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such amounts incurred by
or asserted against Administrative Agent in connection with any dispute between Administrative
Agent and any Bank or between two or more of the Banks), or the enforcement of any of the terms of
the Loan Papers or of any such other documents; provided
that no Bank shall be liable for any of
the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of
Administrative Agent. The obligations of the Banks under this Section 12.8 shall survive
payment of the Obligations and termination of this Agreement.



     Section 12.9 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default hereunder unless
Administrative Agent has received written notice from a Bank 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 Administrative Agent receives such a notice, Administrative Agent
shall give prompt notice thereof to the Banks.



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



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



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     Section 12.12 Successor Administrative Agent. Administrative Agent may resign at any
time by giving written notice thereof to Banks and Borrower, such resignation to be effective upon
the appointment of a successor Administrative Agent or, if no successor Administrative Agent has
been appointed, forty-five (45) days after the retiring Administrative Agent gives notice of its intention to resign. Upon any such resignation, Majority Banks shall have the
right to appoint, on behalf of Borrower and the Banks, a successor Administrative Agent, which
shall be approved by Borrower, such approval not to be unreasonably withheld; provided,
that, Borrower shall not have the right to approve any successor Administrative Agent
appointed during the continuance of any Default. If no successor Administrative Agent shall have
been so appointed by Majority Banks within thirty (30) days after the resigning Administrative
Agent’s giving notice of its intention to resign, then the resigning Administrative Agent may
appoint, on behalf of Borrower and Banks, a successor Administrative Agent which shall be approved
by Borrower, such approval not to be unreasonably withheld; provided, that,
Borrower shall not have the right to approve any successor Administrative Agent appointed during
the continuance of any Default. If Administrative Agent has resigned and no successor
Administrative Agent has been appointed, Banks may perform all the duties of Administrative Agent
hereunder and Borrower shall make all payments in respect of the Obligations to the applicable Bank
and for all other purposes shall deal directly with the Banks; provided, however, that the
Administrative Agent shall retain all rights and obligations under and with respect to each of the
Mortgages, the Borrower Pledge Agreement, the Subsidiary Pledge Agreements and all related
financing statements and any other financing statements, agreements, documents or instruments
relating thereto or contemplated hereby or thereby until such time as a successor Administrative
Agent shall have accepted an appointment hereunder. No successor Administrative Agent shall be
deemed to be appointed hereunder until such successor Administrative Agent has accepted the
appointment. Any such successor Administrative Agent shall be a commercial bank having capital and
retained earnings of at least $100,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and
duties of the resigning Administrative Agent. Upon the effectiveness of the resignation of
Administrative Agent, the resigning Administrative Agent shall be discharged from its duties and
obligations hereunder and under the Loan Papers. After the effectiveness of the resignation of an
Administrative Agent, the provisions of this Article XII shall continue in effect for the
benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it
while it was acting as Administrative Agent hereunder and under the other Loan Papers. In the
event that there is a successor to Administrative Agent by merger, or Administrative Agent assigns
its duties and obligations to an Affiliate pursuant to this Section 12.12, then the term
“Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Administrative Agent.



     Section 12.13 Delegation to Affiliates. Borrower and Banks agree that Administrative
Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such
Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs duties in
connection with this Agreement shall be entitled to the same benefits of the indemnification,
waiver and other protective provisions to which Administrative Agent is entitled under Article
XII and Article XIII.



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     Section 12.14 Execution of Collateral Documents. Without limiting the powers and
authority of Administrative Agent described herein, the Banks hereby empower and authorize
Administrative Agent to execute and deliver to Borrower on their behalf the Mortgages (including,
without limitation, any amendments to the Existing Mortgages), the Borrower Pledge Agreements, the
Subsidiary Pledge Agreements and all related financing statements and any other financing statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the foregoing instruments.



     Section 12.15 Collateral Releases. Banks hereby empower and authorize Administrative
Agent to execute and deliver to Borrower on their behalf any agreements, documents or instruments
as shall be necessary or appropriate to effect any releases of collateral which shall be permitted
by the terms hereof or of any other Loan Paper or which shall otherwise have been approved by
Majority Banks (or, if required by the terms of Section 14.5, all of the Banks) in writing.



     Section 12.16 Agents. None of the Banks (if any) identified in, or appointed at any
time under, this Agreement as a “Documentation Agent,” a “Co-Documentation Agent,” a “Syndication
Agent”, a “Co-Syndication Agent”, a “Joint Lead Arranger” and/or a “Joint Bookrunner” shall have
any right, power, obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, none of any such Agents
shall have or be deemed to have a fiduciary relationship with any Bank. Each Bank hereby makes the
same acknowledgments with respect to any such Agents as it makes with respect to Administrative
Agent in Section 12.11.



ARTICLE XIII

CHANGE IN CIRCUMSTANCES




     Section 13.1 Increased Cost and Reduced Return.



          (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any
change in any applicable law, rule, or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank, or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive (whether or not having the force of law) of any such
Governmental Authority, central bank, or comparable agency:





          (i) shall subject such Bank (or its Applicable Lending Office) to any tax, duty, or
other charge with respect to any Eurodollar Loans, its Note, or its obligation to make
Eurodollar Loans, or change the basis of taxation of any amounts payable to such Bank (or
its Applicable Lending Office) under this Agreement or its Note in respect of any Eurodollar
Loans (other than taxes imposed on the overall net income of such Bank or such Applicable
Lending Office);




          (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment,
compulsory loan, or similar requirement (other than the Reserve Requirement utilized in the
determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or



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commitments of, such Bank (or its Applicable Lending Office), including the Commitment of such Bank hereunder; or




          (iii) shall impose on such Bank (or its Applicable Lending Office) or on the London
interbank market any other condition affecting this Agreement or its Note or any of such
extensions of credit or liabilities or commitments;


and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making, Converting into, Continuing, or maintaining any Eurodollar Loans or to
reduce any sum received or receivable by such Bank (or its Applicable Lending Office) under this
Agreement or its Note with respect to any Eurodollar Loans, then the Borrower shall pay to such
Bank on demand such amount or amounts as will compensate such Bank for such increased costs or
reductions incurred or experienced within one hundred twenty (120) days of such demand. If any
Bank requests compensation by Borrower under this Section 13.1(a), the Borrower may, by
notice to such Bank (with a copy to Administrative Agent), suspend the obligation of such Bank to
make or Continue Eurodollar Loans or to Convert all or part of the Base Rate Loan owing to such
Bank into Eurodollar Loans, until the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 13.4 shall be applicable);
provided, that such suspension shall not affect the right of such Bank to receive
the compensation so requested.




          (b) If, after the date hereof, any Bank shall have determined that the adoption of any
applicable law, rule, or regulation regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any Governmental Authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank, or comparable agency, has or would have the effect of reducing the rate of
return on the capital of such Bank or any corporation controlling such Bank as a consequence of
such Bank’s obligations hereunder to a level below that which such Bank or such corporation could
have achieved but for such adoption, change, request, or directive (taking into consideration its
policies with respect to capital adequacy), then, from time to time upon demand, Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for such reductions
experienced within one hundred twenty (120) days of such demand; provided, that, if
such adoption, change, request or directive giving rise to such reductions is retroactive, then the
one hundred twenty (120) day period referred to above shall be extended to include the period of
retroactive effect thereof.



          (c) Each Bank shall promptly notify Borrower and Administrative Agent of any event of which it
has knowledge, occurring after the date hereof, which will entitle such Bank to compensation
pursuant to this Section 13.1 and will designate a different Applicable Lending Office if
such designation will avoid the need for, or reduce the amount of, such compensation and will not,
in the judgment of such Bank, be otherwise disadvantageous to it. Any Bank claiming compensation
under this Section 13.1 shall furnish to Borrower and Administrative Agent a statement
setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive
in the absence of manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.



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     Section 13.2 Limitation on Type of Loans. If on or prior to the first day of any
Interest Period for any Eurodollar Loan:



          (a) Administrative Agent determines (which determination shall be conclusive) that by reason
of circumstances affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period; or




          (b) Majority Banks determine (which determination shall be conclusive) and notify
Administrative Agent that the Adjusted Eurodollar Rate will not adequately and fairly reflect the
cost to Banks of funding Eurodollar Loans for such Interest Period;



then Administrative Agent shall give Borrower prompt notice thereof specifying the relevant Type of
Revolving Loans and the relevant amounts or periods, and so long as such condition remains in
effect, Banks shall be under no obligation to make additional Revolving Loans of such Type,
Continue Revolving Loans of such Type, or to Convert Revolving Loans of any other Type into
Revolving Loans of such Type, and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Revolving Loans of the affected Type, either prepay such Revolving
Loans or Convert such Revolving Loans into another Type of Revolving Loan in accordance with the
terms of this Agreement.




     Section 13.3 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Bank or its Applicable Lending Office to make, maintain,
or fund Eurodollar Loans hereunder, then such Bank shall promptly notify Borrower thereof and such
Bank’s obligation to make or Continue Eurodollar Loans and to Convert other Types of Revolving
Loans into Eurodollar Loans shall be suspended until such time as such Bank may again make,
maintain, and fund Eurodollar Loans (in which case the provisions of Section 13.4 shall be
applicable).



     Section 13.4 Treatment of Affected Loans. If the obligation of any Bank to make
particular Eurodollar Loans or to Continue Revolving Loans, or to Convert Revolving Loans of
another Type into Revolving Loans of a particular Type shall be suspended pursuant to Section
13.1 or Section 13.3 hereof (Revolving Loans of such Type being herein called
“Affected Loans” and such Type being herein called the “Affected Type”), such
Bank’s Affected Loans shall be automatically Converted into the Base Rate Loan on the last day(s)
of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required
by Section 13.3 hereof, on such earlier date as such Bank may specify to Borrower with a
copy to Administrative Agent) and, unless and until such Bank gives notice as provided below that
the circumstances specified in Section 13.1 or Section 13.3 hereof that gave rise
to such Conversion no longer exist:



          (a) to the extent that such Bank’s Affected Loans have been so Converted, all payments and
prepayments of principal that would otherwise be applied to such Bank’s Affected Loans shall be
applied instead to the Base Rate Loan; and



          (b) all Revolving Loans that would otherwise be made or Continued by such Bank as Revolving
Loans of the Affected Type shall be made or Continued instead as part of the Base Rate Loan, and
all Revolving Loans of such Bank that would otherwise be Converted into



70









 







Revolving Loans of the Affected Type shall be Converted instead into (or shall remain) as part of the Base Rate Loan.


If such Bank gives notice to Borrower (with a copy to Administrative Agent) that the circumstances
specified in Section 13.1 or Section 13.3 hereof that gave rise to the Conversion of such Bank’s
Affected Loans pursuant to this Section 13.4 no longer exist (which such Bank agrees to do promptly
upon such circumstances ceasing to exist) at a time when Revolving Loans of the Affected Type made by other Banks are outstanding, such Bank’s portion of the Base Rate Loan
shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Revolving Loans of the Affected Type, to the extent necessary so that, after
giving effect thereto, all Revolving Loans held by Banks holding Revolving Loans of the Affected
Type and by such Bank are held pro rata (as to principal amounts, Types and Interest Periods) in
accordance with their respective Commitments.




     Section 13.5 Compensation. Upon the request of any Bank, Borrower shall pay to such
Bank such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it
as a result of:



          (a) any payment, prepayment, or Conversion of a Eurodollar Loan for any reason (including,
without limitation, the acceleration of the Revolving Loan) on a date other than the last day of
the Interest Period for such Loan; or




          (b) any failure by the Borrower for any reason (including, without limitation, the failure of
any condition precedent specified in Article VI to be satisfied) to borrow, Convert,
Continue, or prepay a Eurodollar Loan on the date for such Borrowing, Conversion, Continuation, or
prepayment specified in the relevant Request for Borrowing, Notice of Continuation or Conversion,
or other notice of Borrowing, prepayment, Continuation, or Conversion under this Agreement.




     Section 13.6 Taxes.



          (a) Any and all payments by Borrower to or for the account of any Bank or Administrative Agent
hereunder or under any other Loan Paper shall be made free and clear of and without deduction for
any and all present or future Taxes, duties, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Bank and
Administrative Agent, Taxes imposed on its income, and franchise Taxes imposed on it (all such
non-excluded Taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities
being hereinafter referred to in this Section 13.6 as “Non-Excluded Taxes”). If
Borrower shall be required by Law to deduct any Non-Excluded Taxes from or in respect of any sum
payable under this Agreement or any other Loan Paper to any Bank or Administrative Agent, (i) the
sum payable shall be increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 13.6) such Bank or
Administrative Agent receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in accordance with applicable
Law, and (iv) Borrower shall furnish to Administrative Agent, at its



71









 







address set forth on Schedule 1.1 hereto, the original or a certified copy of a receipt evidencing payment
thereof.



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



          (c) Borrower agrees to indemnify each Bank and Administrative Agent for the full amount of
Non-Excluded Taxes and Other Taxes (including, without limitation, any Non-Excluded Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 13.6)
paid by such Bank or Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.



          (d) Each Bank organized under the Laws of a jurisdiction outside the United States, on or
prior to the date of its execution and delivery of this Agreement in the case of each Bank listed
on Schedule 1.1 hereto and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in writing by Borrower or
Administrative Agent (but only so long as such Bank remains lawfully able to do so), shall provide
Borrower and Administrative Agent, at the time or times prescribed by applicable Law, with such
properly completed and executed documentation prescribed by applicable Law (or reasonably requested
by Borrower) certifying that such Bank is entitled to benefits under an income tax treaty to which
the United States is a party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States, and certifying that such Bank is entitled to
an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the
other Loan Papers.



          (e) For any period with respect to which a Bank has failed to provide Borrower and
Administrative Agent with the appropriate form pursuant to Section 13.6(d) (unless such
failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which
a form originally was required to be provided), such Bank shall not be entitled to indemnification
under Section 13.6(a), Section 13.6(b) or Section 13.6(c) with respect to
Non-Excluded Taxes imposed by the United States; provided, however, that should a
Bank, which is otherwise exempt from or subject to a reduced rate of withholding Tax, become
subject to Non-Excluded Taxes because of its failure to deliver a form required hereunder, Borrower
shall take such steps as such Bank shall reasonably request to assist such Bank to recover such
Non-Excluded Taxes.



          (f) If Borrower is required to pay additional amounts to or for the account of any Bank
pursuant to this Section 13.6, then such Bank will agree to use reasonable efforts to
change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not
otherwise disadvantageous to such Bank.



72









 





          (g) Within thirty (30) days after the date of any payment of Non-Excluded Taxes, Borrower
shall furnish to Administrative Agent the original or a certified copy of a receipt evidencing such
payment.



          (h) Without prejudice to the survival of any other agreement of Borrower hereunder, the
agreements and obligations of Borrower contained in this Section 13.6 shall survive the
termination of the Commitments and the payment in full of the Revolving Loan.



     Section 13.7 Discretion of Banks as to Manner of Funding. Notwithstanding any
provisions of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its
funding of all or any part of its Commitment in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder shall be made as if
such Bank had actually funded and maintained each Eurodollar Loan during the Interest Period for
such Eurodollar Loan through the purchase of deposits having a maturity corresponding to the last
day of such Interest Period and bearing an interest rate equal to the Adjusted Eurodollar Rate for
such Interest Period.



ARTICLE XIV

MISCELLANEOUS




     Section 14.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, telecopy or similar writing) and shall be
given, if to Administrative Agent or any Bank, at its address or telecopier number set forth on
Schedule 1.1 hereto, and if given to Borrower, at its address or telecopy number set forth
on the signature pages hereof (or in either case, at such other address or telecopy number as such
party may hereafter specify for the purpose by notice to the other parties hereto). Each such
notice, request or other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 14.1 and the
appropriate answerback is received or receipt is otherwise confirmed, (b) if given by mail, three
(3) Domestic Business Days after deposit in the mails with first class postage prepaid, addressed
as aforesaid, or (c) if given by any other means, when delivered at the address specified in this
Section 14.1; provided that notices to Administrative Agent under Article II or
Article III shall not be effective until received.



     Section 14.2 No Waivers. No failure or delay by Administrative Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note or other Loan Paper shall
operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided
by Law or in any of the other Loan Papers.



     Section 14.3 Expenses; Indemnification.



          (a) Borrower agrees to pay on demand all reasonable costs and expenses of Administrative Agent
and JPMSI, in its capacity as Joint Lead Arranger and Joint Bookrunner, in connection with the
syndication, preparation, execution, delivery, modification, and amendment of this Agreement, the
other Loan Papers, and the other documents to be delivered hereunder,



73









 







including, without limitation, the reasonable fees and expenses of counsel for Administrative Agent with respect
thereto and with respect to advising Administrative Agent as to its rights and responsibilities
under the Loan Papers. Borrower further agrees to pay on demand all costs and expenses of
Administrative Agent and Banks, if any (including, without limitation, reasonable attorneys’ fees
and expenses), in connection with (i) the enforcement (whether through negotiations, legal
proceedings, or otherwise) of the Loan Papers and the other documents to be delivered hereunder,
and (ii) any forbearance or workout, or any modifications to the Loan Papers, following an Event of
Default. Each demand for payment of costs and expenses shall include a reasonably detailed list of such costs and expenses, and such costs and expenses
payable hereunder shall not include the allocated costs of internal counsel of any Agent or Bank.



          (b) BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS EACH AGENT AND EACH BANK AND EACH OF THEIR
AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN
“INDEMNIFIED PARTY”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES,
COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE
INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN EACH CASE ARISING OUT OF OR IN
CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY
INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE
LOAN PAPERS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE
PROCEEDS OF THE REVOLVING LOAN (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE
INDEMNIFIED PARTY), EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS
FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM SUCH INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE CASE OF AN
INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 14.3
APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR
PROCEEDING IS BROUGHT BY CREDIT PARTIES, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNIFIED
PARTY OR ANY OTHER PERSON OR ANY INDEMNIFIED PARTY IS OTHERWISE A PARTY THERETO AND WHETHER OR NOT
THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED. BORROWER AGREES NOT TO ASSERT ANY CLAIM
AGAINST ANY AGENT, ANY BANK, ANY OF THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS, AND ADVISERS, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO THE LOAN
PAPERS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS
OF THE REVOLVING LOAN.



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          (c) Without prejudice to the survival of any other agreement of Borrower hereunder, the
agreements and obligations of Borrower contained in this Section 14.3 shall survive the
payment in full of the Revolving Loan and all other amounts payable under this Agreement.



     Section 14.4 Right of Set-off; Adjustments.



          (a) Upon the occurrence and during the continuance of any Event of Default, each Bank (and
each of its Affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time
owing by such Bank (or any of its Affiliates) to or for the credit or the account of any Credit
Party against any and all of the Obligations, irrespective of whether such Bank shall have made any
demand under this Agreement or Note held by such and although such obligations may be unmatured.
Each Bank agrees promptly to notify the affected Credit Party after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The rights of each Bank
under this Section 14.4 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Bank may have.



          (b) If any Bank (a “benefitted Bank”) shall at any time receive any payment of all or
part of the amounts owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Bank, if any, in respect of such other Bank’s
amounts owing to it, or interest thereon, such benefitted Bank shall purchase for cash from the
other Banks a participating interest in such portion of each such other Bank’s amounts owing to it,
or shall provide such other Banks with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each other Bank; provided,
however, that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Borrower agrees that any
Bank so purchasing a participation from a Bank pursuant to this Section 14.4 may, to the
fullest extent permitted by Law, exercise all of its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Person were the direct creditor of
Borrower in the amount of such participation.



          (c) Each Bank is authorized (but not obligated) to debit any deposit account of the Borrower
now or hereafter maintained by the Borrower with such Bank to pay any Obligations that are then due
and owing and are not paid within 10 Domestic Business Days after request therefor.



     Section 14.5 Amendments and Waivers. Subject to the provisions of Section
14.10(f), any provision of this Agreement, the Notes or any other Loan Paper may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by Borrower and
Majority Banks (and, if the rights or duties of any Agent or Letter of Credit Issuer are affected
thereby, by such Agent or Letter of Credit Issuer, as applicable);
provided that no such



75









 







amendment or waiver shall, (1) unless signed by all Banks, (a) increase the Commitment of any Bank, (b)
reduce the principal of or rate of interest on any Revolving Loan or any fees or other amounts
payable hereunder or for termination of any Commitment, (c) change the percentage of the Total
Commitment, or the number of Banks which shall be required for Banks or any of them to take any
action under this Section 14.5 or any other provision of this Agreement, (d) extend the due
date for, or forgive any principal, interest, fees or reimbursement obligations due hereunder, (e)
release any material guarantor or other material party liable for all or any part of the
Obligations or release any material part of the collateral for the Obligations or any part thereof
other than releases required pursuant to sales of collateral which are expressly permitted by Section 9.5 hereof, (f) amend or modify any of the provisions of Article IV
hereof or the definitions of any terms defined therein, (g) permit the Borrower to assign its
rights hereunder, (h) increase any Borrowing Base (or Conforming Borrowing Base, as applicable)
above the Borrowing Base (or Conforming Borrowing Base, as applicable) then in effect or (i)
establish a Borrowing Base in an amount greater than the Conforming Borrowing Base or (2) unless
signed by Required Banks, decrease or reaffirm the Borrowing Base or Conforming Borrowing Base.
Notwithstanding anything to the contrary herein, no Defaulting Bank shall have any right to approve
or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Bank
may not be increased or extended without the consent of such Bank.



     Section 14.6 Survival. All representations, warranties and covenants made by any
Credit Party herein or in any certificate or other instrument delivered by it or in its behalf
under the Loan Papers shall be considered to have been relied upon by Banks and shall survive the
delivery to Banks of such Loan Papers or the extension of the Revolving Loan (or any part thereof),
regardless of any investigation made by or on behalf of Banks. The indemnity provided in
Section 14.3(b) herein shall survive the repayment of all Obligations and/or the discharge
or release of any Lien granted hereunder or in any other Loan Paper, contract or agreement between
Borrower or any other Credit Party and any Agent or any Bank.



     Section 14.7 Limitation on Interest. Regardless of any provision contained in the
Loan Papers, Banks shall never be entitled to receive, collect, or apply, as interest on the
Revolving Loan, any amount in excess of the Maximum Lawful Rate, and in the event any Bank ever
receives, collects or applies as interest any such excess, such amount which would be deemed
excessive interest shall be deemed a partial prepayment of principal and treated hereunder as such;
and if the Revolving Loan is paid in full, any remaining excess shall promptly be paid to Borrower.
In determining whether or not the interest paid or payable under any specific contingency exceeds
the Maximum Lawful Rate, Borrower and Banks shall, to the extent permitted under applicable Law,
(a) characterize any non-principal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof and (c) amortize, prorate, allocate and
spread, in equal parts, the total amount of the interest throughout the entire contemplated term of
the Revolving Loan, so that the interest rate is the Maximum Lawful Rate throughout the entire term
of the Revolving Loan; provided, however, that if the unpaid principal
balance thereof is paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence thereof exceeds the
Maximum Lawful Rate, Banks shall refund to Borrower the amount of such excess and, in such event,
Banks shall not be subject to any penalties provided by any Laws for contracting for, charging,
taking, reserving or receiving interest in excess of the Maximum Lawful Rate.



76









 





     Section 14.8 Invalid Provisions. If any provision of the Loan Papers is held to be
illegal, invalid, or unenforceable under present or future Laws effective during the term thereof,
such provision shall be fully severable, the Loan Papers shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance therefrom. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision there shall be added automatically as a part of the Loan Papers a provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.



     Section 14.9 Waiver of Consumer Credit Laws. Pursuant to Chapter 346 of the Texas
Finance Code, as amended, Borrower agrees that such Chapter 346 shall not govern or in any manner
apply to the Revolving Loan.



     Section 14.10 Assignments and Participations.



          (a) Successors and Assigns. The terms and provisions of the Loan Papers shall be
binding upon and inure to the benefit of Borrower and Banks and their respective successors and
assigns permitted hereby, except that (i) Borrower shall not have the right to assign its rights or
obligations under the Loan Papers without the prior written consent of each Bank, (ii) any
assignment by any Bank must be made in compliance with Section 14.10(c), and (iii) any
transfer by participation must be made in compliance with Section 14.10(b). Any attempted
assignment or transfer by any party not made in compliance with this Section 14.10(a) shall
be null and void, unless such attempted assignment or transfer is treated as a participation in
accordance with Section 14.10(b). The parties to this Agreement acknowledge that clause
(ii) of this Section 14.10(a) relates only to absolute assignments and this Section
14.10(a) does not prohibit assignments creating security interests, including, without
limitation, (x) any pledge or assignment by any Bank of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Bank which is a Fund, any
pledge or assignment of all or any portion of its rights under this Agreement and any Note to its
trustee in support of its obligations to its trustee; provided, however,
that no such pledge or assignment creating a security interest shall release the transferor
Bank from its obligations hereunder unless and until the parties thereto have complied with the
provisions of Section 14.10(c). Administrative Agent may treat the Person which made any
Revolving Loan or which holds any Note as the owner thereof for all purposes hereof unless and
until such Person complies with Section 14.10(c); provided, however,
that Administrative Agent may in its discretion (but shall not be required to) follow
instructions from the Person which made any Revolving Loan or which holds any Note to direct
payments relating to such Revolving Loan or Note to another Person. Any assignee of the rights to
any Revolving Loan or any Note agrees by acceptance of such assignment to be bound by all the terms
and provisions of the Loan Papers. Any request, authority or consent of any Person, who at the
time of making such request or giving such authority or consent is the owner of the rights to any
Revolving Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and
binding on any subsequent holder or assignee of the rights to such Revolving Loan.



77









 





          (b) Participations.





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




          (ii) Each Bank shall retain the sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any provision of the Loan Papers other
than any amendment, modification or waiver with respect to any Revolving Loan or Commitment
in which such Participant has an interest which would require consent of all of the Banks
pursuant to the terms of Section 14.5 or of any other Loan Paper.




          (iii) Borrower agrees that each Participant shall be deemed to have the right of setoff
provided in Section 14.4 in respect of its participating interest in amounts owing
under the Loan Papers to the same extent as if the amount of its participating interest were
owing directly to it as a Bank under the Loan Papers; provided, that each
Bank shall retain the right of setoff provided in Section 14.4 with respect to the
amount of participating interests sold to each Participant. Banks agree to share with each
Participant, and each Participant, by exercising the right of setoff provided in Section
14.4, agrees to share with each Bank, any amount received pursuant to the exercise of
its right of setoff, such amounts to be shared in accordance with Section 14.4 as if
each Participant were a Bank. Borrower further agrees that each Participant shall be
entitled to the yield protection provisions contained in Article XIII to the same
extent as if it were a Bank and had acquired its interest by assignment pursuant to
Section 14.10(c); provided, that (A) a Participant shall not be
entitled to receive any greater payment under Article XIII than the Bank who sold
the participating interest to such Participant would have received had it retained such
interest for its own account, unless the sale of such interest to such Participant is made
with the prior written consent of Borrower, and (B) any Participant not incorporated under
the laws of the United States of America or any State thereof agrees to comply with the
provisions of Section 13.6 to the same extent as if it were a Bank.



          (c) Assignments.





          (i) Any Bank may at any time assign to one or more banks or other entities
(“Purchasers”) all or any part of its rights and obligations under the Loan Papers.
The parties to such assignment shall execute and deliver an Assignment and Acceptance



78









 







Agreement (herein so called) which shall be substantially in the form of Exhibit J
or in such other form as may be agreed to by the parties thereto. Each such assignment with
respect to a Purchaser which is not a Bank or an Affiliate of a Bank or an Approved Fund
shall either be in an amount equal to the entire applicable Commitment and Revolving Loans
of the assigning Bank or (unless each of Borrower and Administrative Agent otherwise
consents) be in an aggregate amount not less than $5,000,000. The amount of the assignment
shall be based on the Commitment or outstanding Revolving Loans (if the Commitment has been
terminated) subject to the assignment, determined as of the date of
such assignment or as of the “Effective Date,” if the “Effective Date” is specified in
the Assignment and Acceptance Agreement.




          (ii) The consent of Borrower shall be required prior to an assignment becoming
effective unless Purchaser is a Bank, an Affiliate of a Bank or an Approved Fund, provided
that the consent of Borrower shall not be required if a Default has occurred and is
continuing. The consent of Administrative Agent shall be required prior to an assignment
becoming effective unless the Purchaser is a Bank, an Affiliate of a Bank or an Approved
Fund. The consent of Letter of Credit Issuer shall be required prior to an assignment of a
Commitment becoming effective unless Purchaser is a Bank, an Affiliate of a Bank or an
Approved Fund. Any consent required under this Section 14.10(c)(ii) shall not be
unreasonably withheld or delayed.




          (iii) Upon (A) delivery to Administrative Agent of an Assignment and Acceptance
Agreement, together with any consents required by Section 14.10(c)(i) and
(ii), and (B) payment of a $3,500 fee to Administrative Agent for processing such
assignment (unless such fee is waived by Administrative Agent), such assignment shall become
effective on the effective date specified in such Assignment and Acceptance Agreement. On
and after the effective date of such assignment, such Purchaser shall for all purposes be a
Bank party to this Agreement and any other Loan Paper executed by or on behalf of Banks and
shall have all the rights and obligations of a Bank under the Loan Papers, to the same
extent as if it were an original party thereto, and the transferor Bank shall be released
with respect to the Commitment and Revolving Loans assigned to such Purchaser without any
further consent or action by Borrower, Banks or Administrative Agent. In the case of an
assignment covering all of the assigning Bank’s rights and obligations under this Agreement,
such Bank shall cease to be a Bank hereunder but shall continue to be entitled to the
benefits of, and subject to, those provisions of this Agreement and the other Loan Papers
which survive payment of the Obligations and termination of the applicable agreement. Any
assignment or transfer by a Bank of rights or obligations under this Agreement that does not
comply with this Section 14.10(c) shall be treated for purposes of this Agreement as
a sale by such Bank of a participation in such rights and obligations in accordance with
Section 14.10(b). Upon the consummation of any assignment to a Purchaser pursuant
to this Section 14.10(c), the transferor Bank, Administrative Agent and Borrower
shall make appropriate arrangements so that new Notes or, as appropriate, replacement Notes
are issued to such transferor Bank (if such transferor Bank requests a Note) and new Notes
or, as appropriate, replacement Notes, are issued to such Purchaser (if such Purchaser
requests a Note), in each case in principal amounts reflecting their respective Commitments,
as adjusted pursuant to such assignment.



79









 






          (iv) Administrative Agent, acting solely for this purpose as an agent of Borrower,
shall maintain at one of its offices in Chicago, Illinois or Dallas, Texas a copy of each
Assignment and Acceptance Agreement delivered to it and a register for the recordation of
the names and addresses of the Banks, and the Commitments of, and principal amounts of the
Revolving Loans owing to, each Bank pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and Borrower,
Administrative Agent and Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall
be available for inspection by Borrower and any Bank, at any reasonable time and from time
to time upon reasonable prior notice.




          (v) Notwithstanding anything to the contrary contained in this Agreement, in no case
may a Bank assign all or a portion of its rights and obligations under this Agreement to the
Borrower or to any Affiliate of the Borrower.



          (d) Dissemination of Information. Borrower authorizes each Bank to disclose to any
Participant or Purchaser or any other Person acquiring an interest in the Loan Papers by operation
of law (each a “Transferee”) and any prospective Transferee any and all information in such
Bank’s possession concerning the creditworthiness of Borrower and its Subsidiaries, including,
without limitation, any information contained in any financial reports; provided,
that, each Transferee and prospective Transferee agrees to be bound by Section
14.17 of this Agreement.




          (e) Tax Treatment. If any interest in any Loan Paper is transferred to any Transferee
which is not incorporated under the laws of the United States or any State thereof, the transferor
Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 13.6.




          (f) Procedures for Commitment Increases and Addition of New Banks. This Agreement
permits certain increases of a Bank’s Commitment and the admission of new Banks providing new
Commitments, none of which requires any consent or approvals from the other Banks. Any amendment
hereto for such a Commitment Increase or addition shall be in the form attached hereto as
Exhibit L and, subject to the terms and conditions set forth in clause (ii) of Section
2.10 and in the form attached hereto as Exhibit L, shall only require the written
signatures of Administrative Agent, Borrower, the Bank(s) being added or increasing their
Commitment and, if a new Bank is being admitted, the Letter of Credit Issuer. On the effective
date of any such Commitment Increase, Administrative Agent, Borrower and applicable Banks shall
make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to
the applicable Banks, in each case in principal amounts reflecting their respective Commitments,
after giving effect to such Commitment Increase. In addition, within a reasonable period of time
after the effective date of any Commitment Increase, Administrative Agent shall, and is hereby
authorized and directed to, revise Schedule 1.1 to reflect such Commitment Increase and
shall distribute such revised Schedule 1.1 to each of the Banks and Borrower, whereupon
such revised Schedule 1.1 shall replace the old Schedule 1.1 and become part of
this Agreement. On the first Domestic Business Day immediately following any such Commitment
Increase, all outstanding Base Rate Loans shall be reallocated among the Banks (including any


80









 









newly added Bank(s)) in accordance with the Banks’ respective revised pro rata shares of such outstanding
Base Rate Loans. Eurodollar Loans shall not be reallocated among the Banks prior to the expiration
of the applicable Interest Periods in effect at the time of any such Commitment Increase.




     Section 14.11 TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN PAPERS HAVE
BEEN EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE LAWS OF ANY STATE IN WHICH
ANY PROPERTY INTENDED AS SECURITY FOR THE OBLIGATIONS IS LOCATED NECESSARILY GOVERN (A) THE
PERFECTION AND PRIORITY OF THE LIENS IN FAVOR OF ADMINISTRATIVE AGENT AND BANKS WITH RESPECT TO
SUCH PROPERTY, AND (B) THE EXERCISE OF ANY REMEDIES (INCLUDING FORECLOSURE) WITH RESPECT TO SUCH
PROPERTY.



     Section 14.12 Consent to Jurisdiction; Waiver of Immunities.



          (a) Borrower hereby irrevocably submits to the jurisdiction of any Texas State or Federal
court sitting in the Northern District of Texas over any action or proceeding arising out of or
relating to this Agreement or any other Loan Papers, and Borrower hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined in such Texas State
or Federal court. Borrower irrevocably consents to the service of any and all process in any such
action or proceeding by the delivery by Federal Express or other nationally recognized overnight
delivery service of copies of such process to such Person at its address specified in Section
14.1. Borrower agrees that a final judgment on any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law.



          (b) Nothing in this Section 14.12 shall affect any right of Banks to serve legal
process in any other manner permitted by Law or affect the right of any Bank to bring any action or
proceeding against any Credit Party or their properties in the courts of any other jurisdictions.



          (c) To the extent that Borrower has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its
property, such Person hereby irrevocably waives such immunity in respect of its obligations under
this Agreement and the other Loan Papers.



     Section 14.13 Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. Subject to the terms and conditions herein set
forth, this Agreement shall become effective when Administrative Agent shall have received
counterparts hereof signed by all of the parties hereto or, in the case of any Bank as to which an
executed counterpart shall not have been received, Administrative Agent shall have received
telegraphic or other written confirmation from such Bank of execution of a counterpart hereof by
such Bank.



81









 





     Section 14.14 No Third Party Beneficiaries. Except for the provisions hereof inuring
to the benefit of Agents not a party to this Agreement, it is expressly intended that there shall
be no third party beneficiaries of the covenants, agreements, representations or warranties herein
contained other than third party beneficiaries permitted pursuant to Section 14.10.



     Section 14.15 COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS, AGENTS AND THE CREDIT PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
BANKS, AGENTS, AND THE CREDIT PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG BANKS, AGENTS,
AND THE CREDIT PARTIES.



     Section 14.16 WAIVER OF JURY TRIAL. BORROWER, ADMINISTRATIVE AGENT AND BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND FOR ANY COUNTERCLAIM THEREIN.



     Section 14.17 Confidentiality. Administrative Agent and each Bank (each, a
“Lending Party”) agrees to keep confidential any information furnished or made available to
it by Borrower pursuant to this Agreement that is marked confidential; provided,
that nothing herein shall prevent any Lending Party from disclosing such information (a) to
any other Lending Party or any Affiliate of any Lending Party, or any officer, director, employee,
agent, or advisor of any Lending Party or any Affiliate of any Lending Party, (b) to any other
Person if reasonably incidental to the administration of the credit facility provided herein, (c)
as required by any Law, rule or regulation, (d) upon the order of any court or administrative
agency, (e) upon the request or demand of any regulatory agency or authority or self-regulatory
body, (f) that is or becomes available to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party prohibited by this Agreement, (g)
in connection with any litigation to which such Lending Party or any of its affiliates may be a
party relating to the Obligations or any Loan Paper, (h) to the extent necessary in connection with
the exercise of any remedy under this Agreement or any other Loan Paper, and (i) subject to
provisions substantially similar to those contained in this Section 14.17, to any actual or
proposed participant or assignee.



     Section 14.18 USA Patriot Act. Each Bank hereby notifies Borrower that, pursuant to
the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other information that
will allow such Bank to identify Borrower in accordance with the Act.



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective Authorized Officers on the day and year first above written.



[signature pages to follow]




82








 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BORROWER:




	 	 	 	 	 
	DELTA PETROLEUM CORPORATION,

a Delaware corporation

 	 	 
	By:  	/s/ Kevin K. Nanke
 	 	 
	 	Kevin K. Nanke, 	 	 
	 	Chief Financial Officer and Treasurer 	 	 



Address for Notice:




370 17th Street

Suite 4300

Denver, Colorado 80202

Attn: Kevin K. Nanke

Fax No. (303) 298-8251




Signature
Page — 1




 









 










SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




ADMINISTRATIVE AGENT:




	 	 	 	 	 
	JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 	 	 
	By:  	/s/ Ryan Fuessel
 	 	 
	 	Ryan Fuessel, 	 	 
	 	Senior Vice President 	 	 



BANK:




	 	 	 	 	 
	JPMORGAN CHASE BANK, N.A.

 	 	 
	By:  	/s/ Ryan Fuessel
 	 	 
	 	Ryan Fuessel, 	 	 
	 	Senior Vice President 	 	 



Signature Page — 2




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




SYNDICATION AGENT:




	 	 	 	 	 
	BANK OF MONTREAL,

as Syndication Agent

 	 	 
	By: 	/s/ Gumaro Tijerina	 	 
	 	Name: 	Gumaro Tijerina	 	 
	 	Title: 	Vice President	 	 
	 



BANK:




	 	 	 	 	 
	BANK OF MONTREAL

 	 	 
	By:  	/s/ Gumaro Tijerina	 	 
	 	Name:  	Gumaro Tijerina	 	 
	 	Title:  	Vice
President	 	 
	 



Signature Page — 3




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




DOCUMENTATION AGENT:




	 	 	 	 	 
	U.S. BANK NATIONAL ASSOCIATION,

as Documentation Agent

 	 	 
	By:  	/s/ Daria Mahoney	 	 
	 	Name:  	Daria Mahoney	 	 
	 	Title:  	Vice President	 	 
	 



BANK:




	 	 	 	 	 
	U.S. BANK NATIONAL ASSOCIATION

 	 	 
	By:  	/s/ Daria Mahoney	 	 
	 	Name:  	Daria Mahoney	 	 
	 	Title:  	Vice
President	 	 
	 



Signature Page — 4




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	DEUTSCHE BANK TRUST COMPANY
AMERICAS


 	 	 
	By:  	/s/ Erin Morrissey	 	 
	 	Name:  	Erin Morrissey	 	 
	 	Title:  	Vice
President	 	 
	 
	By:  	/s/ Dusan Lazarov	 	 
	 	Name:  	Dusan Lazarov	 	 
	 	Title:  	Vice
President	 	 



Signature
Page — 5




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	KEYBANK NATIONAL ASSOCIATION

 	 	 
	By:  	/s/ Todd Coker	 	 
	 	Name:  	Todd Coker	 	 
	 	Title:  	Assistant Vice President	 	 
	 



Signature
Page —  6




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	BANK OF OKLAHOMA, N.A.

 	 	 
	By: 	/s/ Michael M. Logan	 	 
	 	Name:  	Michael M. Logan	 	 
	 	Title:  	Senior Vice President	 	 
	 



Signature Page — 7




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	NATIXIS

(f.k.a. Natexis Banques Populaires)

 	 	 
	By: 	/s/
Donovan C. Broussard	 	 
	 	Name:  	Donovan
C. Broussard	 	 
	 	Title:  	Managing Director	 	 
	 
	 	 	 
	By:  	/s/ Louis P. Laville	 	 
	 	Name:  	Louis P. Laville	 
	 	Title:  	Managing Director	 	 
	 



Signature Page — 8




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	BANK OF SCOTLAND PLC

 	 	 
	By:  	/s/ Julia R. Franklin	 	 
	 	Name:  	Julia R. Franklin	 	 
	 	Title:  	Assistant Vice President	 	 
	 



Signature Page — 9




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	BARCLAYS BANK PLC

 	 
	By:  	/s/ Joseph Gyurindak	 	 
	 	Name:  	Joseph Gyurindak	 	 
	 	Title:  	Director	 	 
	 



Signature Page — 10




 









 








SIGNATURE PAGE TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BY AND AMONG

DELTA PETROLEUM CORPORATION, AS BORROWER,

JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT,

THE OTHER AGENTS A PARTY THERETO, AND

THE FINANCIAL INSTITUTIONS LISTED

ON SCHEDULE 1.1 THERETO, AS BANKS




BANK:




	 	 	 	 	 
	CAPITAL ONE, NATIONAL ASSOCIATION

(f/k/a Hibernia National Bank)
 	 
	By:  	/s/ Wes Fontana	 	 
	 	Name:  	Wes Fontana	 	 
	 	Title:  	Assistant Vice President	 	 
	 



Signature Page — 11