exv10w2



 




Exhibit 10.2




Execution Form




 

 






SECOND LIEN CREDIT AGREEMENT




Dated as of March 27, 2007




among




CONCHO RESOURCES INC.,

as the Borrower,




BANK OF AMERICA, N.A.,

as Administrative Agent,




And




The Other Lenders Party Hereto




BANC OF AMERICA SECURITIES LLC,

as

Sole Lead Arranger and Sole Book Manager




 

 






 









 












SECOND LIEN CREDIT AGREEMENT




     This SECOND LIEN CREDIT AGREEMENT (“Agreement”) is entered into as of March 27, 2007,
among CONCHO RESOURCES INC., a Delaware corporation (the “Borrower”), each lender from time
to time party hereto (collectively, the “Lenders” and individually, a “Lender”),
and BANK OF AMERICA, N.A., as Administrative Agent.



     A. The Borrower and its Restricted Subsidiaries are engaged directly in the acquisition,
exploration, production and development of oil and gas properties.



     B. In order to provide for the refinancing of certain Indebtedness of the Borrower or certain
of its Subsidiaries, for general corporate purposes (including working capital), and other purposes
related to the exploration, production and development of oil and gas properties, the Borrower has
heretofore entered into that certain first lien Credit Agreement among the Borrower, JPMorgan Chase
Bank, N.A., as administrative agent, letter of credit issuing bank and swing line lender, Bank of
America, N.A. as syndication agent, Wachovia Bank, National Association and BNP Paribas, as
documentation agents, and the lenders party thereto (as amended from time to time, the “First
Lien Credit Agreement”).



     C. The Borrower now desires to obtain commitments from the Lenders pursuant to which term
loans may be made hereunder to the Borrower from the Lenders on the Closing Date, the proceeds of
which will be used to refinance existing Indebtedness of the Borrower (including Indebtedness
outstanding under the First Lien Credit Agreement and existing second lien term loans outstanding
under that certain Second Lien Credit Agreement dated as of July 6, 2006, among Borrower, Bank of
America, N.A., as administrative agent and the lenders party thereto), for general corporate
purposes (including working capital), and other purposes related to the exploration, production and
development of oil and gas properties.



     D. The Lenders are willing, on the terms and subject to the conditions hereinafter set forth
(including Article IV), to make such term loans.



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



ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS




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



     “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan
is, or the Loans comprising such Borrowing are, bearing interest at a rate determined by reference
to the Alternate Base Rate.



     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied
by (b) the Statutory Reserve Rate.



 









 





     “Administrative Agent” means Bank of America, N.A., in its capacity as contractual
representative of the Lenders hereunder pursuant to Article IX and not in its individual capacity
as a Lender, and any successor agent appointed pursuant to Article IX.



     “Administrative Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02, or such other address or account as
the Administrative Agent may from time to time notify to the Borrower and the Lenders.



     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.



     “Affiliate” means, with respect to any specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.



     “Aggregate Commitment” means the aggregate amount of the Commitments of all of the
Lenders.



     “Agreement” means this Second Lien Credit Agreement, dated as of March 27, 2007, as it
may be amended, supplemented or otherwise modified from time to time.



     “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a)
the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.



     “Annual Engineering Report” means the Initial Engineering Report and each engineering
report delivered pursuant to Section 6.01(c).



     “Applicable Percentage” means with respect to any Lender at any time, the percentage
(carried out to the ninth decimal place) of the aggregate outstanding principal amount of all of
the Loans of the Lenders (or, if no Loans are then outstanding, the Aggregate Commitment)
represented by the aggregate outstanding principal amount of the Loans (or, if not Loans are then
outstanding, the Commitment) of such Lender.



     “Applicable Rate” means (x) for any day prior to the sooner to occur of the IPO Date
and the first anniversary of the Closing Date, with respect to any ABR Loan, 2.25% per annum, and
with respect to any Eurodollar Loan, 3.75% per annum, and (y) for any day on or after the sooner
to occur of the IPO Date and the first anniversary of the Closing Date, with respect to any
ABR Loan, 2.75% per annum, and with respect to any Eurodollar Loan, 4.25% per annum.



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



     “Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger
and sole book manager.



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     “Asset Coverage Ratio” means, on any date, the ratio of the Present Value on such date
to Consolidated Funded Indebtedness on such date.



     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.



     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section
10.06), and accepted by the Administrative Agent, in substantially the form of Exhibit C or
any other form approved by the Administrative Agent.



     “Bank of America” means Bank of America, N.A. and its successors.



     “Borrower” has the meaning specified in the introductory paragraph hereto.



     “Borrowing” means Loans of the same Type, made, converted or continued on the same
date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.



     “Borrowing Base Properties” means, at any time, the properties and reserves (which
properties and reserves shall be free of any Liens other than Liens permitted under Section 7.01)
of Borrower and its Restricted Subsidiaries that were evaluated in the most recent Engineering
Report delivered to the Administrative Agent pursuant to this Agreement.



     “Borrowing Request” means the request by the Borrower for the initial Borrowing in
accordance with Section 2.03.



     “Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the states of
New York, Massachusetts or Texas and, if such day relates to any Eurodollar Loan, means any such
day on which dealings in Dollar deposits are conducted by and between banks in the London interbank
Eurodollar market.



     “Caza” means Caza Energy LLC, a New Mexico limited liability company.



     “Change in Control” means, (i) prior to the IPO Date:




	 	(a)	 	the failure of the Control Group, collectively, to own at least 50.1% of the
Equity Interests of the Borrower on a fully diluted basis;
	 
	 	(b)	 	the failure of the Borrower to own, directly or indirectly, one hundred percent
(100%) of the issued and outstanding Equity Interests of COG Oil & Gas, COG GP and COG
LP; or
	 
	 	(c)	 	the failure of the Borrower to own, directly or indirectly, at least 95% of the
issued and outstanding Equity Interests of Concho Holdings; and





     (ii) at any time after the IPO Date:



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	 	(a)	 	the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or group (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in effect on
the IPO Date) other than the Control Group, of Equity Interests representing more than
35% of the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of the Borrower; or
	 
	 	(b)	 	occupation of a majority of the seats (other than vacant seats) on the Board of
Directors of the Borrower by persons who were neither (1) nominated by the Board of
Directors of the Borrower nor (2) appointed by directors so nominated; or
	 
	 	(c)	 	the failure of the Borrower to own, directly or indirectly, one hundred percent
(100%) of the issued and outstanding Equity Interests of COG GP (and any other general
partner in COG Oil & Gas) and COG LP.





     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender (or, for purposes of Section 2.15(b)), by any lending office of such
Lender or by such Lender’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.



     “Charges” has the meaning specified in Section 10.09.



     “Chase” means Chase Oil Corporation, a New Mexico corporation.



     “Chase Group” means Chase, Caza, Robert C. Chase, Richard L. Chase, or Gerene Dianne
Chase Crouch, any lineal descendant of Robert C. Chase, Richard L. Chase or Gerene Dianne Chase
Crouch, any spouse of any of the foregoing natural persons, or any trust solely for the benefit of
any spouse or lineal descendant of any such natural persons.



     “Closing Date” means the first date all the conditions precedent in Section 4.01 are
satisfied or waived in accordance with Section 10.01.



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



     “COG GP” means COG Operating LLC, a Delaware limited liability company.



     “COG LP” means Concho LP LLC, a Delaware limited liability company.



     “COG Oil & Gas” means COG Oil & Gas LP, a Texas limited partnership.



     “COG Realty” means COG Realty LLC, a Texas limited liability company.



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     “Commitment” means as to each Lender, its obligation to make a Loan to the Borrower on
the Closing Date pursuant to Section 2.01 in a principal amount not to exceed the amount set forth
opposite such Lender’s name on Schedule 2.01.



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



     “Concho Energy Services” means Concho Energy Services LLC, a Texas limited liability
company.



     “Concho Holdings” means Concho Equity Holdings Corp., a Delaware corporation.



     “Consolidated Current Assets” means, as of any date of determination, the current
assets of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP, plus, to the extent not already included therein, all unused
commitments as of such date; provided that for purposes of this definition, current assets
shall exclude non-cash assets required to be included in consolidated current assets of the
Borrower and its Restricted Subsidiaries as a result of the application of Financial Accounting
Standard Board Statements 133 or 143.



     “Consolidated Current Liabilities” means, as of any date of determination, the current
liabilities of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP, minus, to the extent included therein, the current portion of
long-term Indebtedness outstanding under this Agreement; provided that for purposes of this
definition, current liabilities shall exclude non-cash liabilities required to be included in
consolidated current liabilities of the Borrower and its Restricted Subsidiaries as a result of the
application of Financial Accounting Standard Board Statements 133 or 143, but shall expressly
include any unpaid liabilities for cash charges or payments that have been incurred as a result of
the termination of any Swap Contract.



     “Consolidated EBITDAX” means, for any period, for the Borrower and its Restricted
Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period
plus (a) the following to the extent deducted in calculating such Consolidated Net Income:
(i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, and
local income and franchise taxes payable by the Borrower and its Restricted Subsidiaries for such
period, (iii) depletion, depreciation, amortization and exploration expense and (iv) other expenses
of the Borrower and its Restricted Subsidiaries reducing such Consolidated Net Income that do not
represent a cash item in such period or any future period and minus (b) the following to
the extent included in calculating such Consolidated Net Income: (i) Federal, state and local
income tax credits of the Borrower and its Restricted Subsidiaries for such period and (ii) all
non-cash items increasing Consolidated Net Income for such period.



     “Consolidated Funded Indebtedness” means, as of any date and without duplication, all
Indebtedness of the Borrower and its Restricted Subsidiaries other than Indebtedness of the type
described in clause (e) and (f) of the definition of Indebtedness.



     “Consolidated Interest Charges” means, for any period, for the Borrower and its
Restricted Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments,
debt discount, fees, charges and related expenses of the Borrower and its Restricted Subsidiaries



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in connection with borrowed money (including capitalized interest) or in connection with the
deferred purchase price of assets, in each case to the extent treated as interest in accordance
with GAAP, and (b) the portion of rent expense of the Borrower and its Restricted Subsidiaries with
respect to such period under capital leases that is treated as interest in accordance with GAAP.



     “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a)
Consolidated Funded Indebtedness of the Borrower and its Restricted Subsidiaries on a consolidated
basis as of such date to (b) Consolidated EBITDAX for the period of the four fiscal quarters most
recently ended.



     “Consolidated Net Income” means, for any period, for the Borrower and its Subsidiaries
on a consolidated basis, the net income of the Borrower and its Subsidiaries (excluding
extraordinary gains and extraordinary losses and the net income of any Person (other than the
Borrower or a Restricted Subsidiary) for that period, except to the extent of the amount of
dividends and distributions actually received by the Borrower or a Restricted Subsidiary), provided
that the calculation of Consolidated Net Income shall exclude any non-cash charges or losses and
any non-cash income or gains, in each case required to be included in net income of the Borrower
and its Subsidiaries as a result of the application of Financial Accounting Standard Board
Statements 123R, 133 or 143, but shall expressly include any cash charges or payments that have
been incurred as a result of the termination of any Swap Contract.



     “Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.



     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise
voting power, by contract or otherwise. “Controlling” and “Controlled” have
meanings correlative thereto.



     “Control Group” means, collectively, the Chase Group, Yorktown, Steven L. Beal,
Timothy A. Leach and the Permitted Family Partnerships.



     “Counterpart Agreement” means a Counterpart Agreement substantially in the form of
Exhibit H delivered by a Restricted Subsidiary pursuant to Section 6.12.



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



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



     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Loans required to be funded by it hereunder within one Business Day of the date required to be
funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any



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other Lender any other amount required to be paid by it hereunder within one Business Day of the
date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or
become the subject of a bankruptcy or insolvency proceeding.



     “Designated Engineer” means, at any time, one or more of any of (a) Williamson
Petroleum Consultants, Inc., (b) Cawley Gillespie & Associates, Inc., (c) Netherland, Sewell &
Associates, Inc., (d) Ryder Scott Company, (e) Gruy Engineering Corporation or (f) any other
petroleum engineer selected by the Borrower and reasonably acceptable to the Administrative Agent.



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



     “Disqualified Stock” means any Equity Interest which, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or upon the happening
of any event, is or becomes mandatorily redeemable in cash, pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder thereof, in whole or in part, on or
prior to the Maturity Date; provided, that any Equity Interest that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the rights to require the
issuer of such Equity Interest to repurchase or redeem such Equity Interest upon the occurrence of
(x) an “asset sale” or a “change of control” that also results in a Change in Control shall not
constitute Disqualified Stock or (y) a “default” or an “event of default” shall not constitute
Disqualified Stock; provided further, that in each case with respect to the foregoing clauses (x)
and (y), the obligations of the Borrower to repurchase or redeem such Equity Interest is required
only if permitted under the terms of this Agreement or with the consent of the Required Lenders or
such obligations are subordinated to the Obligations on terms and conditions reasonably
satisfactory to the Required Lenders.



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



     “Domestic Subsidiary” means any Subsidiary that is organized under the laws of any
political subdivision of the United States.



     “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved
Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative
Agent, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such
approval not to be unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates
or Subsidiaries.



     “Engineered Value” means the most recent value attributed to the Borrowing Base
Properties based upon the discounted present value of the estimated net cash flow to be realized
from the production of hydrocarbons from the Borrowing Base Properties as set forth in the most
recent Engineering Report.



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     “Engineering Report” means an Annual Engineering Report or an Interim Engineering
Report or both as the context may require.



     “Environmental Laws” means any federal, state, or local statute, or rule or regulation
promulgated thereunder, any judicial or administrative order or judgment to which the Borrower or
any of its Subsidiaries is a party or which are applicable to the Borrower or any of its
Subsidiaries or its or their respective properties (whether or not by consent), and any provision
or condition of any permit, license or other governmental operating authorization, relating to
protection of the environment, persons or the public welfare from actual or potential exposure or
the effects of exposure to any actual or potential release, discharge, spill or emission (whether
past or present) of, or regarding the manufacture, processing, production, gathering,
transportation, importation, use, treatment, storage or disposal of, any chemical, raw material,
pollutant, contaminant or toxic or hazardous substance or waste.



     “Environmental Liability” means any liability (including any liability for damages,
costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other
Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to which liability is
assumed or imposed with respect to any of the foregoing.



     “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person
or warrants, rights or options for the purchase or acquisition from such Person of such shares (or
such other interests), and all of the other ownership or profit interests in such Person (including
partnership, membership or trust interests therein), whether voting or nonvoting, and whether or
not such shares, warrants, options, rights or other interests are outstanding on any date of
determination.



     “Equity Issuance” means any issuance or sale by the Borrower or any of its Restricted
Subsidiaries of any Equity Interests of the Borrower or any such Restricted Subsidiary, as
applicable, except in each case for (a) any issuance or sale to the Borrower or any Restricted
Subsidiary, (b) any issuance of directors’ qualifying shares, and (c) sales or issuances of common
stock of the Borrower to directors, management or employees of the Borrower or any Restricted
Subsidiary under any employee stock option or stock purchase plan or employee benefit plan in
existence from time to time.



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



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



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



     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.



     “Event of Default” has the meaning specified in Section 8.01.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any
other recipient of any payment to be made by or on account of any obligation of the Borrower
hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United
States of America (or any political subdivision thereof), or by the jurisdiction under the laws of
which such recipient is organized or in which its principal office is located or, in the case of
any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other jurisdiction in which the
Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by the Borrower under 2.19(b)), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with
Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to Section 2.17(e).



     “Facility Amount” means $200,000,000.



     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.



9









 





     “Fee Letter” means the letter agreement, dated February 12, 2007 among the Borrower,
the Administrative Agent and the Arranger.



     “First Lien Administrative Agent” means the Person serving from time to time as the
administrative agent (or any similar capacity) with respect to the First Lien Facility.



     “First Lien Credit Agreement” has the meaning specified in Recital B.



     “First Lien Facility” means the First Lien Credit Agreement, as the same may from time
to time be amended, amended and restated, supplemented or otherwise modified in accordance with the
Intercreditor Agreement, or any other credit facility with a borrowing base mechanism
that is substantially similar (other that with respect to the administrative process by which
a borrowing base is determined or redetermined thereunder) to that contained in the First Lien
Facility, and any Guarantees of any such Indebtedness by any of the Guarantors.



     “First Lien Lenders” means the lenders party to the First Lien Facility.



     “First Lien Loan Documents” has the meaning assigned to the term “Loan Documents” in
the First Lien Facility.



     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which the Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.



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



     “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.



     “GAAP” means those generally accepted accounting principles and practices that are
recognized as such by the Financial Accounting Standards Board (or any generally recognized
successor). If any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle or practice to
continue as a generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to the Borrower or with respect to the Borrower and its
Subsidiaries must be prepared in accordance with such change. In the event any changes in GAAP
materially affect the calculation of the Consolidated Leverage Ratio, the Asset Coverage Ratio,
Consolidated Current Assets or Consolidated Current Liabilities, the Borrower and the Lenders agree
to enter into good faith negotiations for an agreement to revise such tests to take into account
such changes in GAAP; until the Borrower and the Lenders have entered into such an agreement, such
financial calculation shall continue to be made in accordance with GAAP as in effect immediately
preceding the date of such change.



     “Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,



10









 







instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or the European Central
Bank).



     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness
payable or performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii)
to purchase or lease property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness of the payment or performance of such Indebtedness, (iii) to maintain
working capital, equity capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor to pay such
Indebtedness, or (iv) entered into for the purpose of assuring in any other manner the obligee in
respect of such Indebtedness of the payment or performance thereof or to protect such obligee
against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person
securing any Indebtedness of any other Person, whether or not such Indebtedness is assumed by such
Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any
such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as
a verb has a corresponding meaning.



     “Guarantors” means, collectively, the Initial Guarantors, together with each other
Person that shall deliver a Guaranty (or a Counterpart Agreement with respect thereto) from time to
time.



     “Guaranty” means a Guaranty made by the Guarantors in favor of the Administrative
Agent and the Lenders, substantially in the form of Exhibit D.



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



     “Indebtedness” means, as to any Person at a particular time, without duplication, all
of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) indebtedness of such Person for borrowed money; (b) indebtedness of such Person to pay the
deferred purchase price of property or services (other than customary payment terms taken in the
ordinary course of such Person’s business); (c) indebtedness of such Person evidenced by a bond,
debenture, note or similar instrument; (d) principal obligations under leases capitalized in
accordance with GAAP under which such Person is the lessee and all Synthetic Lease Obligations; (e)
indebtedness, contingent or otherwise, of such Person with respect to bankers’ acceptances or the
face amount of letters of credit or applications or reimbursement agreements



11









 







therefor; (f)
guaranties of such Person of indebtedness or obligations of the type described in clauses
(a), (b), (c), (d) or (e) above of any other Person or
obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in
respect of indebtedness or obligations of the type described in clauses (a), (b),
(c), (d) or (e) above of any other Person, but excluding
endorsements in the ordinary course of business of negotiable instruments in the course of
collection; (g) indebtedness or obligations of the type described in clauses (a),
(b), (c), (d) or (e) above that are secured by a Lien on any
property owned by such Person, whether or not such indebtedness or obligations have been assumed by
such Person (limited however to the lesser of (1) the amount of its liability or (2) the value of
such property); and (h) the undischarged balance of any production payment created by such Person
or for the creation of which such Person directly or indirectly received payment; provided,
however, Indebtedness shall not include (1) accounts payable incurred in the ordinary
course of such Person’s business, or (2) any obligations in respect of (i) any Swap Contract that
is permitted under this Agreement and (ii) prepayments for gas production or net gas imbalances not
in excess of $1,000,000 in the aggregate at any time outstanding. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Indemnitees” has the meaning specified in Section 10.04(b).



     “Initial Engineering Report” means, collectively, (i) that certain report furnished to
the Administrative Agent prior to the Closing Date estimating certain proved oil and gas reserves
of the Borrower and its Subsidiaries as of December 31, 2006, as prepared by Netherland, Sewell &
Associates, Inc. and (ii) that certain report furnished to the Administrative Agent prior to the
Closing Date estimating certain proved oil and gas reserves of the Borrower and its Subsidiaries on
property located in Eddy and Lea Counties, New Mexico, as of December 31, 2006, as audited by
Cawley, Gillespie & Associates, Inc.



     “Initial Financial Statements” means the unaudited financial statements of the
Borrower and its Subsidiaries for the fiscal year ended December 31, 2006, and the related
consolidated statements of income, and consolidated statements of shareholders’ equity and cash
flows for such fiscal year.



     “Initial Guarantors” means, collectively, each of Concho Holdings, COG GP, COG Oil &
Gas, COG Realty and Concho Energy Services.



     “Initial Public Offering” means a sale by the Borrower of its common stock in an
underwritten (firm commitment) initial public offering registered under the Securities Act of 1933,
as amended, resulting in the listing of the Borrower’s common stock on a nationally recognized
stock exchange, including without limitation, the NASDAQ National Market System.



     “Intercreditor Agreement” means that certain Intercreditor Agreement dated of even
date herewith, among the Borrower and the other Loan Parties party thereto, JPMorgan, in its
capacity as administrative agent for the First Lien Lenders, and Bank of America, as



12









 







administrative
agent for the Lenders, as the same may from time to time be amended, amended and restated,
supplemented or otherwise modified.



     “Interest Election Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.07.



     “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each
calendar quarter, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing
with an Interest Period of more than three months’ duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months’ duration after the first day of such
Interest Period.



     “Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three, six months, or, if agreed to by all applicable Lenders,
nine or twelve months, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the
Closing Date and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.



     “Interim Engineering Report” has the meaning given it in Section 6.01(d).



     “Investment” means, as to any Person, any direct or indirect acquisition or investment
by such Person of or in any other Person, whether by means of (a) the purchase or other acquisition
of capital stock or other securities of another Person, (b) a loan, advance or capital contribution
to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other
Indebtedness or Equity Interest in, another Person, including any partnership or joint venture
interest in such other Person and any arrangement pursuant to which the investor Guarantees
Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or
a series of transactions) of assets of another Person that constitute a business unit. For
purposes of covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value of such Investment.



     “IPO Date” means the date an Initial Public Offering is consummated.



     “IRS” means the United States Internal Revenue Service.



     “JPMorgan” means JPMorgan Chase Bank, N.A. and its successors.



     “Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial



13









 







precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.



     “Lenders” means the Persons listed on Schedule 2.01, including, as the context
requires, any other Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.



     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the British Bankers Association LIBOR Rate published by Reuters (or any successor to or substitute
for Reuters providing rate quotations comparable to those currently provided by Reuters, 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 Business Days prior to the commencement of such Interest Period, as the rate
for dollar deposits with a maturity comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by the principal
London office of the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period.



     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement in the nature of a security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any easement, right of way or
other encumbrance on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).



     “Loan” means any term loan made by a Lender to the Borrower under ARTICLE II in
accordance with this Agreement.



     “Loan Documents” means this Agreement, each Note, the Fee Letter, each Guaranty, each
Security Instrument, and any amendments to any of the foregoing, and all other agreements,
certificates, notices and disclosures at any time executed or certified by a Responsible Officer of
and on behalf of any Loan Party and delivered by such Loan Party or such Responsible Officer in
connection herewith or therewith (exclusive of term sheets, commitment letters, correspondence and
similar documents used in the negotiation hereof or thereof).



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



     “Material Adverse Effect” shall mean a material adverse effect on (a) the financial
condition of the Borrower and its Restricted Subsidiaries taken as a whole, (b) the ability of the
Borrower and its Restricted Subsidiaries, taken as a whole, to operate their respective businesses,




14










 




(c) the ability of the Borrower or any other Loan Party to meet its obligations under
the Loan Documents on a timely basis or (d) the ability of the Loan Parties taken as a whole to
meet their obligations under the Loan Documents on a timely basis.




     “Material Domestic Subsidiary” means any Domestic Subsidiary that owns or holds
assets, properties or interests (including oil and gas interests) with an aggregate fair market
value, on a consolidated basis, greater than five percent (5%) of the aggregate fair market value
of all of the assets, properties and interests (including oil and gas interests) of the Borrower
and its Restricted Subsidiaries, on a consolidated basis.



     “Maturity Date” means March 27, 2012.



     “Maximum Rate” has the meaning specified in Section 10.09.



     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a
nationally recognized rating agency.



     “Mortgage” means each mortgage, collateral mortgage, security agreement, assignment,
and deed of trust delivered by any Loan Party pursuant to the terms of the Loan Documents,
substantially in the form of Exhibit F hereto or such other form acceptable to the
Administrative Agent, in each case as amended, supplemented, restated or otherwise modified from
time to time.



     “Mortgaged Property” shall mean all property interests, real and personal, by or in
which any Loan Party or any other Person owns an undivided interest and which is subject to the
Liens, privileges, priorities or security interests existing and to exist under the terms of the
Mortgage.



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



     “Net Cash Proceeds” means (a) with respect to any Disposition (including any casualty
event or loss) of Borrowing Base Properties by Borrower or any Restricted Subsidiary, the excess,
if any, of (i) the sum of cash and cash equivalents received in connection with such Disposition,
but only as and when so received, over (ii) the sum of (1) the principal amount of any
Indebtedness, if any, that is secured by such Borrowing Base Properties and that is required to be
repaid in connection with the sale thereof (other than the Loans and any loans outstanding under
the First Lien Facility), and (2) the out-of-pocket expenses incurred by such Borrower or such
Restricted Subsidiary in connection with such Disposition, and (b) with respect to any issuance or
incurrence of Indebtedness (other than Indebtedness permitted under Section 7.03) or any Equity
Issuance by Borrower or any Restricted Subsidiary (to the extent permitted hereunder or in
accordance herewith), the cash proceeds thereof, net of all Taxes and customary fees (including
legal fees, accounting fees and advisory fees), commissions, discounts, costs and other expenses
incurred in connection therewith.



     “Non-Consenting Lender” has the meaning specified in Section 2.19.



15









 





     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing
the Loan made by such Lender, substantially in the form of Exhibit A with appropriate
modifications for each type of Loan.



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



     “Organization Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents
with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; and (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or organization with
the applicable Governmental Authority in the jurisdiction of its formation or organization and, if
applicable, any certificate or articles of formation or organization of such entity.



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



     “Participant” has the meaning specified in Section 10.06(d).



     “PBGC” means the Pension Benefit Guaranty Corporation.



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



     “Permitted Encumbrances” means (a) Liens for taxes, assessments or other governmental
charges or levies if the same shall not at the particular time in question be due and delinquent
(or, if foreclosure, distraint, sale or other similar proceedings shall not have been commenced or,
if commenced, shall have been stayed) or are being contested in good faith and by appropriate
proceedings, and if the Borrower shall have set aside on its books such reserves (segregated to the
extent required by sound accounting practices) as may be adequate according to GAAP; (b) Liens of
carriers, warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen, and
operators arising in the ordinary course of business or incident to the exploration,



16









 







development, operations and maintenance of oil, gas and other hydrocarbon properties and
related facilities and assets, for sums not yet due or being contested in good faith and by
appropriate proceedings, if the Borrower shall have set aside on its books such reserves
(segregated to the extent required by sound accounting practices) as may be adequate according to
GAAP; (c) Liens arising in the ordinary course of the Loan Parties’ respective businesses in
connection with worker’s compensation, unemployment insurance and other social security legislation
(other than ERISA); (d) Liens incurred in the ordinary course of a Loan Party’s businesses to
secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance and return-of-money bonds and other obligations of a like nature; (e)
Liens, easements, rights-of-way restrictions, servitudes, permits, conditions, covenants,
exceptions, reservations and other similar encumbrances and title defects incurred in the ordinary
course of a Loan Party’s businesses or existing on property and not in the aggregate materially
interfering with the ordinary conduct of a Loan Party’s businesses or a Loan Party’s rights to the
Borrowing Base Properties; (f) legal or equitable encumbrances deemed to exist by reason of
negative pledges permitted under Section 7.09 of this Agreement or the existence of any litigation
or other legal proceeding and any related list pendens filing (excluding any attachment prior to
judgment, judgment lien or attachment lien in aid of execution on a judgment); (g) rights of a
common owner (only in its capacity as common owner) of any interest in property held by any Loan
Party; (h) farmout, carried working interest, joint operating, unitization, royalty, overriding
royalty, sales and similar agreements relating to the exploration or development of, or production
from, oil and gas properties incurred in the ordinary course of business that do not in the
aggregate have a Material Adverse Effect; (i) Liens arising pursuant to Article 9.343 of the Texas
Uniform Commercial Code or other similar statutory provisions of other states with respect to
production purchased from others; and (j) any defects, irregularities, or deficiencies in title to
easements, rights-of-way or other properties that do not in the aggregate have a Material Adverse
Effect; provided that the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.



     “Permitted Family Partnerships” means the S. Beal Family Partnership, Ltd., and Leach
Properties, Ltd; provided such partnerships are controlled by Steven L. Beal and Timothy A. Leach,
respectively, or their respective spouses or lineal descendants or trusts created solely for the
benefit of such Persons.



     “Permitted Investments” means:




	 	(a)	 	Investments in:






	 	(1)	 	open market commercial paper, maturing within 180 days after
acquisition thereof, if at the time of purchase such paper is rated in either
of the two (2) highest categories of S&P or Moody’s;
	 
	 	(2)	 	marketable obligations, maturing within one (1) year after
acquisition thereof, issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America, and in money market and
mutual funds that invest solely in such obligations; or




17









 












	 	(3)	 	demand deposits and time deposits (including certificates of
deposit) maturing within one (1) year from the date of deposit thereof, with
any office of any Lender or any Lender’s Affiliate or with a domestic office of
any national or state bank or trust company which is organized under the laws
of the United States of America or any state therein, which has capital,
surplus and undivided profits of at least $500,000,000 and whose certificates
of deposit are rated in either of the two (2) highest rating categories of S&P
or Moody’s;






	 	(b)	 	Investments outstanding on the Closing Date and disclosed in the Initial
Financial Statements and Investments made subsequent to the Closing Date with the prior
written consent of the Administrative Agent and the Required Lenders; or
	 
	 	(c)	 	Investments by any Loan Party in the ordinary course of business in (1) the
exploration, production and development of oil, natural gas and other liquid and
gaseous hydrocarbons and the gathering, processing, transmission and marketing of
hydrocarbons and activities related or ancillary thereto and (2) the ownership and
maintenance of real property for the primary purpose of carrying out the activities
described in the foregoing clause (1).





     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.



     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) that is established by the Borrower or any ERISA Affiliate and that is subject to Section
412 of the Code or Title IV of ERISA.



     “Pledge Agreement” means any pledge agreement substantially in the form of Exhibit
G delivered pursuant to Section 4.01(a)(xi) or Section 6.12 hereof, as from time to time
amended, modified, or supplemented, as the case may be.



     “Preferred Stock” means the Series A Preferred Stock of Concho Holdings.



     “Prepayment Premium” means with respect to any optional or mandatory prepayment by the
Borrower made (x) prior to the first anniversary of the Closing Date or on or after the third
anniversary of the Closing Date, zero percent (0%) of the principal amount prepaid, (y) on or after
the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date,
two percent (2.0%) of the principal amount prepaid and (z) on or after the second anniversary of
the Closing Date and prior to the third anniversary of the Closing Date, one percent (1.0%) of the
principal amount prepaid; provided that, in any case, the Borrower shall also be obligated to pay
any funding indemnification amounts, if any, due under Section 2.16.



     “Present Value” means, as of any date of determination, the present value, discounted
at a rate of 10%, of the future net revenues expected to accrue to Borrower’s and its Subsidiaries’
collective interests in its proved reserves during the remaining expected economic lives of such
reserves. Each calculation of such expected future net revenues shall be made in accordance with
the then existing standards of the Society of Petroleum Engineers with (a) appropriate deductions
made for (i) severance and ad valorem taxes, (ii) operating, gathering, transportation



18









 







and marketing costs required for the production and sale of such reserves, and (b) the pricing
assumptions used in determining Present Value for (i) any natural gas reserves, based upon the
five-year forward price curve quoted on New York Mercantile Exchange for Henry Hub (and with
respect to quotations for calendar years after the fifth calendar year, the quotation for the fifth
calendar year shall be applied) and (ii) any crude oil reserves, based upon the five-year forward
price curve quoted on New York Mercantile Exchange for WTI-Cushing, Oklahoma (and with respect to
quotations for calendar years after the fifth calendar year, the quotation for the fifth calendar
year shall be applied). The amount of the Present Value then in effect shall be (i) reduced on a
dollar for dollar present value basis for any oil and gas properties included in the most recently
delivered Engineering Report that have been Disposed of since the date of such Engineering Report
and (ii) adjusted to give effect to the Borrower’s and its Subsidiaries’ Swap Contracts then in
effect with respect to commodity prices.



     “Prime Rate” means the rate of interest per annum publicly announced from time to time
by Bank of America as its prime rate in effect, each change in the Prime Rate shall be effective
from and including the date such change is publicly announced as being effective.



     “Register” has the meaning specified in Section 10.06(c).



     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, trustees, agents and advisors of such Person and of such
Person’s Affiliates.



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



     “Required Lenders” means, at any time, Lenders holding more than 50.0% of the
aggregate principal amount of the Loans of all Lenders at such time.



     “Responsible Officer” means the chief executive officer, president, vice president,
chief financial officer, treasurer or assistant treasurer of a Loan Party. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to
have been authorized by all necessary corporate, partnership and/or other action on the part of
such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.



     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity Interest of the
Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such capital stock or other Equity
Interest, or on account of any return of capital to the Borrower’s stockholders, partners or
members (or the equivalent Person thereof).



     “Restricted Subsidiary” means any Subsidiary that is not an Unrestricted Subsidiary.



     “S&P” means Standard & Poor’s Ratings Group and any successor thereto that is a
nationally recognized rating agency.



19









 





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



     “Secured Party” means the Administrative Agent and any Lender.



     “Security Instruments” shall mean the agreements or instruments described or referred
to in Schedule 1.01, the Intercreditor Agreement, and any other Guaranties, Mortgages,
Pledge Agreements, security agreements and any and all other agreements or instruments previously,
now or hereafter executed and delivered by any Loan Party or any other Person to guaranty, or
provide security for the payment or performance of, the Obligations, this Agreement, the Guaranties
or any other Loan Document, as any such instrument or agreement may be supplemented, amended,
renewed, extended or restated from time to time.



     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the FRB for Eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include
those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency funding and to be subject to such reserve requirements without benefit of or credit
for proration, exemptions or offsets that may be available from time to time to any Lender under
such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve percentage.



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



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



20









 







preceding clause (a) (any such master agreement, together with any related schedules, a
“Master Agreement”), including any such obligations or liabilities under any Master
Agreement.



     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after
taking into account the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts.



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



     “Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.



     “Threshold Amount” means $7,500,000.



     “Transactions” means the execution, delivery and performance by the Loan Parties of
this Agreement and the Loan Documents, the borrowing of Loans and the use of the proceeds thereof.



     “Type” when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.



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



     “United States” and “U.S.” mean the United States of America.



     “Unrestricted Subsidiary” means (a) any Subsidiary that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors of the Borrower in the
manner provided below and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
of the Borrower may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries is a
Material Domestic Subsidiary or a Subsidiary owning Borrowing Base Properties.



     “Wholly Owned Subsidiary” means a Subsidiary all of the Equity Interests of which
(other than director’s qualifying shares or, in the case of Concho Holdings prior to any merger of



21









 







Concho Holdings with the Borrower or any other Restricted Subsidiary, up to 5% of the fully
diluted common stock of Concho Holdings) are owned by the Borrower or one or more other Wholly
Owned Subsidiaries.



     “Yorktown” means, collectively, Yorktown Energy Partners V, L.P., and Yorktown Energy
Partners VI, L.P., together with any limited partner of either such partnership that owns any of
the equity securities of the Borrower.



     1.02 Other Interpretive Provisions. With reference to this Agreement and each other
Loan Document, unless otherwise specified herein or in such other Loan Document:



     (a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word
“will” shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document (including any Organization Document) shall be construed as referring
to such agreement, instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements or modifications
set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used in any Loan
Document, shall be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending replacing or interpreting
such law and any reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time, and (vi) the words
“asset” and “property” shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.



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



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



     1.03 Accounting Terms. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time,
except as otherwise specifically prescribed herein.



22









 





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



     1.05 Times of Day. Unless otherwise specified, all references herein to times of day
shall be references to Central time (daylight or standard, as applicable).



     1.06 Classifications of Loans and Borrowings. For purposes of this Agreement, Loans
or Borrowings may be classified and referred to by Type (e.g., a “Eurodollar Loan”).



     1.07 Oil and Gas Definitions. For purposes of this Agreement, the terms “proved [or]
proven reserves,” “proved [or] proven developed reserves,” “proved [or] proven undeveloped
reserves,” “proved [or] proven developed nonproducing reserves” and “proved [or] proven developed
producing reserves” have the meaning given such terms from time to time and at the time in question
by the Society of Petroleum Engineers of the American Institute of Mining Engineers.



ARTICLE II.




THE COMMITMENTS AND BORROWINGS




     2.01 Term Loans. Subject to the terms and conditions set forth herein, each Lender
agrees to make a loan to the Borrower on the Closing Date in an aggregate principal amount equal to
such Lender’s Commitment. No amounts paid or prepaid with respect to the Loans may be reborrowed.



     2.02 Loans and Borrowings.



     (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders
ratably in accordance with their respective Commitments. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other Lender of its obligations hereunder;
provided that the Commitments of the Lenders are several and no Lender shall be responsible
for any other Lender’s failure to make Loans as required.



     (b) The initial Borrowing shall be comprised entirely of ABR Loans.



     (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than
$1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $100,000 and not less than $1,000,000. Borrowings of more
than one Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of four (4) Eurodollar Borrowings outstanding. Each Lender at its option
may make any Eurodollar Borrowing by causing any domestic or foreign branch or Affiliate of such
Lender to make such Borrowing; provided that any exercise of such option shall not affect
the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.



23









 





     (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled
to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date.



     2.03 Requests for Borrowings. To request the initial Borrowing, the Borrower shall
notify the Administrative Agent of such request by telephone not later than 11:00 a.m. on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Such
telephonic and written Borrowing Request shall specify the following information in compliance with
Section 2.02:




     (i) the aggregate amount of the requested Borrowing;




     (ii) the date of such Borrowing, which shall be a Business Day; and




     (iii) the location and number of the Borrower’ account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.06.



Promptly following receipt of the Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.



     2.04  [Reserved].



     2.05  [Reserved].



     2.06 Funding of Borrowings.



     (a) Each Lender shall make the Loan to be made by it hereunder on the Closing Date by wire
transfer of immediately available funds by 12:00 noon to the account of the Administrative Agent
most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent
will make such Loans available to the Borrower by promptly crediting the amounts so received, in
like funds, to a deposit account of the Borrower designated by the Borrower in the Borrowing
Request.



     (b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of such Borrowing that such Lender will not make available to the Administrative
Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender
has made such share available on the proposed date therefor in accordance with paragraph (a) of
this Section and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share of the applicable
Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower
severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount
with interest thereon, for each day from and including the date such amount is made available to
the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case
of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking



24









 







industry rules on interbank compensation or (ii) in the case of the Borrower, the interest
rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then
such amount shall constitute such Lender’s Loan included in such Borrowing.



     2.07 Interest Elections.



     (a) Following the initial Borrowing, the Borrower may elect to convert any Borrowing to a
different Type or to continue any Borrowing and, in the case of a Eurodollar Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate Borrowing.



     (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative
Agent of such election by telephone (a) in the case of a Eurodollar Borrowing, not later than by
11:00 a.m., three Business Days before the effective date of the proposed conversion or
continuation or (b) in the case of an ABR Borrowing, not later than 11:00 a.m. on the effective
date of the proposed conversion or continuation. Each such telephonic Interest Election Request
shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by the Borrower.



     (c) Each telephonic and written Interest Election Request shall specify the following
information:




     (i) the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);




     (ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;




     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and




     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period.”


If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration.




25









 








     (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.



     (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the request of the Required
Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.



     2.08 Termination or Reduction of Commitments. The Commitments of each Lender shall
terminate immediately following the making of the Loans by such Lender on the Closing Date pursuant
to Section 2.01.



     2.09 Repayment of Loans.



     (a) The Borrower hereby unconditionally promises to repay to the Administrative Agent for the
account of each Lender the outstanding principal of the Loans until repaid in full in accordance
with the following amortization schedule:




     (i) an amount equal to $500,000.00 shall be due and payable on the last day of each
calendar quarter commencing with the calendar quarter ending June 30, 2007, to and including
the calendar quarter ending December 31, 2011; and




     (ii) the then unpaid principal amount of each Loan shall be due and payable on the
Maturity Date.



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



     (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and payable from the Borrower
to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.



     (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or the Administrative
Agent to maintain such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this Agreement.



26









 





     (e) Any Lender or Participant may request that the Loan made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender or
Participant a promissory note payable to the order of such Lender or Participant (or, if requested
by such Lender or Participant, to such Lender or Participant and its registered assigns) and in the
form attached hereto as Exhibit A; provided that any promissory note issued to
evidence any Lender’s Loans shall be in a stated amount equal to such Lender’s Applicable
Percentage of the Facility Amount. Thereafter, the Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to Section 10.06) be
represented by one or more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its registered
assigns).



     (f) Each payment made to the Administrative Agent in respect of a Borrowing shall be applied
ratably to the Loans included in the repaid Borrowing. Repayments shall be accompanied by accrued
interest to the extent required by Section 2.13.



     2.10 Optional Prepayment of Loans.



     (a) The Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole and or in part, subject to prior notice in accordance with paragraph (b) of this
Section, provided that the Borrower shall also pay the applicable Prepayment Premium with respect
to any such optional prepayment.



     (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of
any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than
11:00 a.m. three Business Days prior to the date of prepayment, or (ii) in the case of prepayment
of an ABR Borrowing, not later than 11:00 a.m. on the date of prepayment. Each such notice shall
be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid. Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial
prepayment of any Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $500,000. Each prepayment of a Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest
to the extent required by Section 2.13 and any Prepayment Premium to the extent required by clause
(a) above.



     2.11 Mandatory Prepayment of Loans.



     (a) Not later than the next Business Day after it receives Net Cash Proceeds from any
Disposition in excess of $25,000,000 in the aggregate in any period of twelve consecutive months,
or any casualty event or loss, of Borrowing Base Properties pursuant to clause (c) of Section 7.05,
the Borrower shall, or shall cause one or more of its Restricted Subsidiaries to, apply 100% of the
Net Cash Proceeds received in respect of such Disposition or casualty event or loss to prepay
outstanding Loans in accordance with Section 2.11(d) hereof, together with any applicable
Prepayment Premium; provided that such Net Cash Proceeds shall only be required to be
applied as provided above to the extent (if any) that any such Net Cash Proceeds remain after the
Borrower or any Restricted Subsidiary shall have made (x) any mandatory prepayments of



27









 







any credit extension required by the First Lien Facility and (y) any additional prepayment of
any credit extension then outstanding under the First Lien Facility as the Borrower shall elect
provided that concurrently with any such additional prepayment the Borrower shall permanently
reduce the aggregate commitment amount under the First Lien Facility by an equivalent amount;
further provided, however, that, if (1) the Borrower shall deliver a
certificate of a Responsible Officer to the Administrative Agent not later than concurrently with
the consummation of such Disposition or settlement of such casualty event or loss setting forth the
Borrower’s intent to reinvest such Net Cash Proceeds in property of a kind then used or usable in
the business of the Borrower and its Restricted Subsidiaries within 90 days of receipt of such Net
Cash Proceeds, provided, that if the Borrower has signed a purchase and sale agreement to
acquire such property within such 90 day period, then it shall have an additional 90 days in which
to consummate such acquisition, and (2) no Default shall have occurred and shall be continuing at
the time of such certificate or at the proposed time of the application of such Net Cash Proceeds,
then such Net Cash Proceeds shall not be required to be applied in accordance with the foregoing
provisions of this Section 2.11(a) unless and until such 90-day period has elapsed and all or any
portion of such Net Cash Proceeds shall not have been so reinvested, at which time all or any
remaining portion of such Net Cash Proceeds shall immediately be applied in accordance with this
Section 2.11(a) and Section 2.11(d).



     (b) In the event and on each occasion that an Equity Issuance occurs, the Borrower shall, or
shall cause one or more of its Restricted Subsidiaries to, concurrently with (and in any event not
later than the third Business Day next following) the receipt by the Borrower or any of its
Restricted Subsidiaries of the Net Cash Proceeds of such Equity Issuance, apply an amount equal to
50% of the Net Cash Proceeds therefrom to prepay outstanding Loans in accordance with Section
2.11(d), together with any applicable Prepayment Premium; provided that such Net Cash
Proceeds shall only be required to be applied to the extent (if any) that such Net Cash Proceeds
remain after making (i) any mandatory prepayments of any credit extension required by the First
Lien Facility and (ii) any additional prepayment of any credit extension then outstanding under the
First Lien Facility as the Borrower shall elect provided that concurrently with any such additional
prepayment the Borrower shall permanently reduce the aggregate commitment amount under the First
Lien Facility by an equivalent amount.



     (c) In the event that the Borrower or any Guarantor or any of their Subsidiaries shall receive
Net Cash Proceeds from the issuance or incurrence of Indebtedness for borrowed money by the
Borrower or any Guarantor or any of its or their Restricted Subsidiaries (other than any cash
proceeds from the issuance of Indebtedness permitted pursuant to Section 7.03 (it being
acknowledged that any such issuance or incurrence of Indebtedness for borrowed money not otherwise
permitted under Section 7.03 shall require the approval of the Required Lenders)), the Borrower
shall, concurrently with (and in any event not later than the third Business Day next following)
the receipt of such Net Cash Proceeds by such Person, apply an amount equal to 100% of such Net
Cash Proceeds therefrom to prepay outstanding Loans in accordance with Section 2.11(d), together
with any applicable Prepayment Premium; provided that such Net Cash Proceeds shall only be
required to be applied to the extent (if any) that such Net Cash Proceeds remain after making (i)
any mandatory prepayments of any credit extension required by the First Lien Facility and (ii) any
additional prepayment of any credit extension then outstanding under the First Lien Facility as the
Borrower shall elect provided that concurrently with any such



28









 







additional prepayment the Borrower shall permanently reduce the aggregate commitment amount
under the First Lien Facility by an equivalent amount.



     (d) Each prepayment of Borrowings pursuant to this Section 2.11 shall be applied ratably to
the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 2.11 shall be
accompanied by accrued interest to the extent required by Section 2.13 and, any applicable
Prepayment Premium to the extent required by such clauses (a), (b) or (c), as applicable.



     (e) The Borrower shall deliver to the Administrative Agent, at the time of each prepayment
required under this Section 2.11, (i) a certificate signed by a Responsible Officer of the Borrower
setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the
extent practicable, at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Borrowing being prepaid and the
principal amount of each Loan (or portion thereof) to be prepaid.



     2.12 Fees.



     (a) As required under the Fee Letter, the Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately agreed upon between
the Borrower and the Administrative Agent.



     (b) All fees payable hereunder shall be paid on the dates due, in immediately available funds,
to the Administrative Agent for distribution to the Lenders. Fees paid shall not be refundable
under any circumstances.



     2.13 Interest.



     (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate
plus the Applicable Rate.



     (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.



     (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or
other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity,
upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in
paragraph (a) of this Section.



     (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and on the Maturity Date; provided that (i) interest accrued pursuant to
paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable
on the date of such repayment or prepayment and (iii) in the event of




29









 




any conversion of any Eurodollar Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.




     (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO
Rate shall be determined by the Administrative Agent, and such determination shall be conclusive
absent manifest error.



     2.14 Alternate Rate of Interest. If prior to the commencement of any Interest Period
for a Eurodollar Borrowing:



     (a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period; or



     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or
the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the
cost to such Lenders of making or maintaining their Loans included in such Borrowing for such
Interest Period;


then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, any Interest Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective (and shall be deemed
to be a request for an ABR Borrowing).




     2.15 Increased Costs.



     (a) If any Change in Law shall:




     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or




     (ii) impose on any Lender or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Lender;


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or to reduce the amount of any sum received or receivable by such
Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such
Lender, as the case may be, such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.




30









 








     (b) If any Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on such Lender’s capital or on the capital of
such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such
Lender to a level below that which such Lender or such Lender’s holding company could have achieved
but for such Change in Law (taking into consideration such Lender’s policies and the policies of
such Lender’s holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender
or such Lender’s holding company for any such reduction suffered.



     (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such
Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.



     (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender’s right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender pursuant to this Section for any
increased costs or reductions incurred more than 270 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s intention to claim compensation therefor; provided further that, if
the Change in Law giving rise to such increased costs or reductions is retroactive, then the
270-day period referred to above shall be extended to include the period of retroactive effect
thereof.



     2.16 Break Funding Payments. In the event of (a) the payment of any principal of any
Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a
result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto
(regardless of whether such notice may be revoked under 2.10(b) and is revoked in accordance
therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to 2.19, then, in any
such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable
to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount
of interest which would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would bid were it to bid,
at the commencement of such period, for dollar deposits of a comparable amount and period from
other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to



31









 







the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such
Lender the amount shown as due on any such certificate within 10 days after receipt thereof.



     2.17 Taxes.



     (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be
made free and clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent or any Lender (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.



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



     (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days
after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by
or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or by the Administrative Agent, on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.



     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.



     (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.



     (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower
or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.17, it
shall pay over such refund to the Borrower (but only to the extent of indemnity



32









 







payments made, or additional amounts paid, by the Borrower under this Section 2.17 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses
of the Administrative Agent or such Lender and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon
the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such
Lender is required to repay such refund to such Governmental Authority. This Section shall not be
construed to require the Administrative Agent or any Lender to make available its tax returns (or
any other information relating to its taxes which it deems confidential) to the Borrower or any
other Person.



     2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.



     (a) The Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest or of amounts payable under 2.15, 2.16 or 2.17, or otherwise) prior to 12:00
noon on the date when due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at its office for
payment specified on Schedule 10.02 (or such other office as may be specified in accordance
with Section 10.02(c)), and except that payments pursuant to 2.15, 2.16, 2.17 and Section 10.04
shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in Dollars.



     (b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall
be applied first to any interest or fees then due and owing to the extent thereof and then to the
repayment of principal.



     (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued
interest thereon than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this



33









 







Agreement or any payment obtained by a Lender as consideration for the assignment of or sale
of a participation in any of its Loans to any assignee or participant, other than to the Borrower
or any Restricted Subsidiary or Affiliate thereof (as to which the provisions of this paragraph
shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.



     (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders
hereunder that the Borrower will not make such payment, the Administrative Agent may assume that
the Borrower have made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders, the amount due. In such event, if the Borrower have
not in fact made such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such Lender with interest
thereon, for each day from and including the date such amount is distributed to it to but excluding
the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation.



     (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section
2.06(b), 2.17(d) or 10.04(c), 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 Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.



     2.19 Mitigation Obligations; Replacement of Lenders.



     (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to
pay any additional amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender,
such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.



     (b) If any Lender requests compensation under Section 2.15, or if the Borrower is required to
pay any additional amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then
the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 10.06, all its interests, rights and obligations under
this Agreement to an assignee that shall assume such



34









 







obligations (which assignee may be another Lender, if a Lender accepts such assignment);
provided that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of
all other amounts) and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such
assignment will result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and
delegation cease to apply.



     (c) If in connection with any proposed amendment, modification, termination, waiver or consent
with respect to any of the provisions of this Agreement or any other Loan Document as contemplated
by Section 10.01, the consent of Required Lenders shall have been obtained but the consent of one
or more of such other Lenders (each a “Non-Consenting Lender”) whose consent is required
has not been obtained or if any Lender is a Defaulting Lender; then, the Borrower may elect to
replace such Non-Consenting Lender or Defaulting Lender, as the case may be, as a Lender party to
this Agreement in accordance with and subject to the restrictions contained in, and consents
required by Section 10.06; provided that such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all other amounts). A
Lender shall not be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply or, in the case of a Defaulting Lender, such Lender
is no longer a Defaulting Lender.



ARTICLE III.

[RESERVED]




ARTICLE IV.

CONDITIONS PRECEDENT TO LOANS




     4.01 Conditions of Loans. The obligation of each Lender to make its Loan hereunder is
subject to satisfaction of the following conditions precedent:



     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date) and each in form and
substance satisfactory to the Administrative Agent and each of the Lenders:



35









 






     (i) executed counterparts of this Agreement by the Borrower and other party hereto and
of the Guaranty by each Initial Guarantor other than COG LP sufficient in number for
distribution to the Administrative Agent, each Lender and the Borrower;




     (ii) a Note executed by the Borrower in favor of each Lender requesting a Note;




     (iii) such certificates of resolutions, consents or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan Party other than
COG LP as the Administrative Agent may require evidencing the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in
connection with this Agreement and the other Loan Documents to which such Loan Party is a
party, together with copies certified by a Responsible Officer of each Loan Party of each
Loan Party’s Organization Documents;




     (iv) such documents and certifications as the Administrative Agent may reasonably
require to evidence that each Loan Party is duly organized or formed, and that each Loan
Party is validly existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the conduct of its
business requires such qualification, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect;




     (v) a favorable opinion of the Borrower’s general counsel, as counsel to the Loan
Parties, addressed to the Administrative Agent and each Lender, as to such matters
concerning the Loan Parties and the Loan Documents as the Administrative Agent may
reasonably request;




     (vi) a favorable opinion of Cotton, Bledsoe, Tighe & Dawson, PC, special counsel to the
Loan Parties in the State of New Mexico addressed to the Administrative Agent and each
Lender, as to such matters of New Mexico law concerning the Loan Documents as the
Administrative Agent may reasonably request;




     (vii) a certificate of a Responsible Officer of each Loan Party other than COG LP
either (A) attaching copies of all consents, licenses and approvals required in connection
with the execution, delivery and performance by such Loan Party and the validity against
such Loan Party of the Loan Documents to which it is a party, and such consents, licenses
and approvals shall be in full force and effect, or (B) stating that no such consents,
licenses or approvals are so required;




     (viii) a certificate signed by a Responsible Officer of the Borrower certifying (A)
that the representations and warranties of the Borrower and each other Loan Party contained
in Article V or any other Loan Document, or which are contained in any document
furnished in connection herewith or therewith, shall be true and correct on and as of the
Closing Date, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they shall be true and correct as of such earlier
date, and that no Default shall exist, or would result from the Loans or from the
application of the proceeds thereof, and (B) that there has been no event or circumstance



36









 







since December 31, 2006 (the date of the Initial Financial Statements) that has had or
could be reasonably expected to have, either individually or in the aggregate, a Material
Adverse Effect;




     (ix) [Reserved];




     (x) a certificate as to insurance concerning the Borrowing Base Properties and other
material assets of the Loan Parties, which certificate shall provide that the Administrative
Agent is an additional insured thereunder;




     (xi) complete and original executed counterparts of the Mortgages and the other
Security Instruments listed on Schedule 1.01 hereto, each duly executed by the
appropriate Loan Party other than COG LP, together with evidence of arrangements by
Administrative Agent’s counsel for the completion of all recordings and filings of such
Mortgages and any financing statements with respect thereto or with respect to any other
Security Instrument as may be necessary or, in the reasonable opinion of Administrative
Agent, desirable effectively to create a valid, perfected and, subject to the Intercreditor
Agreement, second priority Lien against Borrowing Base Properties representing at least 80%
of the Engineered Value of all proved Borrowing Base Properties included in the Initial
Engineering Report;




     (xii) such other assurances, certificates, documents, consents or opinions as the
Administrative Agent or the Required Lenders reasonably may require; and




     (xiii) the Initial Engineering Report.



     (b) The Borrower shall (i) be entering to an amendment to the First Lien Facility, which
amendment shall, among other things, provide for a Borrowing Base (as defined in the First Lien
Facility) after giving effect to the Transactions of not greater than $375,000,000 (subject to
redetermination thereafter in accordance with the First Lien Facility) and permit the Borrower to
enter into this Agreement and the Borrower and its Restricted Subsidiaries to consummate the
Transactions without violating the terms of the First Lien Facility, (ii) have provided evidence or
assurances satisfactory to the Administrative Agent that such amendment has become effective (or
contemporaneously with the effectiveness of this Agreement will become effective) and (iii) have
provided evidence or assurances satisfactory to the Administrative Agent that after giving effect
to the Transactions, the Borrower will have (after application of the proceeds of the Loans)
availability under the First Lien Credit Agreement of at least $50,000,000.



     (c) The Administrative Agent shall have received evidence or assurances satisfactory to it
that after giving effect to the Transactions, the Borrower will have used a portion of the proceeds
of the Loans to repay in full all outstanding Indebtedness under that certain Second Lien Credit
Agreement dated as of July 6, 2006, among Borrower, Bank of America, N.A., as administrative agent
and the lenders party thereto, and that all Liens securing such Indebtedness have been terminated
and released (provided that the foregoing condition shall not be construed to require the release
of any such Liens as they relate to or secure the First Lien Facility).



37









 





     (d) a duly completed certificate signed by a Responsible Officer of the Borrower with respect
to the financial statements referred to in Section 4.01(l) and Section 4.01(m) setting forth the
Borrower’s pro forma compliance with the financial covenants set forth Section 7.11 as if such
financial covenants applied to the periods covered by such financial statements, provided that the
Borrower’s Consolidated EBITDAX for the period of four consecutive fiscal quarters ending December
31, 2006, shall be deemed to equal the Borrower’s Consolidated EBITDAX for the three consecutive
fiscal quarter period ending December 31, 2006, multiplied by the fraction four-thirds.



     (e) [Reserved].



     (f) Any fees required to be paid on or before the Closing Date shall have been paid.



     (g) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges
and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements incurred or to be
incurred by it through the closing proceedings (provided that such estimate shall not thereafter
preclude a final settling of accounts between the Borrower and the Administrative Agent).



     (h) No event or condition shall have occurred since December 31, 2006, that could reasonably
be expected to result in a Material Adverse Effect.



     (i) Except as disclosed to the Lenders in Schedule 5.06, there shall be no pending or
threatened litigation, action or proceeding against the Borrower or any of its Subsidiaries, or
with respect to any Borrowing Base Properties, that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.



     (j) [Reserved].



     (k) The Administrative Agent shall have received a Solvency Certificate in the form attached
hereto as Exhibit E, dated the Closing Date, and signed by the chief financial officer of
the Borrower.



     (l) The Administrative Agent shall have received from the Borrower an unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as of December 31, 2006, and the related
unaudited consolidated statements of income or operations, shareholders’ equity and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and prepared in accordance with GAAP, and an unaudited
consolidating balance sheet and income statement of the Borrower and its Subsidiaries to be
certified by a Responsible Officer of the Borrower to the effect that such statements are fairly
stated in all material respects when considered in relation to the consolidated financial
statements of the Borrower and its Subsidiaries.



     (m) The Administrative Agent shall have received from the Borrower a pro forma consolidated
balance sheet of the Borrower and its Restricted Subsidiaries, reflecting the consummation of the
Transactions, the related financings and other transactions contemplated by the Loan Documents to
occur on or prior to the Closing Date, which pro forma balance sheet



38









 







shall be prepared consistent in all respects with the information previously provided by the
Borrower to the Administrative Agent and the Lenders and otherwise in form and substance
satisfactory to the Administrative Agent.



     (n) The Closing Date shall have occurred on or before March 31, 2007.



     (o) The Intercreditor Agreement shall have been duly executed by each of the parties thereto
other than COG LP, and shall be in full force and effect.



     (p) The Administrative Agent shall have received a Borrowing Request in accordance with the
requirements hereof.



     Without limiting the generality of the provisions of ARTICLE IX, for purposes of determining
compliance with the conditions specified in this Section 4.01, each Lender that has signed this
Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.



ARTICLE V.

REPRESENTATIONS AND WARRANTIES




     The Borrower represents and warrants to the Administrative Agent and the Lenders that (it
being understood that with respect to the Closing Date such representations and warranties are
deemed to be made concurrently with and after giving effect to the consummation of the
Transactions):



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



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



39









 







thereof is in compliance with all Contractual Obligations referred to in clause (b)(i), except to the extent
that failure to do so could not reasonably be expected to have a Material Adverse Effect.



     5.03 Governmental Authorization; Other Consents. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required in connection with the execution, delivery or performance by,
or enforcement against, any Loan Party of this Agreement or any other Loan Document.



     5.04 Binding Effect. This Agreement has been, and each other Loan Document, when
delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party
thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan
Party that is party thereto in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in law or
in equity.



     5.05 Financial Statements; No Material Adverse Effect.



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



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



     5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending
or, to the knowledge of the Borrower after due and diligent investigation, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against
the Borrower or any of its Restricted Subsidiaries or against any of their properties or revenues
that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby, or (b) either individually or in the aggregate, if determined
adversely, could reasonably be expected to have a Material Adverse Effect.



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



40









 





     5.08 Ownership of Property; Liens. Each of the Borrower and each Restricted
Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of its business, except for such
defects in title as could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The property of the Borrower and its Restricted Subsidiaries is subject
to no Liens, other than Liens permitted under Section 7.01.



     5.09 Environmental Compliance. The Borrower and its Restricted Subsidiaries conduct
in the ordinary course of business a review of the effect of existing Environmental Laws and claims
alleging potential liability or responsibility for violation of any Environmental Law on their
respective businesses, operations and properties, and as a result thereof the Borrower has
reasonably concluded that such Environmental Laws and claims could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.



     5.10 Insurance. The properties of the Borrower and its Restricted Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in
such amounts (after giving effect to any self-insurance compatible with the following standards),
with such deductibles and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the Borrower or the applicable
Restricted Subsidiary operates.



     5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other
material tax returns and reports required to be filed, and have paid all Federal, state and other
material taxes, assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings diligently conducted and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax assessment against
the Borrower or any Subsidiary that would, if made and not timely paid, have a Material Adverse
Effect. Neither any Loan Party nor any Restricted Subsidiary thereof is party to any tax sharing
agreement.



     5.12 ERISA Compliance.



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



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



41









 







prohibited transaction or violation of the fiduciary responsibility rules with respect to any
Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.



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



     5.13 Subsidiaries; Equity Interests. As of the Closing Date, the Borrower has no
Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all
of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid
and nonassessable (except for such Equity Interests consisting of partnership interests and
membership interests) and are owned by a Loan Party as specified, and in the amounts specified, on
Part (a) of Schedule 5.13, free and clear of all Liens (except for Liens created by the
Loan Documents and First Lien Loan Documents). The Borrower has no Equity Interests in any other
corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13.
After giving effect to the Transactions, and prior to the IPO Date, a majority of the outstanding
Equity Interests in the Borrower are owned by the Control Group.



     5.14 Margin Regulations; Investment Company Act.



     (a) The Borrower is not engaged and will not engage, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying
margin stock.



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



     5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the
Lenders all agreements, instruments and corporate or other restrictions to which it or any of its
Restricted Subsidiaries is subject, and all other matters known to it, that if violated,
individually or in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. No report, financial statement, certificate or other information furnished (whether in
writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of this Agreement or
delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by
other information so furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that, with respect to



42









 







projected information, the Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time.



     5.16 Compliance with Laws. Each of the Borrower and each Restricted Subsidiary is in
compliance in all material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its properties, except in such instances in which
(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith
by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.



     5.17 Licenses, Permits and Franchises. Neither the Borrower nor any Restricted
Subsidiary has failed to obtain any license, permit, franchise or other governmental authorization
necessary to the ownership or operation of any of its Borrowing Base Properties or other material
properties or to the conduct of the Borrower’s or such Restricted Subsidiary’s business, except any
failure or other matter that could not reasonably be expected to have a Material Adverse Effect.



     5.18 Liens Under the Security Instruments. Upon the execution and delivery of the
Security Instruments in accordance herewith, and where appropriate the filing and recordation
thereof with the appropriate filing or recording officers in each of the necessary jurisdictions,
the Liens granted and to be granted by any Loan Party to the Administrative Agent, the Lenders or
the Trustee (as defined in any of the Security Instruments) on behalf of the Administrative Agent
and the Lenders in such Loan Party’s assets pursuant to the Security Instruments will be validly
created, perfected and, subject to the Intercreditor Agreement, second priority Liens, subject only
to Liens permitted under Section 7.01.



     5.19 Mortgages with Respect to Borrowing Base Properties. The Engineered Value of all
Borrowing Base Properties described in the Mortgages represents at least 80% of the Engineered
Value of all proved Borrowing Base Properties included in the Initial Engineering Report.



     5.20 Solvency. Each Loan Party is solvent and will continue to be solvent after the
making and guarantying of the Obligations.



     5.21 Direct Benefit. The Loans are for the direct benefit of the Borrower and its
Restricted Subsidiaries. The Borrower and its Restricted Subsidiaries shall engage as an
integrated group in the business of oil and gas exploration and related activities and certain
other legal business purposes, and any benefits to the Borrower and its Restricted Subsidiaries is
a benefit to all of them, both directly or indirectly, inasmuch as the successful operation and
condition of the Borrower and its Restricted Subsidiaries is dependent upon the continued
successful performance of the functions of the integrated group as a whole.



ARTICLE VI.

AFFIRMATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in



43









 







the case of the covenants set forth in Section 6.01, Section 6.02, and Section 6.03) cause
each Restricted Subsidiary to:



     6.01 Financial Statements. Deliver to the Administrative Agent and each Lender, in
form and detail satisfactory to the Administrative Agent and the Required Lenders:



     (a) As soon as available, but in any event not later than, with respect to the fiscal year
ended December 31, 2006, 60 days immediately following the Closing Date, and with respect to each
fiscal year of the Borrower thereafter (commencing with the fiscal year ended December 31, 2007),
90 days immediately following the end of each such fiscal year, a consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited
and accompanied by a report and opinion of an independent certified public accountant of nationally
recognized standing reasonably acceptable to the Administrative Agent, which report and opinion
shall be prepared in accordance with generally accepted auditing standards and shall not be subject
to any “going concern” or like qualification or exception or any qualification or exception as to
the scope of such audit, and an unaudited consolidating balance sheet and income statement of the
Borrower and its Subsidiaries to be certified by a Responsible Officer of the Borrower to the
effect that such statements are fairly stated in all material respects when considered in relation
to the consolidated financial statements of the Borrower and its Subsidiaries; and



     (b) As soon as available, but in any event within 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended
March 31, 2007) the unaudited consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal quarter, the related unaudited consolidated and
consolidating statements of income or operations, and the unaudited consolidated statement
consolidated shareholders’ equity and cash flows for such fiscal quarter and for the portion of the
Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for
the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the
previous fiscal year, all in reasonable detail, such consolidated financial statements certified by
a Responsible Officer of the Borrower as fairly presenting the financial condition, results of
operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance
with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and such
consolidating statements to be certified by a Responsible Officer of the Borrower to the effect
that such statements are fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Borrower and its Subsidiaries; and



     (c) On or before April 1 of each Fiscal Year (i) commencing April 1, 2008, an engineering
report prepared or audited by a Designated Engineer, dated as of the preceding January 1, covering
oil and gas reserves attributable to the Borrowing Base Properties, including a calculation of PV
10 Value (the present value of the Borrowing Base Properties discounted at 10%); and (ii)
commencing April 1, 2008, an annual operating budget prepared by the Borrower in reasonable detail,
based upon reasonable assumptions made in good faith by the Borrower,




44










 




which sets forth quarterly financial projections for the then current Fiscal Year and
annual financial projections for each Fiscal Year thereafter through the Maturity Date; and




     (d) On or before October 1 of each Fiscal Year commencing October 1, 2007 (and in connection
with a Special Redetermination (as defined in the First Lien Facility) requested by the Borrower,
at the time of such request, and in connection with a Special Redetermination pursuant to Section
3.05 of the First Lien Facility at the time specified in such Section 3.05), an engineering report
prepared by the Borrower or an Affiliate of the Borrower, dated as of the preceding June 30, in a
form reasonably satisfactory to the Administrative Agent covering oil and gas reserves attributable
to the Borrowing Base Properties, including a calculation of PV 10 Value (the present value of the
Borrowing Base Properties discounted at 10%) (an “Interim Engineering Report”).



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



     (a) [Reserved];



     (b) concurrently with the delivery of the financial statements referred to in Section 6.01(a)
and Section 6.01(b) (commencing with the delivery of the financial statements for the fiscal
quarter ended March 31, 2007), a duly completed Compliance Certificate signed by a Responsible
Officer of the Borrower;



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



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



     (e) concurrently with the delivery of any information or notices required under the First Lien
Loan Documents, any information or notices delivered to the First Lien Administrative Agent or the
First Lien Lenders (other than routine or administrative information or notices or borrowing
requests or letter of credit issuance requests); and



     (f) promptly, such additional information regarding the business, financial or corporate
affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as
the Administrative Agent or any Lender may from time to time reasonably request.



45









 





     Documents required to be delivered pursuant to Section 6.01(a) or Section 6.01(b) or Section
6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC)
may be delivered electronically and if so delivered, shall be deemed to have been delivered on the
date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s
website on the Internet at the website address listed on Schedule 10.02; or (ii) on which
such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to
which each Lender and the Administrative Agent have access (whether a commercial, third-party
website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower
shall deliver paper copies of such documents to the Administrative Agent or any Lender that
requests the Borrower to deliver such paper copies until a written request to cease delivering
paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify
the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any
such documents and provide to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every
instance the Borrower shall be required to provide paper copies of the Compliance Certificates
required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates,
the Administrative Agent shall have no obligation to request the delivery or to maintain copies of
the documents referred to above, and in any event shall have no responsibility to monitor
compliance by the Borrower with any such request for delivery, and each Lender shall be solely
responsible for requesting delivery to it or maintaining its copies of such documents.



     The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will
make available to the Lenders materials and/or information provided by or on behalf of the Borrower
hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on
IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the
Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public
information with respect to the Borrower or its securities) (each, a “Public Lender”). The
Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public
Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the
word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arranger
and the Lenders to treat such Borrower Materials as either publicly available information or not
material information (although it may be sensitive and proprietary) with respect to the Borrower or
its securities for purposes of United States Federal and state securities laws; (y) all Borrower
Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor;” and (z) the Administrative Agent and the Arranger shall be entitled
to treat Borrower’s Materials that are not marked “PUBLIC” as being suitable only for posting on a
portion of the Platform not designated “Public Investor.”



     6.03 Notices. Promptly notify the Administrative Agent and each Lender:



     (a) of the occurrence of any Default or any default as defined in the First Lien Facility;



46









 





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



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



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



     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the Borrower setting forth details of the occurrence referred to therein and stating
what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant
to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and
any other Loan Document that have been breached.



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



     6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the jurisdiction of its
organization except in a transaction permitted by Section 7.04 or Section 7.05; (b) take all
reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.



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



     6.07 Maintenance of Insurance. Maintain with financially sound and reputable
insurance companies not Affiliates of the Borrower, insurance with respect to its properties and



47









 







business against loss or damage of the kinds customarily insured against by Persons engaged in
the same or similar business, of such types and in such amounts (after giving effect to any
self-insurance compatible with the following standards) as are customarily carried under similar
circumstances by such other Persons and providing for not less than 30 days’ prior notice to the
Administrative Agent of termination, lapse or cancellation of such insurance.



     6.08 Compliance with Laws. Comply in all material respects with the requirements of
all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or
property, except in such instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b)
the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.



     6.09 Books and Records. Maintain proper books of record and account, in which full,
true and correct entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the Borrower or such
Restricted Subsidiary, as the case may be.



     6.10 Inspection Rights. Permit representatives and independent contractors of the
Administrative Agent and each Lender to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and independent public
accountants, all at the expense and risk of the Administrative Agent or Lenders, as applicable, and
at such reasonable times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Borrower; provided, however, that when a
Default exists (and the Borrower has been notified in writing by the Administrative Agent of the
existence of such Default), the Administrative Agent or any Lender (or any of their respective
representatives or independent contractors) may do any of the foregoing at the expense of the
Borrower at any time during normal business hours and without advance notice.



     6.11 Use of Proceeds. Use the proceeds of the Loans for general corporate purposes
(including for the purposes described in Recital C above) not in contravention of any Law or of any
Loan Document.



     6.12 Additional Guarantors. Notify the Administrative Agent at the time that any
additional Restricted Subsidiary of the Borrower is formed or acquired after the Closing Date; and,
if such Restricted Subsidiary Guarantees Indebtedness under the First Lien Facility, promptly
thereafter (and in any event within 30 days) cause such Person to (a) become a Guarantor by
executing and delivering to the Administrative Agent a counterpart of the Guaranty or such other
document as the Administrative Agent shall deem appropriate for such purpose, and (b) deliver to
the Administrative Agent, as requested, documents of the types referred to in clauses (iii)
and (iv) of Section 4.01(a) and favorable opinions of counsel to such Person (which shall
cover, among other things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), all in form, content and scope reasonably satisfactory to
the Administrative Agent. Upon delivery of any such Counterpart Agreement to the Administrative
agent, notice of which is hereby waived by each Loan Party, such Restricted Subsidiary shall be a
Guarantor and shall be as fully a party to the Guaranty as if such Restricted



48









 







Subsidiary were an original signatory hereto. As and when requested by the Administrative
Agent, (1) the Borrower will cause such Restricted Subsidiary to execute a Mortgage (to the extent
it owns Borrowing Base Properties and such Mortgage is necessary to cause the Borrower to comply
with Section 6.16(c)) or other security agreement in form and substance acceptable to
Administrative Agent (to the extent it owns personal property and such security agreement is
necessary to cause the Borrower to comply with Section 6.16(c)) and promptly take such actions to
create and perfect Liens on such Restricted Subsidiary’s assets to secure the Obligations as
Administrative Agent or the Required Lenders shall reasonably request, subject at all times to the
Intercreditor Agreement, and (2) if any stock, membership interest, partnership interest or other
equity interest in, or Indebtedness of, such Restricted Subsidiary is owned by the Borrower or any
other Restricted Subsidiary, the Borrower will cause such stock, membership interest, partnership
interest or other equity interest, and promissory notes evidencing such Indebtedness, to be pledged
pursuant to a Pledge Agreement delivered to the Administrative Agent promptly after such Restricted
Subsidiary is formed or acquired or within such other time frame as acceptable to the
Administrative Agent and promptly take such actions to create and perfect Liens on such assets to
secure the Obligations as the Administrative Agent or the Required Lenders shall reasonably request
subject at all times to the Intercreditor Agreement. Any Restricted Subsidiary formed or acquired
on or after the Closing Date shall be a Wholly Owned Subsidiary.



     6.13 Operations. Cause all Borrowing Base Properties and all other material
properties to be regularly operated, maintained and developed in a good and workmanlike manner, as
would a prudent operator and in accordance with all applicable federal, state and local laws, rules
and regulations, except for any failure to so operate, maintain and develop that could not
reasonably be expected to have a Material Adverse Effect.



     6.14 Delivery of Title Opinions. As and when requested by the Administrative Agent,
deliver to the Administrative Agent such reports, opinions of counsel (which opinions are not
required to be addressed to the Administrative Agent) and other evidence of title as the
Administrative Agent shall reasonably request to verify (i) clear and valid title of the Borrower
and its Restricted Subsidiaries to not less than eighty percent (80%) of the Engineered Value of
the Borrowing Base Properties that are subject to a Mortgage and at least the working interest and
net revenue interest in such oil and gas properties set forth in the most recent Engineering Report
and (ii) the validity, perfection and priority of the Liens created by the Mortgages and Security
Instruments and such other matters regarding such Mortgages as Administrative Agent shall
reasonably request (provided that this clause (ii) shall not be construed to require the Borrower
to deliver, or cause to be delivered, any opinion of counsel as to the priority of any Liens).



     6.15 Post-Closing Deliverables by COG LP. Not later than 30 days following the
Closing Date, the Borrower shall, or shall cause COG LP to, deliver the Administrative Agent, in
sufficient counterparts for each Lender, counterparts of (or a Counterpart Agreement with respect
to) the Guaranty, the Intercreditor Agreement and Security Instruments listed on Schedule
1.01 hereto to which COG LP is to become a party, each duly executed by COG LP, and each of the
Loan Documents, certificates, resolutions, opinions or other documents described in clauses (iii)
or (vii) of Section 4.01(a).



49









 





     6.16 Further Assurances.



     (a) Subject to the provisions of the Intercreditor Agreement, promptly upon the request of
Administrative Agent, the Borrower and its Restricted Subsidiaries shall do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register, any and all such further acts,
deeds, conveyances, security agreements, mortgages, assignments, estoppel certificates,
letter-in-lieu, financing statements and continuations thereof, termination statements, notices of
assignments, transfers, certificates, assurances and other instruments or evidence that the
Administrative Agent may reasonably require from time to time in order (i) to carry out more
effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens
created by any of the Security Instruments any of the properties, rights or interests covered by
any of the Security Instruments, (iii) to perfect and maintain the validity, effectiveness and
(subject to the Intercreditor Agreement) priority of any of the Security Instruments and the Liens
intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Administrative Agent the rights granted or now or hereafter
intended to be granted to the Administrative Agent or any Lender under any Loan Document or under
any other document executed in connection therewith.



     (b) The Borrower and its Restricted Subsidiaries hereby authorize Administrative Agent to file
one or more financing or continuation statements, and amendments thereto, relative to all or any
part of the collateral securing the Obligations without the signature of the relevant Borrower or
any relevant Restricted Subsidiary where permitted by law.



     (c) The Borrower shall, and shall cause each of its Restricted Subsidiaries to take such
actions and execute and deliver such documents and instruments as Administrative Agent shall
reasonably require to ensure that the Administrative Agent shall, at all times, have received
currently effective, duly executed Mortgages as may be necessary or, in the reasonable opinion of
Administrative Agent, desirable to effectively create a valid, perfected and, subject to the
Intercreditor Agreement, second priority Lien against Borrowing Base Properties representing at
least 80% of the Engineered Value of all proved Borrowing Base Properties included in the most
recent Engineering Report provided to the Lenders, and the Borrower and its Restricted Subsidiaries
shall, at the request of Administrative Agent, execute and deliver such additional Mortgages as may
be necessary or, in the reasonable opinion of Administrative Agent, desirable to effectively create
a valid, perfected and, subject to the Intercreditor Agreement, second priority Lien, subject only
to the Liens permitted under Section 7.01, against 80% of the Engineered Value of the proved
Borrowing Base Properties included in the most recent Engineering Report provided to the Lenders.



ARTICLE VII.

NEGATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit any
Restricted Subsidiary to, directly or indirectly:



50









 





     7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any Borrowing Base
Property or any other material property, whether now owned or hereafter acquired, other than:



     (a) any Lien created pursuant to this Agreement or the Security Instruments;



     (b) Permitted Encumbrances;



     (c) any Lien on any property or asset of any Borrower or any Restricted Subsidiary existing on
the date hereof and set forth in Schedule 7.01; provided that (i) such Lien shall
not apply to any other property or asset of any Borrower or any Restricted Subsidiary and (ii) such
Lien shall secure only those obligations which it secures on the date hereof and extensions,
renewals and replacements thereof that do not cause the outstanding principal amount of the
Indebtedness of the Borrowers to exceed the amounts permitted under Section 7.03;



     (d) any Lien existing on any property or asset prior to the acquisition thereof by any
Borrower or any Restricted Subsidiary or existing on any property or asset of any Person that
becomes a Restricted Subsidiary after the date hereof prior to the time such Person becomes a
Restricted Subsidiary; provided that (i) such Lien secures Indebtedness permitted by clause
(c) of Section 7.03, (ii) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Restricted Subsidiary, as the case may be, (iii) such Lien
shall not apply to any other property or assets of any Borrower or any other Restricted Subsidiary
and (iv) such Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Restricted Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the outstanding principal amount
thereof;



     (e) Liens on fixed or capital assets acquired, constructed or improved by any Borrower or any
Restricted Subsidiary; provided that (i) such Liens, secure Indebtedness permitted by
clause (c) of Section 7.03, (ii) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the completion of such construction
or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring,
constructing or improving such fixed or capital assets and (iv) such security interests shall not
apply to any other property or assets of any Borrower or any other Restricted Subsidiaries;



     (f) Liens on any property or asset of any Borrower or any Restricted Subsidiary, other than
property or assets securing the Obligations or any Borrowing Base Properties, to secure
Indebtedness and obligations of such Borrower or such Restricted Subsidiary under Swap Contracts
permitted under Section 7.12; and



     (g) Liens securing Indebtedness that is permitted pursuant to Sections 7.03(f) and Liens
created by the First Lien Loan Documents securing Swap Contracts permitted under Section 7.12;
provided that, in both cases, such Liens (i) shall not encumber any Property that is not subject to
a Lien of the appropriate priority in favor of, or for the benefit of, the Lenders to secure the
Obligations, and (ii) may be contractually senior to the Liens created pursuant to the



51









 







Security Instruments on the terms set forth in the Intercreditor Agreement or on terms
otherwise reasonably satisfactory to the Administrative Agent.



     7.02 Investments. Make any Investments, except:



     (a) Permitted Investments;



     (b) advances to officers, directors and employees of the Borrower and its Restricted
Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, for travel,
entertainment, relocation and similar ordinary business purposes;



     (c) advances to officers, directors and employees of the Borrower and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $12,000,000 plus all accrued and unpaid
interest attributable thereto at any time outstanding to finance the purchase by such officers,
directors and employees of Equity Interests in Concho Holdings prior to the IPO Date;



     (d) Investments by any Loan Party consisting of intercompany Indebtedness permitted under
Section 7.03(b);



     (e) Investments consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course of business, and
Investments received in satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent or limit loss; and



     (f) Guarantees permitted by Section 7.03;



     (g) Investments by any Loan Party in any Person that is, or thereby becomes, a Restricted
Subsidiary of the Borrower and a Guarantor, including any transfer by the Borrower to any
Restricted Subsidiary of the shares of Concho Holdings; provided that, with respect to any
such Investment other than the transfer by the Borrower to a Restricted Subsidiary of the shares of
Concho Holdings, no Event of Default has occurred and is continuing or would be caused by such
Investment; and



     (h) other Investments not otherwise described in the foregoing clauses (a) through (g) in an
aggregate amount not exceeding $3,000,000 at any time.



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



     (a) Indebtedness under the Loan Documents;



     (b) Indebtedness of the Borrower to any Guarantor and of any Guarantor to the Borrower or any
other Guarantor; provided, that (i) all such Indebtedness owing by a Guarantor shall be
unsecured and subordinated in right of payment, as provided in such Guarantor’s Guaranty, to the
payment in full of all of the Obligations and (ii) as and when requested by Administrative Agent,
all such Indebtedness owing by a Guarantor shall be evidenced by promissory notes in form and
substance reasonably satisfactory to the Administrative Agent, and such promissory notes shall be
subject to a second priority security interest in favor of the



52









 







Administrative Agent for the benefit of the Secured Parties on terms and conditions reasonably
satisfactory to the Administrative Agent;



     (c) Indebtedness, other than Indebtedness otherwise permitted by another clause of this
Section 7.03 that (together with any of the Loan Parties’ obligations for net gas imbalances and
prepayments of gas production in excess of $1,000,000) does not in the aggregate for the Borrower
and all of its Restricted Subsidiaries exceed $5,000,000 at any one time outstanding;



     (d) Guaranties of Indebtedness that is the primary obligation of a Restricted Subsidiary of
the Borrower and that is otherwise permitted under this Section 7.03;



     (e) Obligations of the Borrower and its Restricted Subsidiaries outstanding at any one time in
respect of reimbursement obligations given in connection with any bond, surety or similar
requirement of a Governmental Authority (other than any such bond or surety related to any judgment
by any court, arbitrator or similar authority) concerning the operation of the businesses and
assets of the Borrower and its Restricted Subsidiaries; and



     (f) Indebtedness incurred under and in compliance with the First Lien Facility in an aggregate
principal amount not exceeding $750,000,000 at any time outstanding, and any Guarantees thereof by
any of the Guarantors, provided that such Indebtedness is, subject to the Intercreditor Agreement,
pari passu in right of payment with the Obligations hereunder.



     7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any
Person, except that, so long as no Default exists or would result therefrom:



     (a) Any Restricted Subsidiary of the Borrower may merge with (i) the Borrower,
provided that the Borrower shall be the continuing or surviving Person, or (ii) any other
Restricted Subsidiary of the Borrower, provided that the continuing or surviving Person is
a Restricted Subsidiary;



     (b) Any Restricted Subsidiary of the Borrower may Dispose of all or substantially all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or to another Restricted
Subsidiary of the Borrower; and



     (c) Any Restricted Subsidiary of the Borrower may participate in a merger or consolidation as
part of a Disposition of such Restricted Subsidiary that is permitted under Section 7.05(f).



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



     (a) Dispositions permitted by Section 7.04;



     (b) [Reserved];



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     (c) Any Disposition of Borrowing Base Properties permitted under the First Lien Credit
Agreement as in effect on the Closing Date, provided that (i) no Borrowing Base Deficiency (as
defined in the First Lien Credit Agreement) shall have resulted from any such Disposition (taking
into account the application of any net cash proceeds of such Disposition), and (ii) no Default
shall exist before or after giving effect to any such Disposition;



     (d) Dispositions of surplus equipment for fair and adequate consideration and equipment that
is worthless or obsolete or which is replaced by equipment of equal suitability and value;



     (e) Dispositions of inventory (including hydrocarbons sold as produced or processed and
seismic data) in the ordinary course of business on ordinary trade terms; and



     (f) So long as no Event of Default has occurred and is continuing or would be caused by such
Disposition, Dispositions of other assets not constituting Borrowing Base Properties, including all
(but not less than all) of the Borrower’s direct or indirect Equity Interests in any Restricted
Subsidiary that does not own Borrowing Base Properties, directly or indirectly, but excluding any
direct or indirect Equity Interests in any Restricted Subsidiary that does own Borrowing Base
Properties, directly or indirectly;



     provided, however, that any Disposition pursuant to clauses (b) through (f)
shall be for fair market value. Upon request by the Borrower, the Administrative Agent shall
promptly release any Liens it might have burdening assets or properties permitted to be Disposed of
under this Section at the time of such permitted Disposition.



     7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no
Default shall have occurred and be continuing at the time of any action described below or would
result therefrom:



     (a) Each Restricted Subsidiary may make Restricted Payments to the Borrower or to any other
Restricted Subsidiary;



     (b) The Borrower and each Restricted Subsidiary of the Borrower may declare and make dividend
payments or other distributions payable solely in the common stock or other common Equity Interests
of such Person;



     (c) The Borrower and each Restricted Subsidiary may make Investments permitted under Section
7.02 regardless of whether such Investments otherwise constitute Restricted Payments; and



     (d) To the extent not paid prior to the IPO Date, and so long as no Event of Default has
occurred and is continuing or would be caused by such Restricted Payment, accrued and unpaid
dividends on Concho Holdings’ Preferred Stock in an aggregate amount not exceeding $2,500,000.



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     7.07 Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by the Borrower and its Restricted
Subsidiaries on the date hereof or any business substantially related or incidental thereto.



     7.08 Transactions with Affiliates. Enter into any material transaction with any
Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair
and reasonable terms substantially as favorable to the Borrower or such Restricted Subsidiary as
would be obtainable by the Borrower or such Restricted Subsidiary at the time in a comparable arm’s
length transaction with a Person other than an Affiliate, provided that the foregoing restriction
shall not apply to (a) transactions between or among the Borrower and any Restricted Subsidiaries
and not including any other Affiliate or between and among Restricted Subsidiaries and not
including any other Affiliate, (b) to any Investments permitted by Section 7.02, or (c) to any
agreement listed on Schedule 7.08.



     7.09 Burdensome Agreements. Enter into any Contractual Obligation (other than this
Agreement, any other Loan Document or any First Lien Loan Document) that, whether expressly or in
effect, (a) limits the ability (i) of any Restricted Subsidiary to make Restricted Payments to the
Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii)
of any Restricted Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower
or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens in favor of the
Administrative Agent on property of such Person; provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of
Indebtedness permitted under Section 7.03 solely to the extent any such negative pledge relates to
the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien
to secure an obligation of such Person if a Lien is granted to secure another obligation of such
Person.



     7.10 Use of Proceeds. Use the proceeds of any Borrowing, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.



     7.11 Financial Covenants.



     (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio of the
Borrower, as of the last day of any period of four consecutive fiscal quarters (commencing with the
four consecutive fiscal quarter period ended March 31, 2007) for which financial statements
required under Section 6.01(a) or 6.01(b) are available, to be greater than 4.50 to 1.00.



     (b) Current Ratio. Permit the ratio of Consolidated Current Assets to Consolidated
Current Liabilities to be less than 1.00 to 1.00 as of the last day of any fiscal quarter.



     (c) Asset Coverage Ratio. The Borrower will not permit the Asset Coverage Ratio
determined as of each January 1 and June 30 based upon the most recently delivered Engineering
Report to be less than 1.50 to 1.00.



55









 





     7.12 Swap Contracts. Be a party to, or in any manner be liable under, any Swap
Contract, except:



     (a) Swap Contracts entered into with the purpose and effect of mitigating risk with respect to
prices of oil, natural gas and/or gas liquids of the Borrower and its Restricted Subsidiaries
(including Swap Contracts entered into to unwind or offset other permitted Swap Contracts);
provided that at all times, on a net basis, (i) all such Swap Contracts for natural gas or
natural gas liquids shall not cover for each individual period covered thereby more than 85% of
estimated natural gas and gas liquids production from the proven producing reserves of the Borrower
and its Restricted Subsidiaries subject to market-sensitive contracts for the forthcoming four year
period, and (ii) all such Swap Contracts for crude oil shall not cover for each individual period
covered thereby more than 85% of estimated crude oil production from the proved producing reserves
of the Borrower and its Restricted Subsidiaries; provided further, that at the time
the Swap Contract is entered into, the counterparty to such Swap Contract is a First Lien Lender or
an Affiliate of a First Lien Lender, or if not a First Lien Lender or any Affiliate of a First Lien
Lender, such Person’s senior unsecured debt is rated not less than A- by S&P or not less than A3 by
Moody’s; and



     (b) Swap Contracts entered into with the purpose and effect of (i) fixing or limiting interest
rates on a principal amount of indebtedness of any Loan Party that is accruing interest at a
variable rate or (ii) obtaining variable interest rates on a principal amount of indebtedness of
any Loan Party that is accruing interest at a fixed rate (in each case including Swap Contracts
entered into to unwind or offset other permitted Swap Contracts), provided that the aggregate
notional amount of such Swap Contracts does not (on a net basis) exceed the outstanding principal
balance of the variable or fixed rate, as the case may be, Indebtedness of the Loan Parties at the
time such Swap Contract is entered into.



     7.13 Limitation on Sale/Leasebacks. Enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or such Restricted Subsidiary shall sell or
transfer any Borrowing Base Property or other material asset, and whereby the Borrower or such
Restricted Subsidiary shall then or immediately thereafter rent or lease as lessee such Borrowing
Base Property or other asset or any part thereof.



     7.14 Disqualified Stock. Issue any Disqualified Stock.



ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES




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



     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within three days after
the same becomes due, any interest on any Loan or any fee due hereunder, or (iii) within five days
after the same becomes due, any other amount payable hereunder or under any other Loan Document; or



56









 





     (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant
or agreement contained in any of Section 6.03(a), Section 6.10 or Section 6.11 or ARTICLE VII; or



     (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or
agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part
to be performed or observed and such failure continues for 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request of the Required
Lenders); or



     (d) Representations and Warranties. Any representation, warranty, certification or
statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party
herein, in any other Loan Document, or in any document delivered in connection herewith or
therewith shall prove to be false in any material respect when made or deemed made; or



     (e) Cross-Default. (i) The Borrower or any Restricted Subsidiary (A) fails to make
any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and
obligations under Swap Contracts) having an aggregate principal amount (including undrawn committed
or available amounts and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other
agreement or condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto (other than the failure of the
Borrower to comply with any financial covenant contained in the First Lien Facility), the effect of
which default is to cause, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed
(automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made by the Borrower or any Restricted Subsidiary prior to its stated maturity,
or such Guarantee to become payable or cash collateral in respect thereof to be required; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract or
any other event analogous thereto) resulting from any event of default under such Swap Contract as
to which the Borrower or any Restricted Subsidiary is the Defaulting Party (as defined in such Swap
Contract) and the Swap Termination Value owed by the Borrower or such Restricted Subsidiary as a
result thereof is greater than the Threshold Amount; or



     (f) Insolvency Proceedings, Etc. Any Loan Party institutes or consents to the
institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of
its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of such Person and the appointment
continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief
Law relating to any such Person or to all or any material part of its property is



57









 







instituted without the consent of such Person and continues undismissed or unstayed for 60
calendar days, or an order for relief is entered in any such proceeding; or



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



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



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



     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution
and delivery and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan
Party or any other Affiliate of the Borrower contests in any manner the validity or enforceability
of any provision of any Loan Document; or any Loan Party denies that it has any or further
liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any
Loan Document; or



     (k) Change in Control. There occurs any Change in Control.



     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the
Required Lenders, take any or all of the following actions:



     (a) declare the commitment of each Lender to make Loans to be terminated, whereupon such
commitments and obligation shall be terminated;



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



58









 





     (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents;



     provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the
obligation of each Lender to make Loans shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically
become due and payable, in each case without further act of the Administrative Agent or any Lender.



     8.03 Application of Funds. After the exercise of remedies (subject to the terms of
the Intercreditor Agreement) provided for in Section 8.02 (or after the Loans have automatically
become immediately due and payable), any amounts received on account of the Obligations shall be
applied by the Administrative Agent in the following order, subject to the terms of the
Intercreditor Agreement:



     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (other than principal and interest, but including fees, charges and
disbursements of counsel to the Administrative Agent and amounts payable under Sections 2.15, 2.16
and 2.17) payable to the Administrative Agent or the trustee under the Mortgage, in each case, in
its capacity as such;



     Second, to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal and interest) payable to the Lenders (including fees,
charges and disbursements of counsel to the respective Lenders and amounts payable under Sections
2.15, 2.16 and 2.17), ratably among them in proportion to the amounts described in this clause
Second payable to them;



     Third, to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loans and other Obligations, ratably among the Lenders in proportion to the
respective amounts described in this clause Third payable to them;



     Fourth, to payment of that portion of the Obligations constituting unpaid principal of
the Loans, ratably among the Lenders in proportion to the respective amounts described in this
clause Fourth held by them; and



     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by Law.



     8.04 Production Proceeds. Notwithstanding that, by the terms of the Mortgage, the
Borrower and certain other Loan Parties are and will be assigning to the Administrative Agent and
Lenders all of the “Hydrocarbons” (as defined therein) and all proceeds of production
attributable to the Hydrocarbons or the Mortgaged Property, so long as no Default has occurred and
is continuing, the Borrower or such other Loan Party, as applicable, may continue to receive from
the purchasers of production all such proceeds attributable to the Hydrocarbons or the Mortgaged
Property, subject, however, to the Liens created under the Security Instruments, which Liens are
hereby affirmed and ratified. Upon the occurrence of a Default and during the continuance thereof,
the Administrative Agent and Lenders may exercise all rights and remedies granted under the
Security Instruments or under applicable law, including the right to obtain




59










 




possession of all proceeds attributable to the Hydrocarbons and the Mortgaged Property
then held by the Borrower or any other Loan Party and to receive directly from the purchasers of
production all other proceeds attributable to the Hydrocarbons and the Mortgaged Property. In no
case shall any failure, whether intended or inadvertent, by the Administrative Agent or Lenders to
collect directly any such proceeds attributable to the Hydrocarbons or the Mortgaged Property
constitute in any way a waiver, remission or release of any of their rights under the Security
Instruments or under applicable law, nor shall any release of any proceeds attributable to the
Hydrocarbons or the Mortgaged Property by the Administrative Agent or Lenders to the Borrower
constitute a waiver, remission or release of any other proceeds attributable to the Hydrocarbons or
the Mortgaged Property or of any rights of the Administrative Agent or Lenders to thereafter
collect other proceeds attributable to the Hydrocarbons or the Mortgaged Property or any other
rights.




ARTICLE IX.

ADMINISTRATIVE AGENT




     9.01 Appointment and Authority. Each of the Lenders hereby irrevocably appoints Bank
of America to act on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto. The provisions of this
Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the
Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such
provisions.



     9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder
shall have the same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and
its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder
and without any duty to account therefor to the Lenders. Each Lender and each other party hereto
acknowledges and agrees that Bank of America is currently, may continue to be, and shall be
permitted to be, a First Lien Lender notwithstanding any potential or actual conflict that may now
or hereafter arise between the First Lien Lenders, on the one hand, and the Administrative Agent
and Lenders, on the other hand.



     9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Administrative Agent:



     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;



60









 





     (b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents), provided that the Administrative Agent shall
not be required to take any action that, in its opinion or the opinion of its counsel, may expose
the Administrative Agent to liability or that is contrary to any Loan Document or applicable law;
and



     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as
the Administrative Agent or any of its Affiliates in any capacity.



     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Section 10.01 and Section 8.02) or (ii) in the
absence of its own gross negligence or willful misconduct (IT BEING THE INTENTION OF THE PARTIES
HERETO THAT THE ADMINISTRATIVE AGENT AND ANY RELATED PARTIES SHALL, IN ALL CASES, BE INDEMNIFIED
FOR ITS COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE). The Administrative Agent shall be deemed
not to have knowledge of any Default unless and until notice describing such Default is given to
the Administrative Agent by the Borrower or a Lender.



     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.



     9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing (including any electronic message,
Internet or intranet website posting or other distribution) believed by it to be genuine and to
have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of the Loans on the Closing Date which
condition by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent
may presume that such condition is satisfactory to such Lender unless the Administrative Agent
shall have received notice to the contrary from such Lender prior to the



61









 




making of such Loans. The Administrative Agent may consult with legal counsel (who may be
counsel for the Borrower), independent accountants and other experts selected by it, and shall not
be liable for any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.




     9.05 Delegation of Duties. The Administrative Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan Document by or through
any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any
such sub-agent may perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this Article shall apply
to any such sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Administrative Agent.



     9.06 Resignation of Administrative Agent. The Administrative Agent may at any time
give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of
any such bank with an office in the United States. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then the retiring Administrative
Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above; provided that if the Administrative Agent shall notify the
Borrower and the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by the Administrative
Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent
shall continue to hold such collateral security until such time as a successor Administrative Agent
is appointed) and (2) all payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender directly, until such
time as the Required Lenders appoint a successor Administrative Agent as provided for above in this
Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers, privileges and duties
of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be
discharged from all of its duties and obligations hereunder or under the other Loan Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the retiring Administrative
Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article
and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.



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     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent or any other Lender
or any of their Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon the Administrative Agent or
any other Lender or any of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or any related agreement
or any document furnished hereunder or thereunder. In this regard, each Lender acknowledges that
Mayer, Brown, Rowe & Maw LLP is acting in this transaction as special counsel to the Administrative
Agent only. Each other party hereto will consult with its own legal counsel to the extent that it
deems necessary in connection with the Loan Documents and the matters contemplated therein.



     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of
the bookrunner, the arranger, or any other agent listed on the cover page hereof shall have any
powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except
in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.



     9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall
have made any demand on the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise;



     (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements
and advances of the Lenders and the Administrative Agent and their respective agents and counsel
and all other amounts due the Lenders and the Administrative Agent under Section 2.12 and Section
10.04) allowed in such judicial proceeding; and



     (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;


and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under Section 2.12 and
Section 10.04.




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Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.




     9.10 Collateral and Guaranty Matters. The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,



     (a) to release any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all
Obligations (other than contingent indemnification obligations), (ii) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any other Loan Document, or
(iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required
Lenders;



     (b) to subordinate any Lien on any property granted to or held by the Administrative Agent
under any Loan Document to the holder of any Lien on such property that is permitted by Section
7.01 if appropriate; and



     (c) to release any Guarantor from its obligations under the Guaranty if such Person ceases to
be a Restricted Subsidiary of the Borrower as a result of a transaction permitted hereunder.



     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its interest in particular
types or items of property, or to release any Guarantor from its obligations under the Guaranty
pursuant to this Section 9.10.



ARTICLE X.

MISCELLANEOUS




     10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or
any other Loan Document (other than the Fee Letter, which shall be modified only in accordance with
its terms), and no consent to any departure by the Borrower or any other Loan Party therefrom,
shall be effective unless in writing signed by the Required Lenders (or the Administrative Agent
with the consent of the Required Lenders) and the Borrower or the applicable Loan Party, as the
case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given;
provided, however, that no such amendment, waiver or consent shall:



     (a) waive any condition set forth in Section 4.01(a) without the written consent of each
Lender;



     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 2.08 or Section 8.02) without the written consent of such Lender;



     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment of
principal, interest, fees, Prepayment Premium or other amounts due to the Lenders



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(or any of them) or any scheduled or mandatory reduction of the Aggregate Commitments
hereunder or under any other Loan Document without the written consent of each Lender directly
affected thereby;




     (d) reduce or forgive the principal of, or the rate of interest specified herein on, any Loan,
or (subject to clause (iv) of the second proviso to this Section 10.01) any fees, Prepayment
Premium or other amounts payable hereunder or under any other Loan Document; provided,
however, that only the consent of the Required Lenders shall be necessary to amend Section
2.13(c) or to waive any obligation of the Borrower to pay interest at the rate specified in Section
2.13(c);



     (e) change Section 2.18 or Section 8.03 in a manner that would alter the pro rata sharing of
payments required thereby or increase the amount of Indebtedness permitted by Section 7.03(f)
without the written consent of each Lender;



     (f) change any provision of this Section, the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender; or



     (g) release any Guarantor from its Guaranty (except as permitted by Section 9.10) without the
written consent of each Lender or release all or substantially all of the collateral for the
Obligations;


and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Lenders required above, affect
the rights or duties of the Administrative Agent under this Agreement or any other Loan Document;
and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing
executed only by the parties thereto. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent
hereunder, except that the Commitment of such Lender may not be increased or extended without the
consent of such Lender.




     10.02 Notices; Effectiveness; Electronic Communication.



     (a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:




     (i) if to the Borrower or the Administrative Agent, to the address, telecopier number,
electronic mail address or telephone number specified for such Person on Schedule
10.02; and




     (ii) if to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.



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Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).




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



     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function, as available,
return e-mail or other written acknowledgement), provided that if such notice or other
communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the next business day
for the recipient, and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as
described in the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.



     (c) Change of Address, Etc. Each of the Borrower and the Administrative Agent may
change its address, telecopier or telephone number for notices and other communications hereunder
by notice to the other parties hereto. Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the Borrower and the
Administrative Agent.



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



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



     10.04 Expenses; Indemnity; Damage Waiver.



     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred
by the Administrative Agent, and, so long as an Event of Default has occurred and is continuing any
Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent,
and, so long as an Event of Default has occurred and is continuing, counsel for any Lender), in
connection with the enforcement or protection of its rights (A) in connection with this Agreement
and the other Loan Documents, including its rights under this Section, or (B) in connection with
the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.



     (b) INDEMNIFICATION BY THE BORROWER. THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE
AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE
HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE
FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), AND SHALL INDEMNIFY AND HOLD
HARMLESS EACH INDEMNITEE FROM ALL FEES AND TIME CHARGES AND DISBURSEMENTS FOR ATTORNEYS WHO MAY BE
EMPLOYEES OF ANY INDEMNITEE, INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY
THIRD PARTY OR BY THE BORROWER OR ANY OTHER LOAN PARTY ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT
OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR
RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, (II) ANY LOAN OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM, (III) ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR
OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR ANY ENVIRONMENTAL LIABILITY RELATED IN



67









 




ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY
OTHER LOAN PARTY, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, IN ALL CASES,
WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR
SOLE NEGLIGENCE OF THE INDEMNITEE; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED
EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR (Y)
RESULT FROM A CLAIM BROUGHT BY THE BORROWER OR ANY OTHER LOAN PARTY AGAINST AN INDEMNITEE FOR
BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF
THE BORROWER OR SUCH LOAN PARTY HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON
SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.




     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it
to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing
(and without limiting its obligation to do so), each Lender severally agrees to pay to the
Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such
Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as
such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or
any such sub-agent) in connection with such capacity. The respective obligations of the Lenders
under this Agreement are several and not joint and no Lender shall be responsible for the failure
of any other Lender to satisfy its obligations hereunder.



     (d) WAIVER OF CONSEQUENTIAL DAMAGES, ETC. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE,
ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO
DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, ANY LOAN OR THE USE OF THE PROCEEDS THEREOF. NO INDEMNITEE
REFERRED TO IN SUBSECTION (B) ABOVE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY
UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS



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DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION
SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.




     (e) Payments. All amounts due under this Section shall be payable not later than ten
Business Days after demand therefor.



     (f) Survival. The agreements in this Section shall survive the resignation of the
Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments
and the repayment, satisfaction or discharge of all the other Obligations.



     10.05 Payments Set Aside. To the extent that any payment by or on behalf of the
Borrower is made to the Administrative Agent or any Lender or the Administrative Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by the Administrative Agent or such
Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection
with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such setoff had not
occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its
applicable share (without duplication) of any amount so recovered from or repaid by the
Administrative Agent, plus interest thereon from the date of such demand to the date such payment
is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.
The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment
in full of the Obligations and the termination of this Agreement.



     10.06 Successors and Assigns.



     (a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Administrative Agent and
each Lender and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of
this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of
this Section, or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by
any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their respective successors
and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section
and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative
Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this
Agreement.



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     (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that




     (i) except in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to
a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the
aggregate amount of the Commitment (which for this purpose includes Loans outstanding
thereunder) or, if the Commitment is not then in effect, the principal outstanding balance
of the Loans, of the assignor subject to each such assignment, determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the Administrative
Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade
Date, shall not be less than $1,000,000, and the aggregate amount of the Commitment (which
for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in
effect, the principal outstanding balance of the Loans, assigned to the assignee subject to
each such assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified
in the Assignment and Assumption, as of the Trade Date, shall not be less than $1,000,000
and in an integral multiple of $1,000,000, unless in each case the Administrative Agent and,
so long as no Event of Default has occurred and is continuing, the Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed);




     (ii) each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement with respect to the
Loans assigned;




     (iii) [Reserved]; and




     (iv) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation fee of $2,500
(provided that in the event of two or more concurrent assignments to members of the same
Assignee Group (which may be effected by a suballocation of an assigned amount among members
of such Assignee Group) or two or more concurrent assignments by members of the same
Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its
Assignee Group), the Assignment Fee will be $2,500 for up to four concurrent assignments or
suballocations plus $500 for each additional concurrent assignment or suballocation), and
any Eligible Assignee to which any Loans are assigned that is not then a Lender shall
deliver to the Administrative Agent an Administrative Questionnaire.


Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this Section, from and after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the


70









 






extent of the interest assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of Section 2.15, Section 2.16,
Section 2.17, and Section 10.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection (d) of this Section.




     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the “Register”). The entries in the Register shall
be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection and copying by each of the Borrower at any reasonable time and from time
to time upon reasonable prior notice. In addition, at any time that a request for a consent for a
material or substantive change to the Loan Documents is pending, any Lender wishing to consult with
other Lenders in connection therewith may request and receive from the Administrative Agent a copy
of the Register.



     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s rights and obligations
under this Agreement.



     Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of Section 2.15, Section
2.16 and Section 2.17 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.18 as though it were a Lender.



71









 





     (e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 2.15 or Section 2.16 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to
the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section
2.17 as though it were a Lender.



     (f) Certain Pledges. Any Lender may, without the consent of the Administrative Agent
or the Borrower, at any time pledge or assign a security interest in all or any portion of its
rights under this Agreement (including under its Note, if any) to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.



     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as provided for in any
applicable law, including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.



     10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative
Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’
respective partners, directors, officers, employees, trustees, agents, advisors and representatives
(it being understood that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information confidential), (b)
to the extent requested by any regulatory authority purporting to have jurisdiction over it
(including any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f)
subject to an agreement containing provisions substantially the same as those of this Section, to
(i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g)
with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this Section or (y) becomes available to the
Administrative Agent, any Lender, or any of their respective Affiliates on a nonconfidential basis
from a source other than the Borrower.



72









 





     For purposes of this Section, “Information” means all information received from the
Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective
businesses, other than any such information that is available to the Administrative Agent or any
Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary,
provided that, in the case of information received from the Borrower or any Subsidiary
after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.



     10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing,
each Lender and each of their respective Affiliates is hereby authorized at any time and from time
to time, after obtaining the prior written consent of the Administrative Agent, to the fullest
extent permitted by applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and other obligations
(in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit
or the account of the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrower may be contingent or unmatured or are owed
to a branch or office of such Lender different from the branch or office holding such deposit or
obligated on such indebtedness. The rights of each Lender and its Affiliates under this Section
are in addition to other rights and remedies (including other rights of setoff) that such Lender or
its Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent
promptly after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application.



     10.09 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if
at any time the interest rate applicable to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under applicable law (collectively the
“Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be
contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance
with applicable law, the rate of interest payable in respect of such Loan hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be increased (but not
above the Maximum Rate therefor) until the earlier to occur of the following events: (a) payment
in full of the Loans of such Lender or (b) such cumulated amount, together with interest thereon at
the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
Chapter 346 of the Texas Finance Code (which regulates certain revolving credit accounts (formerly
Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to any Loan, nor
shall this Agreement or any Loan be governed by or be subject to the provisions of such Chapter 346
in any manner whatsoever.



73









 





     10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.



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



     10.12 Severability. If any provision of this Agreement or the other Loan Documents is
held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.



     10.13 [Reserved].



     10.14 Governing Law; Jurisdiction; Etc.



     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS.



     (b) SUBMISSION TO JURISDICTION. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY
AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF
THE NORTHERN DISTRICT OF TEXAS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL




74









 




CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY
RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.




     (c) WAIVER OF VENUE. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF
THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.



     (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.



     10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     10.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter
defined) and the Administrative Agent (for itself and not on behalf of any Lender)



75









 




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




     10.17 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.



     10.18 INTERCREDITOR AGREEMENT. Reference is made to the Intercreditor Agreement.
Each Lender hereunder (a) acknowledges that it has received a copy of the Intercreditor Agreement,
(b) consents to the subordination of Liens provided for in the Intercreditor Agreement, (c) agrees
that it will be bound by and will take no actions contrary to the provisions of the Intercreditor
Agreement and (d) authorizes and instructs the Administrative Agent to enter into the Intercreditor
Agreement as collateral agent and as its representative on behalf of such Lender. The foregoing
provisions are intended as an inducement to the First Lien Lenders to permit the incurrence of
Indebtedness and such First Lien Lenders are intended third party beneficiaries of such provisions.



76









 





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



	 	 	 	 	 
	 	CONCHO RESOURCES INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Curt F. Kamradt
 	 
	 	 	Name:  	Curt F. Kamradt 	 
	 	 	Title:  	Vice President and Chief Financial Officer 	 
	 
	 	BANK OF AMERICA, N.A.,

as Administrative Agent

 	 
	 	By:  	/s/ Todd G. MacNeill
 	 
	 	 	Name:  	Todd G. MacNeill 	 
	 	 	Title:  	Vice President 	 
	 
	 	BANK OF AMERICA, N.A.,

as a Lender

 	 
	 	By:  	/s/ Jeffrey H. Rathkamp
 	 
	 	 	Name:  	Jeffrey H. Rathkamp 	 
	 	 	Title:  	Managing Director 	 



S-1









 






	 	 	 	 	 



SCHEDULE 1.01




SECURITY INSTRUMENTS




SECURITY INSTRUMENTS:





	1.	 	Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement, dated as of March 27, 2007, from COG Oil & Gas LP, a Texas limited
partnership, as Mortgagor, to Jeffrey H. Rathkamp, as Trustee, and Bank of America, N.A., as
Administrative Agent.






	2.	 	Guaranty from the Initial Guarantors.







	3.	 	Pledge Agreements dated March 27, 2007, from each of the Loan Parties listed below in column
A, respectively, as Pledgor, to Bank of America, N.A., as Administrative Agent, pledging such
Loan Party’s interest in its respective Restricted Subsidiaries, each as set forth opposite
such Loan Party’s name in column B, below:





	 	 	 
	Column A (Obligor)	 	Column B (Assets Pledged)
	the Borrower

	 	Concho Equity Holdings Corp. — all shares
(approximately 98%) of
 common stock owned by
the Borrower
	 
	 	 
	Concho Equity Holdings Corp.

	 	COG Operating LLC — 100% membership interests

Concho LP LLC — 100% membership interests

COG Realty LLC — 100% membership interests
	 
	 	 
	COG Operating LLC

	 	COG Oil & Gas LP — 1% general partner interest
	 
	 	 
	 

	 	Concho Energy Services LLC — 100% membership
interests
	 
	 	 
	Concho LP LLC

	 	COG Oil & Gas LP — 99% limited partner interest






Schedule 1.01





 









 








SCHEDULE 2.01




COMMITMENTS

AND APPLICABLE PERCENTAGES



	 	 	 	 	 	 	 	 	 
	Lender	 	Commitment	 	 	Applicable Percentage	 
	 
	Bank of America, N.A.
	 	$	200,000,000.00	 	 	 	100.0000000	%
	 
	Total
	 	$	200,000,000.00	 	 	 	100.0000000	%






SCHEDULE 2.01




 









 








SCHEDULE 5.06




LITIGATION




None




SCHEDULE 5.06




 









 








SCHEDULE 5.13




SUBSIDIARIES, OTHER EQUITY INTERESTS OF THE BORROWER




	 	 	 
	Part (a).

	 	Restricted Subsidiaries.
	 
	 	 
	 

	 	Concho Holdings (The Borrower will merge Concho Acquisition Inc.
(owned 100% by the Borrower), an Unrestricted Subsidiary, into
Concho Holdings (owned approximately 98% by the Borrower) and
will thereby acquire from the non-accredited Concho Holdings’
shareholders the remaining shares of the Concho Holdings stock
in exchange for the Borrower’s common stock shortly before the
IPO Date)
	 
	 	 
	 

	 	COG GP (owned 100% by Concho Holdings)
	 
	 	 
	 

	 	COG LP (owned 100% by Concho Holdings)
	 
	 	 
	 

	 	COG Oil & Gas (99% limited partner interest owned by COG LP and
1% general partner interest owned by COG GP)
	 
	 	 
	 

	 	COG Realty (owned 100% by Concho Holdings)

Concho Energy Services (owned 100% by COG GP)
	 
	 	 
	 

	 	Unrestricted Subsidiaries.
	 
	 	 
	 

	 	Concho Acquisition Inc., a Delaware corporation (owned 100% by
Concho Holdings)
	 
	 	 
	Part (b).

	 	Other Equity Interest of the Borrower.
	 
	 	 
	 

	 	None






SCHEDULE 5.13




 









 








SCHEDULE 7.01




EXISTING LIENS




None.




SCHEDULE 7.01




 









 








SCHEDULE 7.08




AFFILIATE AGREEMENTS





	1.	 	Contract Operating Agreement among COG Oil & Gas, COG GP and Mack Energy Corporation.
(termination pending)
	 
	2.	 	Salt Water Disposal Well Ownership and Operating Agreement among COG Oil & Gas, COG GP, Mack
Energy Corporation, Chase Oil Corporation, and others.
	 
	3.	 	Combination Agreement dated as of February 24, 2006 among the Borrower, Concho Equity
Holdings Corp., Chase Oil Corporation, Caza Energy LLC and certain other signatories thereto.
	 
	4.	 	Software License Agreement dated as of March 1, 2006, by and between COG Operating LLC and
Enertia Software Systems.
	 
	5.	 	Drilling contracts with Silver Oak Drilling LLC (to terminate August 1, 2007)





SCHEDULE 7.08




 









 








SCHEDULE 10.02




ADMINISTRATIVE AGENT’S OFFICE;

CERTAIN ADDRESSES FOR NOTICES




BORROWER




Concho Resources Inc.

550 W. Texas, Suite 1300

Midland, Texas 79701

Attention: Curt F. Kamradt

Telephone: (432) 683-7443

Telecopier: (432) 683-7441

Electronic Mail: ckamradt@conchoresources.com




ADMINISTRATIVE AGENT:




Administrative Agent’s Office

(for payments and Requests for Credit Extensions):




Bank of America, N.A.

One Independence Center

101 N. Tryon Street

Charlotte, NC 28255-0001

Attention: Jean Hood

Telephone: (704) 388-9114

Fax: (704) 719-8162




ABA # 026009593

Bank of America, New York, NY

Account # 136-621-225-0600

Account Name: Corporate Credit Services, Charlotte NC

Ref: Concho




Other Notices as Administrative Agent:




Todd Mac Neill

Agency Officer

Bank of America

100 Federal Street

Boston, MA 02110

Mail Code: MA5-100-11-02

Telephone: (617) 434-6842

Fax: (617) 790-1361

Email: todd.g.macneill@bankofamerica.com




SCHEDULE 10.02





 









 





EXHIBIT A




FORM OF NOTE




                    




     FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to
                                         or registered assigns (the “Lender”), in accordance with the
provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time
to time made by the Lender to the Borrower under that certain Second Lien Credit Agreement, dated
as of March 27, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing
from time to time, the “Agreement;” the terms defined therein being used herein as therein
defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America,
N.A., as Administrative Agent.



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



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



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



Form of Note




Exhibit A




 









 





     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.



	 	 	 	 	 
	 	CONCHO RESOURCES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Form of Note




Exhibit A




 









 





LOANS AND PAYMENTS WITH RESPECT THERETO




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





Form of Note




Exhibit A




 









 





EXHIBIT B




FORM OF COMPLIANCE CERTIFICATE




Financial Statement Date:                     ,




To: Bank of America, N.A., as Administrative Agent



Ladies and Gentlemen:




     Reference is made to that certain Second Lien Credit Agreement, dated as of March 27, 2007 (as
amended, restated, extended, supplemented or otherwise modified in writing from time to time, the
“Agreement;” the terms defined therein being used herein as therein defined), among Concho
Resources Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time
party thereto, Bank of America, N.A., as Administrative Agent, and Wachovia Bank, National
Association, and BNP Paribas, as Documentation Agents.



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



[Use following paragraph 1 for fiscal year-end financial statements]




     1. Attached hereto as Schedule 1 are the year-end audited financial statements
required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the
above date, together with the report and opinion of an independent certified public accountant
required by such section.



[Use following paragraph 1 for fiscal quarter-end financial statements]




     1. Attached hereto as Schedule 1 are the unaudited financial statements required by
Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date.
Such financial statements fairly present the financial condition, results of operations and cash
flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such
period, subject only to normal year-end audit adjustments and the absence of footnotes.



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



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



Form of Compliance Certificate




Exhibit B




 









 





[select one:]




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



—or—




     [the covenants listed on Schedule 4 have not been performed or observed and
Schedule 4 lists each such Default and its nature and status:]



     4. Except as listed in Schedule 4, the representations and warranties of the Borrower
contained in Article V of the Agreement, and any representations and warranties of [the
Borrower][any Loan Party] that are contained in any document furnished at any time under or in
connection with the Loan Documents, are true and correct on and as of the date hereof, except to
the extent that such representations and warranties specifically refer to an earlier date, in which
case they are true and correct as of such earlier date, and except that for purposes of this
Compliance Certificate, the representations and warranties contained in Section 5.05(a) of the
Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a)
and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection
with which this Compliance Certificate is delivered.



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



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



	 	 	 	 	 
	 	CONCHO RESOURCES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Form of Compliance Certificate




Exhibit B




 









 





For the Quarter/Year ended __________________(“Statement Date”)




SCHEDULE 2

to the Compliance Certificate

($ in 000’s)




	 	 	 	 	 	 	 	 	 
	I.	 	Section 7.11 (a) —Consolidated Leverage Ratio.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	A.	 	Consolidated Funded Indebtedness at Statement Date:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	B.	 	Consolidated EBITDAX for Subject Period:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	C.	 	Consolidated Leverage Ratio (Line I.A  ̧ Line I.B):	 	____________ to 1
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	Maximum permitted:  4.50 to 1.00	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	II.	 	Section 7.11 (b) — Current Ratio.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	A.	 	Consolidated Current Assets:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	B.	 	Consolidated Current Liabilities:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	C.	 	Consolidated Current Ratio (Line II.A  ̧ Line II.B):	 	____________ to 1
	 
	 	 	 	 	 	 	 	 
	 	 	Minimum permitted: 1.00 to 1.00	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	II.	 	Section 7.11 (c) — Asset Coverage Ratio.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	A.	 	Present Value for Subject Period:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	B.	 	Consolidated Funded Indebtedness at Statement Date:	 	$______________	 
	 
	 	 	 	 	 	 	 	 
	 
	 	C.	 	Asset Coverage Ratio (Line III.A  ̧ Line III.B):	 	____________ to 1
	 
	 	 	 	 	 	 	 	 
	 
	 	Minimum permitted:  1.50 to 1.00	 	 	 	 	 






SCHEDULE 2 TO THE COMPLIANCE CERTIFICATE




 









 








For the
Quarter/Year ended __________________ (“Statement Date”)




SCHEDULE 3

to the Compliance Certificate

($ in 000’s)




Consolidated EBITDAX

(in accordance with the definition of Consolidated EBITDAX

as set forth in the Agreement)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Twelve	 
	Consolidated	 	Quarter	 	 	Quarter	 	 	Quarter	 	 	Quarter	 	 	Months	 
	EBITDAX	 	Ended	 	 	Ended	 	 	Ended	 	 	Ended	 	 	Ended	 
	Consolidated
Net Income
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ Consolidated
Interest Charges
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ income and
franchise taxes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ depletion expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ depreciation
expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ amortization
expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ exploration expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	+ non-cash expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	- income tax credits
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	- non-cash income
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	= Consolidated
EBITDAX
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






SCHEDULE 3 TO THE COMPLIANCE CERTIFICATE





 









 





EXHIBIT C




ASSIGNMENT AND ASSUMPTION




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



     For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the
Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s
rights and obligations as a Lender under the Credit Agreement and any other documents or
instruments delivered pursuant thereto to the extent related to the amount and percentage interest
identified below of all of such outstanding rights and obligations of the Assignor under the
respective facilities identified below and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the
loan transactions governed thereby or in any way based on or related to any of the foregoing,
including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims
and all other claims at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i)
and (ii) above being referred to herein collectively as, the “Assigned
Interest”). Such sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment and Assumption, without representation or warranty by the
Assignor.




	1.	 	Assignor:                                         
	 
	2.	 	Assignee:                                          [and is an Affiliate/Approved Fund of [identify
Lender]1
	 
	3.	 	Borrower(s):                                         
	 
	4.	 	Administrative Agent: Bank of America, N.A., as the administrative agent under the
Credit Agreement







 




			
	1	 	Select as applicable.





Form of Assignment and Assumption




Exhibit C




 









 






	5.	 	Credit Agreement: Second Lien Credit Agreement, dated as of March 27, 2007, among
Concho Resources Inc., the Lenders from time to time party thereto, and Bank of America, N.A.,
as Administrative Agent.
	 
	6.	 	Assigned Interest:





	 	 	 	 	 	 	 	 	 
	 	 	Aggregate	 	 	 	 	 	 
	 	 	Amount of	 	Amount of	 	Percentage	 	 
	 	 	Loans	 	Loans	 	Assigned of	 	CUSIP Number
	Facility Assigned	 	for all Lenders*	 	Assigned*	 	Loans2	 	(if any)
	 
	Term Loans
	 	 	 	 	 	 	 	 






7. [Trade Date:                                         ]3



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






 




			
	2	 	Set forth, to at least 9 decimals, as a
percentage of the Loans of all Lenders thereunder.
	 
	3	 	To be completed if the Assignor and the
Assignee intend that the minimum assignment amount is to be determined as of
the Trade Date.





Form of Assignment and Assumption




Exhibit C




 









 





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



	 	 	 	 	 
	 	ASSIGNOR

[NAME OF ASSIGNOR]
 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 
	 	ASSIGNEE

[NAME OF ASSIGNEE]

 	 
	 	By:  	 	 
	 	 	Title: 	 



[Consented to and]4 Accepted:




	 	 	 	 	 
	BANK OF AMERICA, N.A., as

Administrative Agent

 	 	 
	By:  	 	 	 
	 	Title: 	 	 



	 	 	 	 	 
	[Consented to:]5



CONCHO RESOURCES INC., as

Borrower

 	 	 
	By:  	 	 	 
	 	Title: 	 	 





 




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





Form of Assignment and Assumption




Exhibit C




 









 





ANNEX 1 TO ASSIGNMENT AND ASSUMPTION




[                                        ]1




STANDARD TERMS AND CONDITIONS FOR




ASSIGNMENT AND ASSUMPTION




          1. Representations and Warranties.




          1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any
lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Credit Agreement or any
other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective obligations under any
Loan Document.




          1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full power and
authority, and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender
thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such
other documents and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any
documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.






 




			
	1	 	Describe Credit Agreement at option of
Administrative Agent.





Form of Assignment and Assumption




Exhibit C




 









 





          2. Payments. From and after the Effective Date, the Administrative Agent shall make
all payments in respect of the Assigned Interest (including payments of principal, interest, fees
and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective
Date and to the Assignee for amounts which have accrued from and after the Effective Date.




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




Form of Assignment and Assumption




Exhibit C





 









 





EXHIBIT D




FORM OF GUARANTY




Form of Guaranty




Exhibit D




 









 





EXHIBIT D




FORM OF GUARANTY




Form of Guaranty




FORM OF




GUARANTY




     THIS GUARANTY (this “Guaranty”), dated as of                     , made by Concho Equity Holdings
Corp., a Delaware corporation (“Concho Holdings”), COG Operating LLC, a Delaware limited
liability company (“COG GP”), Concho LP LLC, a Delaware limited liability company (“COG
LP”), COG Oil & Gas LP, a Texas limited partnership (“COG Oil & Gas”), Concho Energy
Services LLC, a Texas limited liability company (“Concho Energy”), and COG Realty LLC, a
Texas limited liability company (“COG Realty”; COG Realty together with each other
signatory hereto, each a “Guarantor” and, collectively, the “Guarantors”) is in
favor of each of the Lender Parties (as defined below).



W I T N E S S E T H:




     WHEREAS, pursuant to that certain Second Lien Credit Agreement dated as of                     , by and
among Concho Resources Inc., a Delaware corporation (the “Borrower”), Bank of America,
N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), and the
financial institutions from time to time parties thereto, as lenders (each a “Lender” and
collectively the “Lenders”) (together with all amendments, supplements, restatements and
other modifications, if any, thereafter made thereto, the “Second Lien Credit Agreement”),
the Lenders have extended Commitments (as defined in the Second Lien Credit Agreement) to make term
Loans to the Borrower; and



     WHEREAS, as a condition precedent to the making of the Loans under the Second Lien Credit
Agreement, each Guarantor is required to execute and deliver this Guaranty; and



     WHEREAS, each Guarantor has duly authorized the execution, delivery and performance of this
Guaranty; and



     WHEREAS, it is in the best interests of each Guarantor to execute this Guaranty inasmuch as
each Guarantor will derive substantial direct and indirect benefits from the Loans made from time
to time to the Borrower;



     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, and in order to induce the Lenders to make the term Loans to the Borrower pursuant to
the Second Lien Credit Agreement, each Guarantor agrees, for the benefit of each Lender Party, as
follows:



ARTICLE I



DEFINITIONS




     SECTION 1.1 Certain Terms. The following terms (whether or not underscored) when used
in this Guaranty, including its preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):



     “Lender Party” means, as the context may require, any Lender, the Administrative Agent
and each of their respective successors, transferees and assigns.



     “UCC” means the Uniform Commercial Code as in effect in the State of Texas.



Exhibit D




 









 








     SECTION 1.2 Second Lien Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its preamble and
recitals, have the meanings provided in the Second Lien Credit Agreement.



     SECTION 1.3 UCC Definitions. Unless otherwise defined herein or the context otherwise
requires, terms for which meanings are provided in the UCC are used in this Guaranty, including its
preamble and recitals, with such meanings.



ARTICLE II



GUARANTY PROVISIONS




     SECTION 2.1 Guaranty. Each Guarantor hereby absolutely, unconditionally and
irrevocably



          (a) guarantees





     (i) the full and punctual payment when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise, of all
Obligations of the Borrower and each other Loan Party now or hereafter existing
under the Second Lien Credit Agreement, the Notes and each other Loan Document to
which the Borrower is or may become a party, whether for principal, interest, fees,
expenses or otherwise;




     (ii) [Intentionally Omitted];




     (iii) all renewals, rearrangements, increases, extensions for any period,
substitutions, modification, amendments or supplements in whole or in part of any of
the above Loan Documents or obligations,




(including all such amounts which would become due but for the operation of the automatic
stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §362(a), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
§502(b) and §506(b)), and




     (b) indemnifies and holds harmless strictly in accordance with the terms of the Second
Lien Credit Agreement each Lender Party and each holder of a Note from the Borrower, for any
and all costs and expenses (including reasonable attorney’s fees and expenses) incurred by
such Lender Party or such holder, as the case may be, in enforcing any rights under this
Guaranty;


provided, however, that such Guarantor shall only be liable under this Guaranty to
the extent provided for in Article IV hereof. This Guaranty constitutes a guaranty of payment when
due and not of collection, and each Guarantor specifically agrees that it shall not be necessary or
required that any Lender Party or any holder of any Note exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Borrower or any other Loan Party (or any other
Person) before or as a condition to the obligations of such Guarantor hereunder. All payments
hereunder are to be made in the currency in which they are due under the Second Lien Credit
Agreement.




Exhibit D




2









 








     SECTION 2.2 Acceleration of Guaranty. Each Guarantor agrees that, in the event of the
dissolution or insolvency of the Borrower, such Guarantor, or any other Loan Party, or the
inability or failure of the Borrower, such Guarantor, or any other Loan Party to pay debts as they
become due, or an assignment by the Borrower, such Guarantor, or any other Loan Party for the
benefit of creditors, or the commencement of any case or proceeding in respect of the Borrower,
such Guarantor, or any other Loan Party under any bankruptcy, insolvency or similar laws, and if
such event shall occur at a time when any of the Obligations of the Borrower or any other Loan
Party may not then be due and payable, such Guarantor will pay to the Lender Parties forthwith the
full amount which would be payable hereunder by such Guarantor if all such Obligations were then
due and payable.



     SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects be a
continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full
force and effect until all Obligations of the Borrower have been paid in full, all obligations of
each Guarantor hereunder shall have been paid in full. Each Guarantor guarantees that the
Obligations of the Borrower will be paid strictly in accordance with the terms of the Second Lien
Credit Agreement and each other Loan Document under which they arise, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Lender Party or any holder of any Note with respect thereto. The liability of
each Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective
of:




     (a) (i) any lack of validity, legality or enforceability of the Second Lien Credit
Agreement, any Note or any other Loan Document or any portion of any thereof or (ii) the
Second Lien Credit Agreement, any Note or any other Loan Document or any portion of any
thereof being void or voidable;




     (b) the failure of any Lender Party or any holder of any Note:




     (i) to assert any claim or demand or to enforce any right or remedy against the
Borrower, any other Loan Party or any other Person (including any other guarantor)
under the provisions of the Second Lien Credit Agreement, any Note, any other Loan
Document or otherwise, or




     (ii) to exercise any right or remedy against any other guarantor of, or
collateral securing, any Obligations of the Borrower or any other Loan Party;




     (c) any change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations of the Borrower or any other Loan Party, or any other extension,
compromise or renewal of any Obligation of the Borrower or any other Loan Party;




     (d) any reduction, limitation, impairment or termination of any Obligations of the
Borrower or any other Loan Party for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and each Guarantor hereby
waives any right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,



Exhibit D




3









 









nongenuineness, irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of the Borrower, any other Loan Party or otherwise;




     (e) any amendment to, extensions of, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Second Lien Credit Agreement, any
Note or any other Loan Document;




     (f) any addition, exchange, release, surrender or non-perfection of any collateral, or
any amendment to or waiver or release or addition of, or consent to departure from, any
other guaranty, held by any Lender Party or any holder of any Note, or interest therein
securing any of the Obligations of the Borrower or any other Loan Party; or




     (g) any other circumstance which might otherwise constitute a defense available to, or
a legal or equitable discharge of, the Borrower, any other Loan Party, any surety or any
guarantor.



     SECTION 2.4 Reinstatement. Each Guarantor agrees that this Guaranty shall continue to
be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part)
of any of the Obligations guaranteed hereby is rescinded or must otherwise be restored by any
Lender Party or any holder of any Note upon the insolvency, bankruptcy or reorganization of the
Borrower, or any other Loan Party or otherwise, all as though such payment had not been made.



     SECTION 2.5 Waiver. Each Guarantor hereby expressly waives:




     (a) promptness, diligence, presentment, notice of acceptance and any other notice with
respect to any of the Obligations of the Borrower or any other Loan Party and this Guaranty
and any requirement that the Administrative Agent, any other Lender Party or any holder of
any Note or any interest therein protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action against the
Borrower, any other Loan Party or any other Person (including any other guarantor) or entity
or any collateral securing the Obligations of the Borrower or any other Loan Party, as the
case may be; and




     (b) each and every right to which it may be entitled by virtue of the suretyship law of
the State of Texas including, without limitation, any rights it may have pursuant to Rule
31, Texas Rules of Civil Procedure, Section 17.001, Civil Practice and Remedies Code, and
Chapter 34 of the Texas Business and Commerce Code.



     SECTION 2.6 Waiver of Subrogation. Each Guarantor hereby irrevocably waives any claim
or other rights which it may now or hereafter acquire against the Borrower or any other Loan Party
that arise from the existence, payment, performance or enforcement of such Guarantor’s obligations
under this Guaranty or any other Loan Document, including any right of subrogation, reimbursement,
contribution, exoneration, or indemnification, any right to participate in any claim or remedy of
the Lender Parties against the Borrower or any other Loan Party or any collateral which the
Administrative Agent now has or hereafter acquires, whether or



Exhibit D




4









 







not such claim, remedy or right arises in equity, or under contract, statute or common law,
including the right to take or receive from the Borrower or any other Loan Party, directly or
indirectly, in cash or other property or by set-off or in any manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any Guarantor in violation
of the preceding sentence and the Obligations shall not have been paid in cash in full, such amount
shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for, the
Lender Parties, and shall forthwith be paid to the Lender Parties to be credited and applied upon
the Obligations, whether matured or unmatured; otherwise it shall be returned to remitter. Each
Guarantor acknowledges that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Second Lien Credit Agreement and that the waiver set forth in this
Section is knowingly made in contemplation of such benefits.




     SECTION 2.7 Successors, Transferees and Assigns; Transfers of Notes. This Guaranty
shall:




     (a) be binding upon each Guarantor, and its successors, transferees and assigns
(provided, however, that such Guarantor may not assign any of its obligations hereunder
without the prior written consent of all Lenders); and




     (b) inure to the benefit of and be enforceable by each Agent and each other Lender
Party.


Without limiting the generality of the foregoing clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note, Loan or interest therein held by it to any other
Person or entity, and such other Person or entity shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document (including this
Guaranty) or otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Section 10.06 of the Second Lien Credit Agreement.




     SECTION 2.8 Taxes.



     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of any Guarantor hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if
any Guarantor shall be required by applicable law to deduct any Indemnified Taxes (including any
Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to additional sums payable
under this Section 2.8) the Administrative Agent or Lender, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made, (ii) such
Guarantor shall make such deductions and (iii) such Guarantor shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable law.



     (b) Payment of Other Taxes by each Guarantor. Without limiting the provisions of
subsection (a) above, each Guarantor shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.



Exhibit D




5









 








     (c) Indemnification by the Borrower. Each Guarantor shall indemnify the
Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent
or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as
to the amount of such payment or liability delivered to the Guarantors by a Lender (with a copy to
the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a
Lender, shall be conclusive absent manifest error.



     (d) Evidence of Payments. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Guarantor to a Governmental Authority, each Guarantor shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.



     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which any Guarantor is resident
for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Guarantors (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by
the Guarantors or the Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Guarantors or the
Administrative Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Guarantors or the Administrative Agent as will enable the Guarantors or
the Administrative Agent to determine whether or not such Lender is subject to backup withholding
or information reporting requirements.



     (f) Treatment of Certain Refunds. If the Administrative Agent or any Lender
determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by any Guarantor or with respect to which any Guarantor has paid
additional amounts pursuant to this Section 2.8, it shall pay to such Guarantor an amount
equal to such refund (but only to the extent of indemnity payments made, or additional amounts
paid, by such Guarantor under this Section with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the
case may be, and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that such Guarantor, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to such Guarantor
(plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to
the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is
required to repay such refund to such Governmental Authority. This subsection shall not be
construed to require the Administrative Agent or any Lender to make available its tax returns (or
any other information relating to its taxes that it deems confidential) to any Guarantor or any
other Person.



Exhibit D




6









 








     The undersigned waives any statutory right to recover from any Lender Party any amount due to
any such Lender Party and paid by the undersigned under this Section 2.8.



     SECTION 2.9 Make-Whole Qualifications. Each Lender Party’s claims for reimbursements,
payments, indemnities or otherwise under Section 2.8 and the undersigned’s obligations with
respect thereto, shall be limited and qualified by and subject to the following:




     (a) the undersigned’s obligation to pay, satisfy or recognize such claim shall be
limited to costs or losses incurred within nine (9) months immediately prior to any demand
or request therefor upon the undersigned;




     (b) each Lender Party’s demand for reimbursement, payment or indemnity must be limited
to that which is being generally applied at the time by such Lender for comparable
guarantors and guaranties subject to similar provisions;




     (c) each Lender Party that asserts its rights with respect thereto or which is seeking
or imposing such reimbursement, payment or indemnity shall provide evidence regarding the
basis of such claim and the calculation and application thereof in reasonable detail and, in
determining such amount, each Lender Party may use reasonable methods of attribution and
averaging; and




     (d) each Lender Party that is seeking payment, indemnity or reimbursement pursuant to
Section 2.8 shall, if so requested by the undersigned use reasonable efforts
(subject to the overall policy considerations of such Lender Party) to designate a different
lending office hereunder if to do so will avoid the need for, or reduce the amount of, any
such payment, indemnity or reimbursement; provided that, Lender Party would, in its
sole but reasonable determination, suffer no material economic, legal or regulatory
disadvantage or burden.



     SECTION 2.10 Judgment. Each Guarantor hereby agrees that:




     (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert
a sum due hereunder in United States Dollars into another currency, such Guarantor agrees,
to the fullest extent permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative Agent could purchase
United States Dollars with such other currency on the Business Day preceding that on which
final judgment is given.




     (b) The obligation of such Guarantor in respect of any sum due from it to any Lender
Party or any holder of a Note hereunder shall, notwithstanding any judgment in a currency
other than United States Dollars, be discharged only to the extent that on the Business Day
following receipt by such Lender Party or such holder, as the case may be, of any sum
adjudged to be so due in such other currency such Lender Party or such holder, as the case
may be, may, in accordance with normal banking procedures, purchase United States Dollars
with such other currency; in the event that the United States Dollars so purchased are less
than the sum originally due to such Lender Party in United States Dollars, such Guarantor,
as a separate obligation and notwithstanding any such judgment, hereby indemnifies and holds
harmless such Lender Party and such



Exhibit D




7









 









holder against such loss, and if the United States Dollars so purchased exceed the sum
originally due to such Lender Party or such holder in United States Dollars, such Lender
Party or such holder, as the case may be, shall remit to such Guarantor such excess.



     SECTION 2.11 Intercreditor Agreement; Liens. Any Liens securing this Guaranty are
subject to the terms of that certain Intercreditor Agreement dated of even date herewith, among the
Borrower and the other Loan Parties party thereto, JPMorgan Chase Bank, N.A. (in its capacity as
administrative agent for the lenders party to that certain First Lien Credit Agreement), and
Administrative Agent, as the same may from time to time be amended, amended and restated,
supplemented or otherwise modified.



ARTICLE III



REPRESENTATIONS AND WARRANTIES




     SECTION 3.1 Each Guarantor hereby represents and warrants unto each Lender Party that each
representation or warranty contained in Article V of the Second Lien Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor as if such representation or warranty
was set forth in full in this Guaranty and made by such Guarantor.



ARTICLE IV

LIMITATION ON OBLIGATIONS




     SECTION 4.1 Limitation on Obligations. The provisions of this Guaranty are severable,
and in any action or proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if
the obligations of any Guarantor under this Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such Guarantor’s liability under
this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the
amount of such liability shall, without any further action by the Guarantors, the Administrative
Agent, any Lender or any Lender Party, be automatically limited and reduced to the highest amount
that is valid and enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the relevant Guarantor’s “Maximum Liability”). This Section
4.1 with respect to the Maximum Liability of the Guarantors is intended solely to preserve the
rights of the Administrative Agent, the Lenders and the Lender Parties hereunder to the maximum
extent not subject to avoidance under applicable law, and no Guarantor nor any other person or
entity shall have any right or claim under this Section 4.1 with respect to the Maximum
Liability, except to the extent necessary so that the obligations of each Guarantor hereunder shall
not be rendered voidable under applicable law.



     SECTION 4.2 Maximum Liability. Each Guarantor agrees that the obligations guaranteed
under this Guaranty may at any time and from time to time exceed the Maximum Liability of each
Guarantor, and may exceed the aggregate Maximum Liability of all other Guarantors, without
impairing this Guaranty or affecting the rights and remedies of the Administrative Agent, the
Lenders and the Lender Parties hereunder. Nothing in this Section 4.2 shall be construed
to increase any Guarantor’s obligations hereunder beyond its Maximum Liability.



Exhibit D




8









 








     SECTION 4.3 Payments. In the event any Guarantor (a “Paying Guarantor”) shall
make any payment or payments under this Guaranty or shall suffer any loss as a result of any
realization upon any collateral granted by it to secure its obligations under this Guaranty, each
other Guarantor (each a “Non-Paying Guarantor”) shall contribute to such Paying Guarantor
an amount equal to such Non-Paying Guarantor’s “Pro Rata Share” of such payment or payments made,
or losses suffered, by such Paying Guarantor. For the purposes hereof, each Non-Paying Guarantor’s
“Pro Rata Share” with respect to any such payment or loss by a Paying Guarantor shall be determined
as of the date on which such payment or loss was made by reference to the ratio of (i) such
Non-Paying Guarantor’s Maximum Liability as of such date (without giving effect to any right to
receive, or obligation to make, any contribution hereunder) or, if such Non-Paying Guarantor’s
Maximum Liability has not been determined, the aggregate amount of all monies received by such
Non-Paying Guarantor from the Borrower after the date hereof (whether by loan, capital infusion or
by other means) to (ii) the aggregate Maximum Liability of all Guarantors hereunder (including such
Paying Guarantor) as of such date (without giving effect to any right to receive, or obligation to
make, any contribution hereunder), or to the extent that a Maximum Liability has not been
determined for the Guarantors, the aggregate amount of all monies received by such Guarantors from
the Borrower after the date hereof (whether by loan, capital infusion or by other means). Nothing
in this Section 4.3 shall affect any Guarantor’s several liability for the entire amount of
the obligations guaranteed under this Guaranty (up to such Guarantor’s Maximum Liability). Each of
the Guarantors covenants and agrees that its right to receive any contribution under this Guaranty
from a Non-Paying Guarantor shall be subordinate and junior in right of payment to all the
Guaranteed Obligations. The provisions of this Section 4.3 are for the benefit of the
Administrative Agent, the Lenders and the Lender Parties and the Guarantors and may be enforced by
any one, or more, or all of them in accordance with the terms hereof.



ARTICLE V



MISCELLANEOUS PROVISIONS




     SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed pursuant to the
Second Lien Credit Agreement and shall (unless otherwise expressly indicated herein) be construed,
administered and applied in accordance with the terms and provisions thereof.



     SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment. In addition
to, and not in limitation of, Section 2.7, this Guaranty shall be binding upon each
Guarantor and its successors, transferees and assigns and shall inure to the benefit of and be
enforceable by each Lender Party and each holder of a Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to Section 2.7);
provided, however, no Guarantor may assign any of its obligations hereunder without
the prior written consent of all Lenders.



     SECTION 5.3 Amendments. No amendment to or waiver of any provision of this Guaranty,
nor consent to any departure by any Guarantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Administrative Agent, and then



Exhibit D




9









 







such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given.




     SECTION 5.4 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing, unless otherwise specifically
provided herein and shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy (with telephonic confirmation of transmission, by delivery service with proof
of delivery, or by registered or certified United States mail, postage prepaid, to the Guarantors
at the address of the Guarantors specified on the signature pages hereto and to each Agent and each
Lender at their addresses specified on the signature pages to the Second Lien Credit Agreement
(unless changed by similar notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given:




     (a) in the case of personal delivery or delivery service, as of the date of first
attempted delivery at the address provided herein;




     (b) in the case of telecopy, upon receipt; or




     (c) in the case of registered or certified United States mail, three days after deposit
in the mail, postage prepaid.



     SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Lender Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.



     SECTION 5.6 Section Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this Guaranty.



     SECTION 5.7 Setoff. In addition to, and not in limitation of, any rights of any Lender
Party or any holder of a Note under applicable law, each Lender Party and each such holder shall,
upon the occurrence of any Default described in Section 8.01(f) of the Second Lien Credit Agreement
or any Event of Default, have the right to appropriate and apply to the payment of the obligations
of any Guarantor owing to it hereunder, whether or not then due, and each Guarantor hereby grants
to each Lender Party and each such holder a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of such Guarantor then or thereafter maintained with such
Lender Party or such holder and any and all property of every kind or description of or in the name
of such Guarantor now or hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, such Lender Party, such holder or any agent or bailee for such Lender
Party or such holder.



     SECTION 5.8 Severability. Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Guaranty shall be prohibited by or invalid under such law, such provision shall



Exhibit D




10









 







be ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.




     SECTION 5.9 Counterparts. This Guaranty may be executed in counterparts (and by
different parties hereto in different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract. Additional Restricted
Subsidiaries of the Borrower may from time to time execute one or more Counterpart Agreements to be
attached to this Guaranty and upon delivery of any such Counterpart Agreement to Administrative
Agent, such additional Restricted Subsidiary shall be a Guarantor hereunder for all purposes.



     SECTION 5.10 Subordination. Each Guarantor hereby subordinates and makes inferior to
the Obligations any and all indebtedness now or at any time hereafter owed to any such Guarantor by
Borrower or any other Guarantor (in this paragraph, the “Obligors”). Each Guarantor agrees
that during the continuance of any Event of Default it will neither permit any Obligor to repay
such indebtedness or any part thereof nor accept payment from any Obligor of such indebtedness or
any part thereof without the prior written consent of Administrative Agent. If any Guarantor
receives any such payment without the prior written consent of Administrative Agent, the amount so
paid shall be held in trust for the benefit of the Lender Parties, shall be segregated from the
other funds of such Guarantor, and shall forthwith be paid over to Administrative Agent to be held
by Administrative Agent as collateral for, or then or at any time thereafter applied in whole or in
part by Administrative Agent against, all or any portions of the Obligations, whether matured or
unmatured, in such order as Administrative Agent shall elect in accordance with the provisions of
the Second Lien Credit Agreement.



     SECTION 5.11 Governing Law, Entire Agreement. THIS GUARANTY SHALL BE GOVERNED BY AND
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICT OF LAW). THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.



     SECTION 5.12 Waiver of Jury Trial. EACH OF THE GUARANTORS, AGENTS AND LENDER PARTIES
HEREBY (a) IRREVOCABLY WAIVES, THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (d) ACKNOWLEDGES
THAT IT HAS BEEN INDUCED TO ENTER INTO AND ACCEPT



Exhibit D




11









 







THIS GUARANTY, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.




     SECTION 5.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE LENDER PARTIES OR ANY GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF TEXAS SITTING IN DALLAS COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH PROPERTY MAY BE FOUND. EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH
SUCH LITIGATION. EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. EACH
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR 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 OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.



Exhibit D




12









 








     THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.




[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




Exhibit D




13









 





     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered
by its officer thereunto duly authorized as of the date first above written.



	 	 	 	 	 	 	 
	INITIAL GUARANTORS:	 	CONCHO EQUITY HOLDINGS CORP.  
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Curt F. Kamradt
	 	 	Title: Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	COG OPERATING LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Curt F. Kamradt
	 	 	Title: Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	COG OIL & GAS LP
	 	 	By:	 	COG Operating LLC, its sole general partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Curt F. Kamradt
	 	 	Title: Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	COG REALTY LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Curt F. Kamradt
	 	 	Title: Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	CONCHO ENERGY SERVICES LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Curt F. Kamradt
	 	 	Title: Vice President and Chief Financial Officer






Exhibit D




S - 1









 








	 	 	 	 	 
	 	 	Notice information for all Initial Guarantors:
	 

	 	Address:
	 	550 W. Texas, Suite 1300
	 

	 	 	 	Midland, Texas 79701
	 

	 	Attention:
	 	Curt F. Kamradt
	 

	 	Telephone:
	 	(432) 683-7443
	 

	 	Telecopy:
	 	(432) 683-7441
	 
	 	 	 	 
	 

	 	with a copy to:	 	 
	 
	 	 	 	 
	 

	 	 	 	David Copeland
	 

	 	Address:
	 	550 W. Texas, Suite 1300
	 

	 	 	 	Midland, Texas 79701
	 

	 	Telephone:
	 	(432) 683-7443
	 

	 	Telecopy:
	 	(432) 683-7441






Exhibit D





S - 2









 





EXHIBIT E




FORM OF SOLVENCY CERTIFICATE




     The undersigned, as Chief Financial Officer of Concho Resources Inc., a Delaware corporation
(the “Borrower”), hereby gives this Solvency Certificate to induce Bank of America, N.A.,
as Administrative Agent for the Lenders (defined below) (the “Administrative Agent”) and
the Lenders to consummate certain financial accommodations pursuant to the terms and conditions of
that certain Second Lien Credit Agreement dated the date hereof (the “Credit Agreement”)
among the Borrower, the lenders signatory thereto (“Lenders”), and Bank of America, N.A.,
as administrative agent. Capitalized terms used in this certificate are defined in the Credit
Agreement, unless otherwise stated.



     The undersigned hereby certifies to the Administrative Agent that:



     1. The undersigned is familiar with the business and financial affairs of the Borrower,
including, without limitation, the Transactions and the matters hereinafter described.



     2. Immediately following the consummation of, and after giving effect to, the transactions
contemplated by the Loan Documents and the application of the proceeds from the fundings being made
on the Closing Date, the Borrower is solvent.



     3. The Borrower does not intend to incur, or believe it will incur, debts beyond its ability
to pay as they mature.



	 	 	 	 	 
	 	DATED: March 27, 2007


CONCHO RESOURCES INC.,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Chief Financial Officer 	 
	 



Form of Solvency Certificate




Exhibit E




 









 





EXHIBIT F




FORM OF MORTGAGE




Form of Mortgage




Exhibit F




 









 





EXHIBIT F




FORM OF MORTGAGE




Form of Mortgage




FORM OF




SECOND LIEN MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST,

ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT




FROM




COG OIL & GAS LP,

a Texas limited partnership,

(Taxpayer I.D. No. 14-1913261)

(Organizational I.D. No. 800364536)




TO




Jeffrey H. Rathkamp, as Trustee,




AND




BANK OF AMERICA, N.A.,

as Administrative Agent




Dated as of                     



A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A
FINANCING STATEMENT.



THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.



THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.



THE OIL AND GAS INTERESTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE FINANCED AT THE WELLHEADS OF
THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS
TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS.



THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE MINERALS OR OTHER SUBSTANCES OF VALUE WHICH MAY
BE EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE ACCOUNTS RELATING
THERETO, WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED NOW OR HEREAFTER ON THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO. THIS INSTRUMENT ALSO COVERS AS-EXTRACTED COLLATERAL AND GOODS THAT
ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THIS INSTRUMENT IS TO BE
FILED OF RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OF THE COUNTIES, RECORDING
DISTRICTS AND/OR PARISHES REFERENCED IN EXHIBIT A HERETO AND SUCH FILING SHALL SERVE, AMONG OTHER
PURPOSES, AS A FIXTURE FILING. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE
CONCERNED, WHICH INTEREST IS DESCRIBED IN EXHIBIT A HERETO.




Exhibit F




 









 




THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH IS DESCRIBED IN EXHIBIT
A HERETO.



SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY IS OR IS TO BE
AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE
FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS.



A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW THE MORTGAGEE TO
TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE MORTGAGOR UNDER THIS MORTGAGE.



NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE
FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS:
YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.



THIS INSTRUMENT WAS PREPARED BY AND WHEN RECORDED AND/OR FILED RETURNED TO:




Tristan E. Propst

Mayer, Brown, Rowe & Maw LLP

700 Louisiana, Suite 3400

Houston, Texas 77002




Exhibit F




ii 









 





SECOND LIEN MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST,

ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT




     THIS SECOND LIEN MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT AND FINANCING STATEMENT (this “Mortgage”), dated as of ___, is from COG
OIL & GAS LP, a Texas limited partnership (herein the “Mortgagor”), having its chief
executive office at 550 W. Texas, Suite 1300, Midland, Texas 79701, to Jeffrey H. Rathkamp of
Boston, Massachusetts, as Trustee (herein the “Trustee”), and BANK OF AMERICA, N.A., having
its principal office at 100 Federal Street, Mail Stop MA DE 10008D, Boston, Massachusetts 02110
(herein called “Bank of America”), as Administrative Agent for the lenders and other
financial institutions parties to the Credit Agreement referred to below (herein, in such capacity,
together with any successor(s) thereto in such capacity, called the “Administrative
Agent”).



RECITALS:




     1. Pursuant to a Second Lien Credit Agreement dated as of ___, by and among Concho
Resources Inc., a Delaware corporation (the “Borrower”), Bank of America, N.A., as Administrative
Agent, and the other various commercial lending institutions (individually a “Lender” and
collectively the “Lenders”) from time to time parties thereto (together with all
amendments, supplements, restatements and other modifications, if any, thereafter made thereto, the
“Credit Agreement”), pursuant to which, upon the terms and subject to the conditions
therein set forth the Lenders have extended Commitments to make term Loans to the Borrower in an
aggregate principal amount not exceeding $200,000,000.00 at any time outstanding.



     2. The Loans to be made by the Lenders pursuant to the terms of the Credit Agreement may be
evidenced by Notes (as defined in the Credit Agreement and used herein with the same meaning) from
the Borrower, payable to the order of each respective Lender, each bearing interest at the rates
provided for in the Credit Agreement, and each containing provisions for payment of attorneys’ fees
and acceleration of maturity upon an Event of Default.



     3. It is a condition precedent to the making of the Loan under the Credit Agreement that the
Mortgagor have duly authorized the execution, delivery and performance of this Mortgage.



     4. The Mortgagor is a Subsidiary of the Borrower. In consideration of the financial and other
support that the Borrower has provided, and such financial and other support as the Borrower may in
the future provide, to the Mortgagor, and in order to induce the Lenders to extend credit under the
Credit Agreement, and because the Mortgagor has determined that executing this Mortgage is in its
interest and to its financial benefit, the Mortgagor is willing to execute this Mortgage.



     5. For all purposes of this Mortgage, unless the context otherwise requires:




     (a) “Guaranty” shall mean that certain Guaranty dated as of ___,
executed by the Mortgagor and certain other Subsidiaries of the Borrower in favor of the
Lender Parties, as it may be amended, restated, modified or supplemented from time to time.


Exhibit F



1









 






     (b) “Hydrocarbons” shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, and all
products refined or separated therefrom;




     (c) “Indebtedness” shall have the meaning set forth in Section 1.2
hereof;




     (d) “lands described in Exhibit A” shall include any lands which are either
described in Exhibit A or the description of which is incorporated in Exhibit
A by reference to another instrument or document, and shall also include any lands now
or hereafter unitized or pooled with lands which are either described in Exhibit A
or the description of which is incorporated in Exhibit A by reference to another
instrument or document;




     (e) “Lender Parties” shall mean, as the context may require, the Administrative
Agent, any Lender, and each of their respective successors, transferees and assigns;




     (f) [Intentionally Omitted];




     (g) “Mortgaged Property” shall mean the properties, rights and interests
hereinafter described and defined as the Mortgaged Property;




     (h) “Notes” shall mean, collectively, any Notes dated ___, issued by
the Borrower in the aggregate principal amount not to exceed $200,000,000 bearing interest
at the rates provided for in the Credit Agreement and providing for the payment of
attorney’s fees and acceleration of maturity as set forth in the Credit Agreement, and with
a present maturity date of ___, or such other date as provided for in the Credit
Agreement, all as more particularly described therein or in the Credit Agreement;




     (i) “oil and gas leases” shall include oil, gas and mineral leases, subleases
and assignments thereof, operating rights, and shall also include subleases and assignments
of operating rights;




     (j) “Operating Equipment” shall mean all surface or subsurface machinery,
goods, equipment, fixtures, inventory, facilities, supplies or other property of whatsoever
kind or nature (excluding drilling rigs, trucks, automotive equipment or other property
taken to the premises to drill a well or for other similar temporary uses) now or hereafter
located on or under any of the lands described in Exhibit A which are useful for the
production, gathering, treatment, processing, storage or transportation of Hydrocarbons
(together with all accessions, additions and attachments to any thereof), including, but not
by way of limitation, all oil wells, gas wells, water wells, injection wells, casing,
tubing, tubular goods, rods, pumping units and engines, christmas trees, platforms,
derricks, separators, compressors, gun barrels, flow lines, tanks, gas systems (for
gathering, treating and compression), pipelines (including gathering lines, laterals and
trunk lines), chemicals, solutions, water systems (for treating, disposal and injection),
power plants, poles, lines, transformers, starters and controllers, machine shops, tools,
storage yards and equipment stored therein, buildings and camps, telegraph, telephone and
other communication systems, roads, loading docks, loading racks and shipping facilities;



Exhibit F



2









 






     (k) “Production Sale Contracts” shall mean contracts now in effect, or
hereafter entered into by the Mortgagor, or entered into by the Mortgagor’s predecessors in
interest, for the sale, purchase, exchange, gathering, transportation, treating or
processing of Hydrocarbons produced from the lands described in Exhibit A attached
hereto and made a part hereof;




     (l) [Intentionally Omitted]; and




     (m) “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect from time to time in the states of Texas and New Mexico, and the terms “Account,”
“Account Debtor,” “As-Extracted Collateral,” “Chattel Paper,” “Deposit Account,” “Document,”
“General Intangibles,” “Goods,” “Equipment,” “Fixtures,” “Inventory,” “Instrument,” and
“Proceeds” shall have the respective meanings assigned to such terms in the Uniform
Commercial Code.



     Unless otherwise defined herein or the context otherwise requires, terms used in this Mortgage
(including its preamble and recitals) have the meanings provided in the Credit Agreement.



     NOW, THEREFORE, the Mortgagor, for and in consideration of the premises and of the debts and
trusts provided in the Credit Agreement and hereinafter, has GRANTED, BARGAINED, SOLD, WARRANTED,
MORTGAGED, ASSIGNED, TRANSFERRED and CONVEYED, and by these presents does GRANT, BARGAIN, SELL,
WARRANT, MORTGAGE, ASSIGN, TRANSFER and CONVEY unto the Trustee, in trust, with a POWER OF SALE,
for the use and benefit of the Administrative Agent, for itself and as agent for the Lender Parties
(and where appropriate to effectuate the provisions of Section 5.13 hereof, does hereby
MORTGAGE, to Administrative Agent), all the Mortgagor’s right, title and interest, whether now
owned or hereafter acquired, in and to all of the hereinafter described properties, rights and
interests that are located in (or cover properties located within) the States of New Mexico or
Texas or which are located within (or cover property located within) the offshore area over which
the United States of America asserts jurisdiction and to which the laws of the State of Texas are
applicable with respect to this Mortgage and/or the lien or security interests created hereby; and,
insofar as such properties, rights and interests consist of Equipment, General Intangibles,
Accounts, Contract Rights, Inventory, Fixtures, As-Extracted Collateral, Chattel Paper, Documents,
Deposit Accounts, Goods, Instruments, Proceeds of collateral or any other personal property of a
kind or character defined in or subject to the applicable provisions of the Uniform Commercial Code
(as in effect in the appropriate jurisdiction with respect to each of said properties, rights and
interests), the Mortgagor hereby grants to the Administrative Agent, for the pro rata and pari
passu use and benefit of the Lender Parties, a security interest therein, whether now owned or
hereafter acquired; namely:




     (a) the lands described in Exhibit A, and the oil and gas leases, the fee,
mineral, overriding royalty, royalty and other interests which are specifically described in
Exhibit A,




     (b) the presently existing and (subject to the terms of Section 2.7 hereof)
hereafter arising unitization, unit operating, communitization and pooling agreements and
the properties covered and the units created thereby (including, without limitation, all
units and forced pooling acreage formed under orders, regulations, rules, approvals,



Exhibit F



3









 







decisions or other official acts of any federal, state or other governmental agency
having jurisdiction) which are specifically described in Exhibit A or which relate
to any of the properties and interests specifically described in Exhibit A,




     (c) the Hydrocarbons which are in, under, upon, produced or to be produced from the
lands described in Exhibit A,




     (d) the Production Sale Contracts,




     (e) the Operating Equipment,




     (f) without duplication of any other provision of this granting clause, Equipment,
Fixtures and other Goods necessary or used in connection with, and Inventory, Accounts,
General Intangibles, As-Extracted Collateral, Chattel Paper, Deposit Accounts, Documents,
Instruments and Proceeds arising from, or relating to, the properties and other interests
described in Exhibit A, and




     (g) any and all liens and security interests in Hydrocarbons securing the payment of
Proceeds from the sale of Hydrocarbons, including but not limited to those liens and
security interests provided by the statutes of Texas or New Mexico, as applicable;


together with any and all corrections or amendments to, or renewals, extensions or ratifications
of, or replacements or substitutions for, any of the same, or any instrument relating thereto, and
all accounts, contracts, contract rights, options, nominee agreements, operating agreements,
processing agreements, farmin agreements, farmout agreements, joint venture agreements, exploration
agreements, bottomhole agreements, dryhole agreements, support agreements, acreage contribution
agreements, insurance policies, title opinions, title abstracts, title materials and information,
files, records, writings, data bases, information, systems, logs, well cores, fluid samples,
production data and reports, well testing data and reports, maps, seismic and geophysical,
geological and chemical data and information, interpretative and analytical reports of any kind or
nature (including, without limitation, reserve studies and reserve evaluations), computer hardware
and software and all documentation therefor or relating thereto (including, without limitation, all
licenses relating to or covering such computer hardware, software and/or documentation), trade
secrets, trademarks, service marks and business names and the goodwill of the business relating
thereto, copyrights, copyright registrations, unpatented inventions, patent applications and
patents, rights-of-way, franchises, easements, servitudes, surface leases, permits, licenses,
tenements, hereditaments, appurtenances, general intangibles, rents, issues, profits, products and
proceeds, whether now or hereafter existing or arising, used or useful in connection with,
covering, relating to, or arising from or in connection with, any of the aforesaid in this granting
clause referenced, and all other things of value and incident thereto (including, without
limitation, any and all liens, lien rights, security interests and other rights and interests)
which the Mortgagor might at any time have or be entitled to, and, to the extent not included in
the foregoing (whether or not related to the land described in Exhibit A), all other
equipment, inventory, accounts, money, payment intangibles, deposit accounts, contracts, contract
rights, rights to payment of money (whether or not earned and including under any warranty,
condemnation award, indemnity or guaranty), chattel paper, documents, documents of title,
instruments, letters of credit, letter-of-credit rights, general intangibles, intellectual property
(including patent rights, copyrights, trademarks and computer hardware and software), bank


Exhibit F



4









 






accounts, investment property, fixtures and other supporting obligations and in each case together
with all accessions, substitutions, replacements, products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing, and all of the Mortgagor’s
other property and rights of every kind and description and interest therein; all the aforesaid
properties, rights and interests, to the full extent of the Mortgagor’s right, title and interest,
including alike the Mortgagor’s entire legal and beneficial interest therein, whether now owned or
hereafter acquired, together with any additions thereto which may be subjected to the lien and
security interest of this Mortgage by means of supplements hereto, being hereinafter called the
“Mortgaged Property”.




     Subject, however, to (i) the restrictions, exceptions, reservations, conditions, limitations,
interests and other matters, if any, set forth or referred to in the specific descriptions of such
properties and interests in Exhibit A (including all presently existing royalties,
overriding royalties, payments out of production and other burdens which are referred to in
Exhibit A and which are taken into consideration in computing any percentage, decimal or
fractional interest as set forth in Exhibit A), (ii) the assignment of production contained
in Article III hereof, but only insofar and so long as said assignment of production is not
inoperative under the provisions of Section 3.5 hereof, and (iii) the condition that none
of the Trustee, the Administrative Agent or any of the Lender Parties shall be liable in any
respect for the performance of any covenant or obligation of the Mortgagor in respect of the
Mortgaged Property.



     TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and the Administrative Agent (as
the case may be) forever to secure the payment of the Indebtedness and to secure the performance of
the obligations of the Mortgagor herein contained.



     The Mortgagor, in consideration of the premises, to induce the Lenders to make the Loans,
hereby covenants and agrees with the Trustee, the Administrative Agent and the Lenders as follows:



ARTICLE I




INDEBTEDNESS SECURED




     Section 1.1 Items of Indebtedness Secured. The following items of indebtedness are
secured hereby:




     1.1.1 All Obligations now or hereafter existing (including any future advances) under
the Notes, the Guaranty and all other obligations and liabilities of the Borrower and the
Mortgagor under and in connection with the Credit Agreement or any of the other Loan
Documents;




     1.1.2 Any promissory note taken in extension or renewal of or in replacement or
substitution for any of the Notes;




     1.1.3 Any and all other Obligations under the Credit Agreement of the Borrower and the
Mortgagor to the Lenders now or hereafter owing, whether direct or indirect, primary or
secondary, fixed or contingent, joint or several, regardless or how evidenced or arising;


Exhibit F




5









 






     1.1.4 Any sums advanced or expenses or costs incurred by the Trustee, the
Administrative Agent or the Lender Parties (or any receiver appointed hereunder) which are
made or incurred pursuant to, or permitted by, the terms hereof, plus interest thereon at
the rate herein specified or otherwise agreed upon, from the date of the advances or the
incurring of such expenses or costs until reimbursed;




     1.1.5 [Intentionally Omitted];




     1.1.6 Any extensions or renewals of all such items of indebtedness described in the
immediately preceding subparagraphs above, whether or not the Borrower or the Mortgagor
executes any extension agreement or renewal instruments.



     Section 1.2 Indebtedness Defined. All the above items of indebtedness are hereinafter
collectively referred to as the “Indebtedness”.



     Section 1.3 NEW MEXICO AGGREGATE UNPAID PRINCIPAL AMOUNT. AS TO ONLY THE MORTGAGED
PROPERTY SITUATED IN THE STATE OF NEW MEXICO, THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF THE
INDEBTEDNESS OUTSTANDING AT ANY PARTICULAR TIME (AFTER HAVING GIVEN EFFECT TO ALL ADVANCES AND ALL
REPAYMENTS MADE PRIOR TO SUCH TIME) WHICH IS SECURED BY PROPERTY LOCATED IN NEW MEXICO SHALL NOT
AGGREGATE AN UNPAID PRINCIPAL AMOUNT IN EXCESS OF THREE HUNDRED MILLION AND NO/100 DOLLARS
($300,000,000.00).



ARTICLE II




PARTICULAR COVENANTS AND WARRANTIES

OF THE MORTGAGOR




     Section 2.1 Payment of the Indebtedness. The Mortgagor will duly and punctually pay
its respective Indebtedness, and duly and punctually perform each and every obligation performable
by it under the Credit Agreement and each other Loan Document.



     Section 2.2 Warranties. The Mortgagor represents and warrants to the Trustee, the
Administrative Agent and the other Lender Parties that (a) except where individually or in the
aggregate it would not have a Material Adverse Effect, the oil and gas leases described in
Exhibit A hereto are valid, subsisting leases, superior and paramount to all other oil and
gas leases respecting the properties to which they pertain, (b) except where individually or in the
aggregate it would not have a Material Adverse Effect, all producing wells located on the lands
described in Exhibit A have been drilled, operated and produced in conformity with all
applicable laws, rules and regulations of all authorities having jurisdiction, and are subject to
no penalties on account of past production, and such wells are in fact bottomed under and are
producing from, and the well bores are wholly within, the lands described in Exhibit A, (c)
the Mortgagor has valid, good and indefeasible title to each property right or interest
constituting the Mortgaged Property and has a good and legal right to grant, convey and mortgage
the same to the Trustee, and without limitation as to the coverage of this instrument, where
working interest or a net revenue interest is shown on Exhibit A, the Mortgagor’s working
interest is not greater than that shown and that its net revenue interest is not less than that
shown, (d) the Mortgaged Property is free from all encumbrances or liens whatsoever, except as may
be specifically set


Exhibit F




6









 







forth in Exhibit A or as permitted by the provisions of Section 2.5.5 hereof,
and (e) except where individually or in the aggregate it would not have a Material Adverse Effect,
no Mortgagor is obligated, by virtue of any prepayment under any contract providing for the sale by
the Mortgagor of Hydrocarbons which contains a “take or pay” clause or under any similar
arrangement, to deliver Hydrocarbons at some future time without then or thereafter receiving full
payment therefor. The Mortgagor will warrant and forever defend the Mortgaged Property unto the
Trustee against every person whomsoever lawfully claiming the same or any part thereof, and the
Mortgagor will maintain and preserve the lien and security interest hereby created so long as any
of the Indebtedness remains unpaid.



     Section 2.3 Further Assurances. The Mortgagor will execute and deliver such other and
further instruments and will do such other and further acts as in the opinion of the Trustee may be
necessary or desirable to carry out more effectually the purposes of this Mortgage, including,
without limiting the generality of the foregoing, (a) prompt correction of any defect which may
hereafter be discovered in the title to the Mortgaged Property or in the execution and
acknowledgment of this Mortgage, any Note, the Guaranty, or any other document executed in
connection herewith, and (b) upon and during the continuance of an Event of Default, prompt
execution and delivery of all notices to parties producing, purchasing or receiving proceeds of
production from the Mortgaged Property, and all division orders or transfer orders, any of which,
in the opinion of the Administrative Agent, is needed to transfer effectually or to assist in
transferring effectually to the Administrative Agent the assigned proceeds of production from the
Mortgaged Property.



     Section 2.4 Taxes. Subject to (a) the Mortgagor’s right to contest the same and (b)
the extent provided in Section 6.04 of the Credit Agreement, the Mortgagor will promptly pay all
taxes, assessments and governmental charges legally imposed upon this Mortgage or upon the
Mortgaged Property, or upon the interest of the Trustee, the Administrative Agent or the Lenders
therein, or upon the income and profits thereof.



     Section 2.5 Operation of the Mortgaged Property. So long as the Indebtedness or any
part thereof remains unpaid, and whether or not the Mortgagor is the operator of the Mortgagor’s
Mortgaged Property, the Mortgagor shall, at its own expense:




     2.5.1 do all things necessary to keep unimpaired the Mortgagor’s rights in the
Mortgaged Property and not, except (i) in the ordinary course of business or (ii) to the
extent expressly provided in the Credit Agreement, (x) enter into any operating agreement
with respect to the Mortgaged Property, (y) abandon any well, or (z) forfeit, surrender or
release any oil and gas lease or any rights in the Mortgaged Property, without the prior
written consent of the Administrative Agent;




     2.5.2 cause the lands described in Exhibit A to be maintained, developed,
protected against drainage, and continuously operated for the production of Hydrocarbons in
a good and workmanlike manner as would a prudent operator, and in accordance with generally
accepted practices, applicable operating agreements, and all applicable federal, state and
local laws, rules and regulations, excepting those being contested in good faith;


Exhibit F




7









 






     2.5.3 cause to be paid, promptly as and when due and payable, all rentals and royalties
payable in respect of the Mortgaged Property, and all expenses incurred in or arising from
the operation or development of the Mortgaged Property;




     2.5.4 cause the Operating Equipment to be kept in good and effective operating
condition and all repairs, renewals, renovations, replacements, additions and improvements
thereof or thereto, needful to the production of Hydrocarbons from the lands described in
Exhibit A, to be promptly made as would a prudent operator;




     2.5.5 cause the Mortgaged Property to be kept free and clear of liens, charges and
encumbrances of every character, other than (1) the lien and security interest hereof, (2)
taxes constituting a lien but not due and payable, (3) defects or irregularities in title,
and liens, charges or encumbrances, which are not such as to interfere materially with the
development, operation or value of the Mortgaged Property and not such as to affect
materially title thereto, (4) those set forth or referred to in Exhibit A, (5) those
being contested by the Mortgagor in good faith in such manner as not to jeopardize the
Trustee’s and the Lenders’ rights in and to the Mortgaged Property, (6) other Permitted
Encumbrances, (7) liens and security interest securing the First Lien Facility and (8) those
consented to in writing by the Administrative Agent; and




     2.5.6 carry insurance with financially sound and reputable insurance companies and in
amounts and covering such risks as are in accordance with normal industry practice for
companies engaged in similar businesses and owning similar properties in the same general
areas in which the Mortgaged Property is located.



     Section 2.6 Recording. The Mortgagor will promptly, and at its expense, record,
register, deposit and file this and every other instrument in addition or supplemental hereto in
such offices and places and at such times and as often as may be necessary to preserve, protect and
renew the lien and security interest hereof as a second lien on and perfected security interest in
real or personal property, as the case may be, and the rights and remedies of the Trustee and of
the Administrative Agent and the Lenders, and otherwise will do and observe all things or matters
necessary or expedient to be done or observed by reason of any law or regulation of any State or of
the United States of America or of any other competent authority, for the purpose of effectively
creating, maintaining and preserving the lien and security interest hereof on and in the Mortgaged
Property.



     Section 2.7 Sale or Mortgage of the Mortgaged Property by Mortgagor. Except for (a)
sales and other dispositions expressly permitted by Section 7.05 in the Credit Agreement, (b)
sales of severed Hydrocarbons in the ordinary course of the Mortgagor’s business and (c) the lien
and security interest created by this Mortgage and other liens permitted under Section
2.5.5 above, the Mortgagor will not sell, convey, mortgage, pledge or otherwise dispose of or
encumber the Mortgaged Property nor any portion thereof, nor the Mortgagor’s right, title or
interest therein, without first securing the written consent of the Administrative Agent as
provided in the Credit Agreement.



     Section 2.8 Records, Statements and Reports. The Mortgagor will keep proper books of
record and account in which complete and correct entries will be made of its transactions in
accordance with generally accepted accounting principles and will furnish or cause to be


Exhibit F




8









 







furnished to the Lenders such information concerning its business, affairs and financial
condition as the Trustee or the Lenders may from time to time reasonably request.



     Section 2.9 No Governmental Approvals. The Mortgagor represents and warrants that no
approval or consent of any regulatory or administrative commission or authority, or of any other
governmental body, is necessary to authorize the execution and delivery of this Mortgage, the
Guaranty or of the Notes, or to authorize the observance or performance of the covenants herein
contained, or that such approvals as are required have been obtained or will be obtained promptly.



     Section 2.10 Right of Entry. The Mortgagor will permit the Trustee, the
Administrative Agent or the Lenders, or the agents of any of them (upon and during the continuance
of an Event of Default, at the cost and expense and risk of the Mortgagor, but otherwise at the
expense and risk of the applicable Trustee, Administrative Agent or Lender) to enter upon the
Mortgaged Property, and all parts thereof, for the purpose of investigating and inspecting the
condition and operation thereof.



     Section 2.11 Qualification of Mortgagor. (a) The cover page to this instrument lists
the legal name of the Mortgagor as registered in the jurisdiction in which the Mortgagor is
organized, formed or incorporated, and the Mortgagor’s taxpayer identification number, (b) the
Mortgagor’s state of incorporation, formation or organization, its organization identification
number as designated by the state of its incorporation, formation or organization, and its
principal place of business (or, if it has more than one place of business, its chief executive
office) are as set forth in the Credit Agreement, (c) Mortgagor is not nor has it been known by any
trade name or assumed name, and (d) the Mortgagor will continue to be duly qualified to transact
business in each state where the conduct of its business requires it to be qualified, except for
any failure to qualify that could not be reasonably expected to have a Material Adverse Effect.



ARTICLE III




ASSIGNMENT OF PRODUCTION




     Section 3.1 Assignment. As further security for the payment of the Indebtedness and
performance of the Mortgagor’s obligations under the Credit Agreement and the other Loan Documents,
the Mortgagor hereby transfers, assigns, warrants and conveys to the Administrative Agent for the
pro rata and pari passu use and benefit of the Lender Parties, effective as of the date hereof, at
7:00 A.M., local time, all Hydrocarbons which are thereafter produced from and which accrue to the
Mortgaged Property, and all proceeds therefrom until the final payment of the Indebtedness, the
termination of the Commitments and the release or cancellation of the Mortgage of record. All
parties producing, purchasing or receiving any such Hydrocarbons, or having such, or proceeds
therefrom, in their possession for which they or others are accountable to the Administrative Agent
by virtue of the provisions of this Article, are authorized and directed to treat and regard the
Administrative Agent as the assignee and transferee of the Mortgagor and entitled in the
Mortgagor’s place and stead to receive such Hydrocarbons and all proceeds therefrom; and said
parties and each of them shall be fully protected in so treating and regarding the Administrative
Agent and shall be under no obligation to see to the application by the Administrative Agent of any
such proceeds or payments received by it.


Exhibit F




9









 





     Section 3.2 Application of Proceeds. All payments received by the Administrative
Agent pursuant to Section 3.1 hereof shall be placed in a cash collateral account at the
principal office of the Administrative Agent and on the first business day of each calendar month
applied as set forth in Section 8.03 of the Credit Agreement.



     Section 3.3 No Liability of the Administrative Agent in Collecting. The
Administrative Agent is hereby absolved from all liability for failure to enforce collection of any
proceeds so assigned (and no such failure shall be deemed to be a waiver of any right of the
Administrative Agent or the Lenders under this Article) and from all other responsibility in
connection therewith, except the responsibility to account to the Mortgagor for funds actually
received.



     Section 3.4 Assignment Not a Restriction on the Administrative Agent’s Rights.
Nothing herein contained shall detract from or limit the absolute obligation of the Mortgagor to
make payment of the Indebtedness regardless of whether the proceeds assigned by this Article are
sufficient to pay the same, and the rights under this Article shall be in addition to all other
security now or hereafter existing to secure the payment of the Indebtedness.



     Section 3.5 Status of Assignment. Notwithstanding the other provisions of this
Article, the Trustee or any receiver appointed in judicial proceedings for the enforcement of this
Mortgage shall have the right to receive all of the Hydrocarbons herein assigned and the proceeds
therefrom after any Indebtedness has been declared due and payable in accordance with the
provisions of Section 4.1 hereof and to apply all of said proceeds as provided in
Section 3.2 hereof. Upon any sale of the Mortgaged Property or any part thereof pursuant
to Article V, the Hydrocarbons thereafter produced from the property so sold, and the
proceeds therefrom, shall be included in such sale and shall pass to the purchaser free and clear
of the assignment contained in this Article.



     Section 3.6 Indemnity. The Mortgagor agrees to indemnify the Trustee, the
Administrative Agent, the Lender Parties, and their respective Affiliates, directors, officers,
employees, counsel, agents, and attorneys-in-fact, or any of the foregoing Persons against all
claims, damages, actions, liabilities, judgments, costs, attorneys’ fees or other charges of
whatsoever kind or nature (all hereinafter in this Section 3.6 called “claims”)
made against or incurred by them or any of them and arising out of, in connection with, or as a
result of the assertion, either before or after the payment in full of the Indebtedness, that they
or any of them received Hydrocarbons herein assigned or the proceeds thereof claimed by third
persons, and the Trustee, the Administrative Agent, and the Lenders shall have the right to defend
against any such claims, employing attorneys therefor, and unless furnished with reasonable
indemnity, they or any of them shall have the right to pay or compromise and adjust all such
claims. The Mortgagor will indemnify and pay to the Trustee, the Administrative Agent or the
Lenders, as the case may be, any and all such amounts as may be paid in respect thereof or as may
be successfully adjudged against the Trustee, the Administrative Agent or the Lenders or any of
them. The obligations of the Mortgagor as hereinabove set forth in this Section 3.6 shall
survive the release, termination, foreclosure or assignment of this Mortgage or any sale hereunder.


Exhibit F




10









 





ARTICLE IV




EVENTS OF DEFAULT




     Section 4.1 Events of Default Hereunder. As used herein, “event of default” means an
Event of Default under the Credit Agreement. In case any “event of default” shall occur
and be continuing, then and in any such event the Administrative Agent at its option may, as
provided in the Credit Agreement, declare the entire unpaid principal of and the interest accrued
on the Notes and all other Indebtedness secured hereby to be forthwith due and payable, without any
notice or demand of any kind, both of which are hereby expressly waived.



ARTICLE V




ENFORCEMENT OF THE SECURITY




     Section 5.1 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an event of default and if such event shall be continuing,
the Trustee shall have the right and power to sell, to the extent permitted by law, at one or more
sales, as an entirety or in parcels, as it may elect, the real property constituting a part of the
Mortgaged Property, at such place or places and otherwise in such manner and upon such notice as
may be required by law, or, in the absence of any such requirement, as the Trustee may deem
appropriate, and to make conveyance to the purchaser or purchasers; and the Mortgagor shall warrant
title to such real property to such purchaser or purchasers. The Trustee may postpone the sale of
all or any portion of such real property by public announcement at the time and place of such sale,
and from time to time thereafter may further postpone such sale by public announcement made at the
time of sale fixed by the preceding postponement. The right of sale hereunder shall not be
exhausted by one or any sale, and the Trustee may make other and successive sales until all of the
Mortgaged Property be legally sold.



     Section 5.2 Rights of the Trustee with Respect to Personal Property Constituting a Part of
the Mortgaged Property. Upon the occurrence of an event of default and if such event shall be
continuing, the Trustee will have all rights and remedies granted by law, and particularly by the
Uniform Commercial Code, including, but not limited to, the right to take possession of all
personal property constituting a part of the Mortgaged Property, and for this purpose the Trustee
may enter upon any premises on which any or all of such personal property is situated and take
possession of and operate such personal property (or any portion thereof) or remove it therefrom.
The Trustee may require the Mortgagor to assemble such personal property and make it available to
the Trustee at a place to be designated by the Trustee which is reasonably convenient to all
parties. Unless such personal property is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, the Trustee will give the Mortgagor
reasonable notice of the time and place of any public sale or of the time after which any private
sale or other disposition of such personal property is to be made. This requirement of sending
reasonable notice will be met if the notice is mailed by first-class mail, postage prepaid, to the
Mortgagor at the address shown below the signatures at the end of this Mortgage at least ten (10)
days before the time of the sale or disposition.



     Section 5.3 Rights of the Trustee with Respect to Fixtures Constituting a Part of the
Mortgaged Property. Upon the occurrence of an event of default and if such event shall be
continuing, the Trustee may elect to treat the fixtures constituting a part of the Mortgaged


Exhibit F




11









 







Property as either real property collateral or personal property collateral and then proceed
to exercise such rights as apply to such type of collateral.



     Section 5.4 Judicial Proceedings. Upon occurrence of an event of default and if such
event shall be continuing, the Trustee or the Administrative Agent, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits in equity or at law,
whether for a foreclosure hereunder, or for the sale of the Mortgaged Property, or for the specific
performance of any covenant or agreement herein contained or in aid of the execution of any power
herein granted, or for the appointment of a receiver pending any foreclosure hereunder or the sale
of the Mortgaged Property, or for the enforcement of any other appropriate legal or equitable
remedy.



     Section 5.5 Possession of the Mortgaged Property. It shall not be necessary for the
Trustee to have physically present or constructively in his possession at any sale held by the
Trustee or by any court, receiver or public officer any or all of the Mortgaged Property; and the
Mortgagor shall deliver to the purchasers at such sale on the date of sale the Mortgaged Property
purchased by such purchasers at such sale, and if it should be impossible or impracticable for any
of such purchasers to take actual delivery of the Mortgaged Property, then the title and right of
possession to the Mortgaged Property shall pass to such purchaser at such sale as completely as if
the same had been actually present and delivered.



     Section 5.6 Certain Aspects of a Sale. The Administrative Agent shall have the right
to become the purchaser at any sale held by the Trustee or by any court, receiver or public
officer, and the Administrative Agent shall have the right to credit upon the amount of the bid
made therefor the amount payable out of the net proceeds of such sale to it. Recitals contained in
any conveyance made to any purchaser at any sale made hereunder shall conclusively establish the
truth and accuracy of the matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, and the interest accrued on, the Indebtedness
after the same have become due and payable, advertisement and conduct of such sale in the manner
provided herein or appointment of any successor Trustee hereunder.



     Section 5.7 Receipt to Purchaser. Upon any sale, whether made under the power of sale
herein granted and conferred or by virtue of judicial proceedings, the receipt of the Trustee, or
of the officer making sale under judicial proceedings, shall be sufficient discharge to the
purchaser or purchasers at any sale for his or their purchase money, and such purchaser or
purchasers, or his or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Trustee or of such officer therefor, be obliged to
see to the application of such purchase money, or be in any wise answerable for any loss,
misapplication or nonapplication thereof.



     Section 5.8 Effect of Sale. Any sale or sales of the Mortgaged Property, whether
under the power of sale herein granted and conferred or by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand whatsoever either at law or in
equity, of the Mortgagor of, in and to the premises and the property sold, and shall be a perpetual
bar, both at law and in equity, against the Mortgagor, and the Mortgagor’s successors or assigns,
and against any and all persons claiming or who shall thereafter claim all or any of the property
sold from, through or under the Mortgagor or the Mortgagor’s successors or assigns. Nevertheless,
the Mortgagor, if requested by the Trustee so to do, shall join in the execution and delivery of
all proper conveyances, assignments and transfers of the properties so sold.


Exhibit F




12









 





     Section 5.9 Application of Proceeds. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the power of sale herein granted and conferred or by
virtue of judicial proceedings, shall be applied as set forth in Section 8.03 of the Credit
Agreement.



     Section 5.10 The Mortgagor’s Waiver of Appraisement, Marshalling and Other Rights.
The Mortgagor agrees, to the full extent that the Mortgagor may lawfully so agree, that the
Mortgagor will not at any time insist upon or plead or in any manner whatever claim the benefit of
any appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order
to prevent or hinder the enforcement or foreclosure of this Mortgage or the absolute sale of the
Mortgaged Property or the possession thereof by any purchaser at any sale made pursuant to any
provision hereof, or pursuant to the decree of any court of competent jurisdiction; but the
Mortgagor, for the Mortgagor and all who may claim through or under the Mortgagor, so far as the
Mortgagor or those claiming through or under the Mortgagor now or hereafter lawfully may, hereby
waives the benefit of all such laws. The Mortgagor, for the Mortgagor and all who may claim
through or under the Mortgagor, waives, to the extent that the Mortgagor may lawfully do so, any
and all right to have the Mortgaged Property marshalled upon any foreclosure of the lien hereof, or
sold in inverse order of alienation, and agrees that the Trustee or any court having jurisdiction
to foreclose such lien may sell the Mortgaged Property as an entirety. The Mortgagor, for the
Mortgagor and all who may claim through or under the Mortgagor, further waives, to the full extent
that the Mortgagor may lawfully do so, any requirement for posting a receiver’s bond or replevin
bond or other similar type of bond if the Trustee commences an action for appointment of a receiver
or an action for replevin to recover possession of any of the Mortgaged Property. If any law in
this paragraph referred to and now in force, of which the Mortgagor or the Mortgagor’s successor or
successors might take advantage despite the provisions hereof, shall hereafter be repealed or cease
to be in force, such law shall not thereafter be deemed to constitute any part of the contract
herein contained or to preclude the operation or application of the provisions of this paragraph.
Pursuant to Section 39-5-19, New Mexico Statutes, Annotated, 1978 Comp., as amended, the Mortgagor
agrees that as to the Mortgaged Property situated in the State of New Mexico, the redemption period
shall be shortened to one (1) month.



     Section 5.11 Costs and Expenses. All costs and expenses (including attorneys’ fees)
incurred by the Trustee, the Administrative Agent or the Lenders in protecting and enforcing their
rights hereunder, shall constitute a demand obligation owing by the Mortgagor to the party
incurring such costs and expenses and shall draw interest at an annual rate (herein called the
“Default Rate”) equal to 2% plus the rate applicable to ABR Loans until paid, all of which
shall constitute a portion of the Indebtedness.



     Section 5.12 Sale of the Mortgaged Property in Texas. If any Indebtedness is not paid
when due, whether by acceleration or otherwise, the Trustee is hereby authorized and empowered to
sell any part of the Mortgaged Property located in the State of Texas at public sale to the highest
bidder for cash in the area at the county courthouse of the county in Texas in which the Texas
portion of the Mortgaged Property or any part thereof is situated, as herein described, designated
by such county’s commissioner’s court for such proceedings, or if no area is so designated, at the
door of the county courthouse of said county, at a time between the hours of 10:00 A.M. and 4:00
P.M. which is no later than three (3) hours after the time stated in the notice described
immediately below as the earliest time at which such sale would occur on the


Exhibit F




13









 







first Tuesday of any month, after advertising the earliest time at which said sale would
occur, the place, and terms of said sale, and the portion of the Mortgaged Property to be sold, by
(a) posting (or by having some person or persons acting for the Trustee post) for at least
twenty-one (21) days preceding the date of the sale, written or printed notice of the proposed sale
at the courthouse door of said county in which the sale is to be made; and if such portion of the
Mortgaged Property lies in more than one county, one such notice of sale shall be posted at the
courthouse door of each county in which such part of the Mortgaged Property is situated and such
part of the Mortgaged Property may be sold in the area at the county courthouse of any one of such
counties designated by such county’s commissioner’s court for such proceedings, or if no area is
designated, at the courthouse door of such county, and the notice so posted shall designate in
which county such property shall be sold, and (b) filing in the office of the county clerk of each
county in which any part of the Texas portion of the Mortgaged Property which is to be sold at such
sale is situated a copy of the notice posted in accordance with the preceding clause (a). In
addition to such posting and filing of notice, the Lenders or other holder of the Indebtedness
shall, at least twenty-one (21) days preceding the date of sale, serve or cause to be served
written notice of the proposed sale by certified mail on the Mortgagor and on each other debtor, if
any, obligated to pay the Indebtedness according to the records of the Lenders or other holder of
the Indebtedness. Service of such notice shall be completed upon deposit of the notice, enclosed
in a postpaid wrapper properly addressed to the Mortgagor and such other debtors at their most
recent address or addresses as shown by the records of the Lenders or other holder of the
Indebtedness in a post office or official depository under the care and custody of the United
States Postal Service. The affidavit of any person having knowledge of the facts to the effect
that such a service was completed shall be prima facie evidence of the fact of
service. The Mortgagor agrees that no notice of any sale, other than as set out in this paragraph,
need be given by the Trustee, the Lenders or any other person. The Mortgagor hereby designates as
its address for the purpose of such notice the address set out on the signature page hereof; and
agrees that such address shall be changed only as provided in the Credit Agreement or by depositing
notice of such change enclosed in a postpaid wrapper in a post office or official depository under
the care and custody of the United States Postal Service, certified mail, postage prepaid, return
receipt requested, addressed to the Administrative Agent at the address for the Administrative
Agent set out herein (or to such other address as the Administrative Agent may have designated by
notice given as above provided to the Mortgagor and such other debtors). Any such notice of change
of address of the Mortgagor or other debtors or of the Administrative Agent shall be effective
three (3) business days after such deposit if such post office or official depository is located in
the State of Texas, otherwise to be effective upon receipt. The Mortgagor authorizes and empowers
the Trustee to sell the Texas portion of the Mortgaged Property in lots or parcels or in its
entirety as the Trustee shall deem expedient; and to execute and deliver to the purchaser or
purchasers thereof good and sufficient deeds of conveyance thereto by fee simple title, with
evidence of general warranty by the Mortgagor, and the title of such purchaser or purchasers when
so made by the Trustee, the Mortgagor binds itself to warrant and forever defend. Where portions
of the Mortgaged Property lie in different counties, sales in such counties may be conducted in any
order that the Trustee may deem expedient; and one or more such sales may be conducted in the same
month, or in successive or different months as the Trustee may deem expedient. Notwithstanding
anything to the contrary contained herein, the Trustee may postpone the sale provided for in this
Section 5.12 at any time without the necessity of a public announcement. The provisions
hereof with respect to the posting and giving of notices of sale are intended to comply with the
provisions of Section 51.002 of the Property Code of the State of Texas, effective January 1, 1984,
and in the event the requirements, or any notice, under such


Exhibit F




14









 







Section 51.002 of the Property Code of the State of Texas shall be eliminated or the
prescribed manner of giving such notices modified by future amendment to, or adoption of any
statute superseding, Section 51.002 of the Property Code of the State of Texas, the requirement for
such particular notices shall be deemed stricken from or modified in this Mortgage in conformity
with such amendment or superseding statute, effective as of the effective date thereof.



     Section 5.13 Effective as Mortgage. This Mortgage shall be effective as a mortgage as
well as a deed of trust and upon the occurrence of an event of default may be foreclosed as to any
of the Mortgaged Property in any manner permitted by applicable law, and any foreclosure suit may
be brought by Trustee or by Administrative Agent. To the extent, if any, required to cause this
Mortgage to be so effective as a mortgage as well as a deed of trust, Mortgagor hereby mortgages
the Mortgaged Property to Administrative Agent.



     Section 5.14 Operation of the Mortgaged Property by the Trustee. Upon the occurrence
of an event of default and in addition to all other rights herein conferred on the Trustee, the
Trustee (or any person, firm or corporation designated by the Trustee) shall have the right and
power, but shall not be obligated, to enter upon and take possession of any of the Mortgaged
Property, and to exclude the Mortgagor, and the Mortgagor’s agents or servants, wholly therefrom,
and to hold, use, administer, manage and operate the same to the extent that the Mortgagor shall be
at the time entitled and in its place and stead. The Trustee, or any person, firm or corporation
designated by the Trustee, may operate the same without any liability to the Mortgagor in
connection with such operations, except to use ordinary care in the operation of such properties,
and the Trustee or any person, firm or corporation designated by the Trustee, shall have the right
to collect, receive and receipt for all Hydrocarbons produced and sold from said properties, to
make repairs, purchase machinery and equipment, conduct work-over operations, drill additional
wells and to exercise every power, right and privilege of the Mortgagor with respect to the
Mortgaged Property. When and if the expenses of such operation and development (including costs of
unsuccessful work-over operations or additional wells) have been paid and the Indebtedness paid,
said properties shall, if there has been no sale or foreclosure, be returned to the Mortgagor.



     Section 5.15 Intercreditor Agreement. The lien created by this Mortgage on the
Mortgaged Property is junior and subordinate to the lien on such Mortgaged Property created by any
mortgage, deed of trust or similar instrument now or hereafter granted to the First Lien
Administrative Agent in such property, in accordance with the provisions of the Intercreditor
Agreement.



ARTICLE VI




MISCELLANEOUS PROVISIONS




     Section 6.1 Successor Trustee. Any Trustee may resign in writing addressed to the
Administrative Agent or may be removed at any time with or without cause by an instrument in
writing duly executed by the Administrative Agent. In case of the death, resignation or removal of
a Trustee, one or more successor Trustee may be appointed by the Administrative Agent by instrument
of substitution complying with any applicable requirements of law, and in the absence of any such
requirement without formality other than appointment and designation in writing. Such appointment
and designation shall be full evidence of the right and authority to make the same and of all facts
therein recited, and upon the making of any such appointment and


Exhibit F




15









 




designation this conveyance shall vest in the named successor Trustee all the estate and title
of the prior Trustee in all of the Mortgaged Property, and he or they shall thereupon succeed to
all the rights, powers, privileges, immunities and duties hereby conferred upon the prior Trustee.
All references herein to a Trustee or the Trustees shall be deemed to refer to each Trustee or the
Trustees, as applicable, from time to time acting hereunder.




     Section 6.2 Actions or Advances by the Administrative Agent or the Trustee. Each and
every covenant herein contained shall be performed and kept by the Mortgagor solely at the
Mortgagor’s expense. If the Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Mortgage, the Administrative Agent, the Trustee, any of
the Lenders or any receiver appointed hereunder, may, but shall not be obligated to, take action
and/or make advances to perform the same in the Mortgagor’s behalf, and the Mortgagor hereby agrees
to repay the expense of such action and such advances upon demand plus interest at an annual rate
equal to the Default Rate until paid or, in the event any promissory note evidences such
indebtedness, upon the terms and conditions thereof. No such advance or action by the
Administrative Agent, the Trustee, any of the Lenders or any receiver appointed hereunder shall be
deemed to relieve the Mortgagor from any default hereunder.



     Section 6.3 Defense of Claims. The Mortgagor will notify the Administrative Agent and
the Lenders, in writing, promptly of the commencement of any legal proceedings affecting the lien
or security interest hereof or the Mortgaged Property, or any part thereof, and will take such
action, employing attorneys agreeable to the Administrative Agent, as may be necessary or
appropriate to preserve the Mortgagor’s, the Trustee’s, the Administrative Agent’s and the Lenders’
rights affected thereby and/or to hold harmless the Trustee, the Administrative Agent and the
Lenders in respect of such proceedings; and should the Mortgagor fail or refuse to take any such
action, the Administrative Agent may, upon giving prior written notice thereof to the Mortgagor,
take such action in behalf and in the name of the Mortgagor and at the Mortgagor’s expense.
Moreover, the Administrative Agent, or the Trustee on behalf of the Administrative Agent and the
Lenders, may take such independent action in connection therewith as it or they may in its or their
discretion deem proper, the Mortgagor hereby agreeing that all sums advanced or all expenses
incurred in such actions plus interest at the Default Rate until paid, will, on demand, be
reimbursed, as appropriate, to the Administrative Agent, the Trustee, the Lenders, or any receiver
appointed hereunder. The obligations of the Mortgagor as hereinabove set forth in this Section
6.3 shall survive the release, termination, foreclosure or assignment of this Mortgage or any
sale hereunder.



     Section 6.4 The Mortgaged Property to Revert. If the Indebtedness shall be fully paid
and the covenants herein contained shall be well and truly performed, then all of the Mortgaged
Property shall revert to the Mortgagor and the entire estate, right, title and interest of the
Trustee and the Lenders shall thereupon cease; and the Administrative Agent in such case shall,
upon the request of the Mortgagor and at the Mortgagor’s cost and expense, deliver to the Mortgagor
proper instruments acknowledging satisfaction of this Mortgage.



     Section 6.5 Renewals, Amendments and Other Security. Renewals and extensions of the
Indebtedness may be given at any time and amendments may be made to agreements relating to any part
of such Indebtedness or the Mortgaged Property and the Trustee and the Lenders may take or may now
hold other security for the Indebtedness, all without notice to or consent of the Mortgagor. The
Trustee or the Lenders may resort first to such other security or any part thereof or first to the
security herein given or any part thereof, or from time to time to either or both,


Exhibit F




16









 







even to the partial or complete abandonment of either security, and such action shall not be a
waiver of any rights conferred by this Mortgage, which shall continue as a second lien upon and
perfected security interest in the Mortgaged Property not expressly released until the Notes and
all other Indebtedness secured hereby are fully paid.



     Section 6.6 Instrument an Assignment, etc. This Mortgage shall be deemed to be and
may be enforced from time to time as an assignment, chattel mortgage, contract, deed of trust,
financing statement, real estate mortgage, or security agreement, and from time to time as any one
or more thereof.



     Section 6.7 Limitation on Interest. No provision of this Mortgage or of the Notes
shall require the payment or permit the collection of interest in excess of the maximum permitted
by law or which is otherwise contrary to law. If any excess of interest in such respect is herein
or in the Notes provided for, or shall be adjudicated to be so provided for herein or in the Notes,
the Mortgagor shall not be obligated to pay such excess.



     Section 6.8 Unenforceable or Inapplicable Provisions. If any provision hereof is
invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full
force and effect in such jurisdiction, and the remaining provisions hereof shall be liberally
construed in favor of the Trustee, the Administrative Agent and the Lender Parties in order to
effectuate the provisions hereof, and the invalidity of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of any such provision in any other jurisdiction.
Any reference herein contained to a statute or law of a state in which no part of the Mortgaged
Property is situated shall be deemed inapplicable to, and not used in, the interpretation hereof.



     Section 6.9 Rights Cumulative. Each and every right, power and remedy herein given to
the Trustee, the Administrative Agent or the Lender Parties shall be cumulative and not exclusive;
and each and every right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and so often and in such order as may be deemed expedient by the
Trustee, the Administrative Agent or the Lenders, as the case may be, and the exercise, or the
beginning of the exercise, of any such right, power or remedy shall not be deemed a waiver of the
right to exercise, at the same time or thereafter, any other right, power or remedy. No delay or
omission by the Trustee, the Administrative Agent or the Lender Parties in the exercise of any
right, power or remedy shall impair any such right, power or remedy or operate as a waiver thereof
or of any other right, power or remedy then or thereafter existing.



     Section 6.10 Waiver by the Trustee. This instrument may be amended, modified,
revised, discharged, released or terminated only by a written instrument or instruments executed by
the Mortgagor and the Administrative Agent, but without the joinder of the Trustee which shall not
be required. Any alleged amendment, modification, revision, discharge, release or termination
which is not so documented shall not be effective as to any party. Any and all covenants in this
Mortgage may from time to time by instrument in writing signed by the Administrative Agent be
waived to such extent and in such manner as the Administrative Agent may desire, but no such waiver
shall ever affect or impair either the Trustee’s or the Lender Parties’ rights or liens or security
interests hereunder, except to the extent specifically stated in such written instrument.
Notwithstanding anything contained herein to the contrary, the Administrative Agent shall not be
required, except as expressly provided in the Credit Agreement, to obtain the consent of any Lender
Party in order to amend, modify, revise,


Exhibit F




17









 







discharge, release or terminate this Mortgage regardless of whether this Mortgage secures
Indebtedness owed to such Lender Party.



     Section 6.11 Action by Individual Trustee. Any Trustee from time to time serving
hereunder shall have the absolute right, acting individually, to take any action and to give any
consent and to exercise any right, remedy, power, privilege or authority conferred upon the
Trustee, and any action taken by either Trustee from time to time serving hereunder shall be
binding upon the other Trustee and no person dealing with any Trustee from time to time serving
hereunder shall be obligated to confirm the power and authority of such Trustee to act without the
concurrence of the other Trustee. In this Mortgage, the term “Trustee” shall mean the
Trustee hereinabove named and any successor Trustee.



     Section 6.12 Miscellaneous Warranties. The Mortgagor additionally represents and
warrants to the Trustee, the Administrative Agent and the Lenders that (a) the execution and
delivery of this Mortgage, and the performance by the Mortgagor of its obligations hereunder, are
within the corporate, partnership or limited liability company powers of the Mortgagor and have
been duly authorized by all necessary corporate, partnership or limited liability company action on
the part of the Mortgagor, and (b) this Mortgage has been duly executed and delivered on behalf of
the Mortgagor and is the legal, valid and binding obligation of the Mortgagor, enforceable in
accordance with its terms, the making and performance of which do not and will not contravene or
conflict with the charter or by-laws of the Mortgagor or violate or constitute a default under any
law, any presently existing requirement or restriction imposed by judicial, arbitral or any
governmental instrumentality or any agreement, instrument or indenture by which the Mortgagor is
bound.



     Section 6.13 Successors and Assigns. This Mortgage is binding upon the Mortgagor, the
Mortgagor’s successors and assigns, and shall inure to the benefit of the Trustee, their
successors, and the Administrative Agent, the Lenders, their respective successors and assigns, and
the provisions hereof shall likewise be covenants running with the land.



     Section 6.14 Article and Section Headings. The article and section headings in this
Mortgage are inserted for convenience of reference and shall not be considered a part of this
Mortgage or used in its interpretation.



     Section 6.15 Execution in Counterparts; Exhibits. This Mortgage may be executed in
any number of counterparts, each of which shall for all purposes be deemed to be an original and
all of which are identical, except that, to facilitate recordation or filing, in any particular
counterpart portions of Exhibit A hereto which describe properties situated in counties
other than the county in which such counterpart is to be recorded or filed may have been omitted.
The exhibits referenced in and attached to this instrument shall constitute and be a part of this
instrument for all purposes.



     Section 6.16 Special Filing as Financing Statement. This Mortgage and Deed of Trust
shall likewise be a Security Agreement and a Financing Statement. This Mortgage and Deed of Trust
shall be filed for record, among other places, in the real estate records of each county in which
any portion of the real property covered by the oil and gas leases described in Exhibit A
hereto is situated, and, when filed in such counties shall be effective as a financing statement
covering fixtures located on and as-extracted collateral relating to the oil and gas properties
described in Exhibit A hereto, which oil and gas properties (and accounts arising
therefrom) are


Exhibit F




18









 







to be financed at the wellheads of the wells located on the real property described in
Exhibit A hereto. At the option of the Administrative Agent, a carbon, photographic or
other reproduction of this Mortgage or of any financing statement covering the Mortgaged Property
or any portion thereof shall be sufficient as a financing statement and may be filed as such. By
the execution and delivery hereof, the Mortgagor hereby authorizes the Administrative Agent to file
any financing statements, and any amendments or continuation statements with respect thereto, as to
the Mortgaged Property pursuant to the applicable Uniform Commercial Code without the Mortgagor’s
signature thereon.



     Section 6.17 Notices. Any notice, request, demand or other instrument which may be
required to be given or served upon the Mortgagor shall be sufficiently given when mailed by
first-class mail, addressed to the Mortgagor at the address shown below the signatures at the end
of this Mortgage or to such different address as the Mortgagor shall have designated by written
notice received by the Trustee, the Administrative Agent or the Lenders.



     Section 6.18 No Partnership. Nothing contained in this instrument is intended to, or
shall be construed as, creating to any extent and in any manner whatsoever, any partnership, joint
venture, or association among the Mortgagor, the Trustee, the Administrative Agent, the Lender
Parties or their respective Affiliates, or in any way as to make the Administrative Agent, the
Lender Parties or the Trustee co-principals with the Mortgagor with reference to the Mortgaged
Property, and any inferences to the contrary are hereby expressly negated.



     Section 6.19 No Liability for Trustee. THE TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR
OF JUDGMENT OR ACT DONE BY THE TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE
UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE TRUSTEE’S NEGLIGENCE),
EXCEPT FOR THE TRUSTEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Trustee shall have the right
to rely on any instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be genuine. All moneys
received by the Trustee shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated in any manner from any other
moneys (except to the extent required by law), and the Trustee shall be under no liability for
interest on any moneys received by him hereunder.



     Section 6.20 Line of Credit Mortgage. THE PARTIES HERETO AGREE THAT THIS MORTGAGE
CONSTITUTES A LINE OF CREDIT MORTGAGE PURSUANT TO SECTION 48-7-4 OF NEW MEXICO STATUTES 1978
ANNOTATED.



     Section 6.21 GOVERNING LAW. THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT OF
LAW); PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW; AND EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION
OF THE MORTGAGED PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE
MORTGAGED PROPERTY) NECESSARILY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS


Exhibit F




19









 







RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND
OTHER RIGHTS AND REMEDIES OF THE LENDER PARTIES GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY
AS TO THAT PORTION OF THE MORTGAGED PROPERTY LOCATED IN (OR OTHERWISE SUBJECT TO THE LAWS OF) SUCH
STATE. THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



Exhibit F





20









 








     IN WITNESS WHEREOF, the Mortgagor has executed or caused to be executed this Second Lien
Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment, Security Agreement and Financing
Statement on the day, month and year first above written.



	 	 	 	 	 	 	 
	 	 	MORTGAGOR:	 	 
	 
	 	 	 	 	 	 
	 	 	COG OIL & GAS LP

By: COG Operating LLC, its sole general
 partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

	 	 
	 	 	Name: David W. Copeland

Title: Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	COG Oil & Gas LP

550 W. Texas, Suite 1300

Midland, TX 79701

Attention:       Curt F. Kamradt

Telephone:       (432) 683-7443

Telecopy:         (432) 683-7441	 	 
	 
	 	 	 	 	 	 
	 	 	with a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	COG Oil & Gas LP

550 W. Texas, Suite 1300

Midland, TX 79701

Attention:       David W. Copeland

Telephone:       (432) 683-7443

Telecopy:         (432) 683-7441	 	 





The name and mailing address of the Mortgagor is:




COG Oil & Gas LP

550 W. Texas, Suite 1300

Midland, TX 79701

Attention:      Curt F. Kamradt, Vice President




Exhibit F



S-1









 





ACKNOWLEDGMENT




	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF HARRIS

	 	§






     This
instrument is acknowledged before me this ___ day of ___, ___, by ___,
___ of COG Operating LLC, a Delaware limited liability company, as the sole general partner
of COG Oil & Gas LP, a Texas limited partnership, on behalf of said limited liability company and
said limited partnership.



	 	 	 	 	 
	 

	 	  

Notary
Public, State of Texas
	 	 





My commission expires:




Exhibit F



S-2









 





	 	 	 	 	 	 	 
	 	 	CONSENTED TO:	 	 
	 
	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.,

as Administrative Agent under the First Lien Credit

Agreement	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

	 	 
	 

	 	Title:	 	 	 	 






JPMorgan Chase Bank, N.A.

JPMorgan Chase Bank, N.A.

Mail Code TX1-2448

1717 Main Street

Dallas, Texas 75201

Attention:      
 




Telephone:      
 



Telecopy:       
 







Exhibit F



S-3









 





ACKNOWLEDGMENT




	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF DALLAS

	 	§






     This
instrument is acknowledged before me this ___ day of
___, ___, by ______, ___ of JPMorgan Chase Bank, N.A., a national banking association, on
behalf of said association.



	 	 	 	 	 
	 

	 	  

Notary
Public, State of Texas
	 	 





My commission expires:




                                        



Exhibit F




S-4









 





EXHIBIT A




To Second Lien Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment,

Security Agreement and Financing Statement, dated ______, _____, from

COG OIL & GAS LP, as Mortgagor, to

Jeffrey H. Rathkamp, as Trustee, and

BANK OF AMERICA, N.A., as Administrative Agent




List of Properties




[Attached Hereto]




     1. Depth limitations, unit designations, unit tract descriptions and descriptions of undivided
leasehold interests, well names, “Operating Interests”, “Working Interests” and
“Net Revenue Interests” contained in this Exhibit A and the listing of any percentage,
decimal or fractional interest in this Exhibit A shall not be deemed to limit or otherwise diminish
the interests being subjected to the lien, security interest and encumbrance of this Mortgage.



     2. Some of the land descriptions in this Exhibit A may refer only to a portion of the land
covered by a particular lease. This Mortgage is not limited to the land described in Exhibit A but
is intended to cover the entire interest of the Mortgagor in any lease described in Exhibit A even
if such interest relates to land not described in Exhibit A. Reference is made to the land
descriptions contained in the documents of title recorded as described in this Exhibit A. To the
extent that the land descriptions in this Exhibit A are incomplete, incorrect or not legally
sufficient, the land descriptions contained in the documents so recorded are incorporated herein by
this reference.



     3. Some of the descriptions contained in this Exhibit A may refer to a well or wells. This
mortgage is not limited to the well or wells described in this Exhibit A, but is intended to cover
the entire interest of the Mortgagor in the well, any and all leases underlying the well, any
pooling interest acquired or owned by the Mortgagor in any unit comprised of the well and all
personal property associated therewith.



     4. References in Exhibit A to instruments on file in the public records are made for all
purposes. Unless provided otherwise, all recording references in Exhibit A are to the official
real property records of the county or counties (or parish or parishes) in which the mortgaged
property is located and in which records such documents are or in the past have been customarily
recorded, whether Deed Records, Oil and Gas Records, Oil and Gas Lease Records or other records.
Reference is specifically made to the records in the Office of the Bureau of Land Management in
Santa Fe, New Mexico and the records in the Office of the Commissioner of Public Lands in Santa Fe,
New Mexico for more particular descriptions of the federal and state leases described in Exhibit
“A” and the lands covered by such leases.



     5. A statement herein that a certain interest described herein is subject to the terms of
certain described or referred to agreements, instruments or other matters shall not operate to
subject such interest to any such agreement, instrument or other matter except to the extent that
such agreement, instrument or matter is otherwise valid and presently subsisting nor shall such


Exhibit F




 









 







statement be deemed to constitute a recognition by the parties hereto that any such agreement,
instrument or other matter is valid and presently subsisting.



Exhibit F




 









 





EXHIBIT G




FORM OF PLEDGE AGREEMENT




Form of Pledge Agreement




Exhibit G




 









 





EXHIBIT
G




FORM
OF PLEDGE AGREEMENT


Form of Pledge Agreement




SECOND LIEN PLEDGE AGREEMENT

AND IRREVOCABLE PROXY




     THIS SECOND LIEN PLEDGE AGREEMENT AND IRREVOCABLE PROXY (this “Pledge Agreement”),
dated as of                     , made by Concho Resources Inc., a Delaware corporation (the
“Borrower”), Concho Equity Holdings Corp., a Delaware corporation (“Concho
Holdings”), COG Operating LLC, a Delaware limited liability company (“COG GP”), Concho
LP LLC, a Delaware limited liability company (“COG LP”), COG Oil & Gas LP, a Texas limited
partnership (“COG Oil & Gas”), Concho Energy Services, LLC, a Texas limited liability
company (“Concho Energy”), COG Realty LLC, a Texas limited liability company (“COG
Realty”; COG Realty together with each of Borrower, Concho Holdings, COG GP, COG LP, COG Oil &
Gas, Concho Energy and COG Realty, each a “Pledgor” and, collectively, the
“Pledgors”) is in favor of Bank of America, N.A., as administrative agent (together with
any successor(s) thereto in such capacity, the “Administrative Agent”) for each of Lender
Parties (as defined below).



W I T N E S S E T H:




     WHEREAS, pursuant to that certain Second Lien Credit Agreement dated as of                     , by and
among the Borrower and Bank of America, N.A., as Administrative Agent, and the other various
commercial lending institutions (individually a “Lender” and collectively the
“Lenders”) from time to time parties thereto (together with all amendments, supplements,
restatements and other modifications, if any, thereafter made thereto, the “Second Lien Credit
Agreement”), the Lenders have extended Commitments to make term Loans to the Borrower; and



     WHEREAS, each Pledgor (other than Borrower) has delivered that certain Guaranty dated as of
even date herewith in favor of the Lender Parties (“Pledgors’ Guaranty”); and



     WHEREAS, pursuant to the Second Lien Credit Agreement, each Pledgor is required to execute and
deliver this Pledge Agreement to secure its obligations under the Notes, the Pledgors’ Guaranty and
the other Loan Documents; and



     WHEREAS, each Pledgor has duly authorized the execution, delivery and performance of this
Pledge Agreement; and



     WHEREAS, it is in the best interests of each Pledgor to execute this Pledge Agreement inasmuch
as each Pledgor will derive substantial direct and indirect benefits from the term Loans made to
the Borrower pursuant to the Second Lien Credit Agreement;



     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, and in order to induce the Lenders to make the Loans to the Borrower pursuant to the
Second Lien Credit Agreement, each Pledgor agrees, for the benefit of each Lender Party, as
follows:



Exhibit G




 









 





ARTICLE I

DEFINITIONS




     SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and recitals, shall have
the following meanings (such definitions to be equally applicable to the singular and plural forms
thereof):



     “Collateral” is defined in Section 2.1.



     “Distributions” means all stock dividends, liquidating dividends, shares of stock
resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants,
options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar
or dissimilar to the foregoing) on or with respect to any Pledged Shares, Pledged Interest or other
shares of capital stock, member interest or other ownership interests or security entitlements
constituting Collateral, but shall not include Dividends.



     “Dividends” means cash dividends and cash distributions with respect to any Pledged
Shares or any Pledged Interests made in the ordinary course of business and not as a liquidating
dividend.



     “First Lien Administrative Agent” shall have the meaning set forth in the Second Lien
Credit Agreement.



     “First Lien Credit Agreement” shall have the meaning provided in the Second Lien
Credit Agreement.



     “Intercreditor Agreement” means that certain Intercreditor Agreement dated of even
date herewith, among the Borrower and the other Loan Parties party thereto, JPMorgan Chase Bank,
N.A. (in its capacity as administrative agent for the lenders party to the First Lien Credit
Agreement), and Administrative Agent, as the same may from time to time be amended, amended and
restated, supplemented or otherwise modified.



     “Lender Party” means, as the context may require, any Lender, the Administrative Agent
and each of their respective successors, transferees and assigns.



     “Perfection Agent” means (x) until the First Priority Obligations Payment Date (as
defined in the Intercreditor Agreement) shall have occurred, the First Lien Administrative Agent,
which shall act as the Administrative Agent’s bailee and agent in accordance with Section 2.3 of
the Intercreditor Agreement for purposes of perfecting the security interests granted hereunder by
possession or control and (y) from and after the First Priority Obligations Payment Date, the
Administrative Agent.



     “Pledged Interests” means all member interests, general or limited partnership
interests or other ownership interests of any Pledged Interest Issuer described in Attachment
1 hereto; all member interests, general or limited partnership interests or other ownership
interests issued by each Pledgor’s subsidiaries; all registrations, certificates, articles or
agreements governing or representing any such interests (including, without limitation, any limited
liability company agreement, regulations or limited partnership agreement); all options and other
rights, contractual



Exhibit G




2









 




or otherwise, at any time existing with respect to such interests; and all distributions,
cash, instruments and other property now or hereafter received, receivable or otherwise distributed
in respect of or in exchange for any or all of such interests.




     “Pledged Interest Issuer” means each Person identified in Item C of
Attachment 1 hereto as the issuer of the Pledged Interests identified opposite the name of
such Person.



     “Pledged Note Issuer” means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such Person, and any
other maker of a Pledged Note.



     “Pledged Notes” means all promissory notes of any Pledged Note Issuer in substantially
the form of Exhibit A hereto that are delivered by a Pledgor to the Perfection Agent as
Pledged Property hereunder, or any other promissory notes delivered to the Perfection Agent as
Pledged Property hereunder, as such promissory notes, in accordance with Section 4.5, are
amended, restated, modified or supplemented from time to time and together with any promissory note
of any Pledged Note Issuer taken in extension or renewal thereof or substitution therefor.



     “Pledged Property” means all Pledged Shares, all Pledged Notes, all Pledged Note
Liens, all Pledged Interests and all other pledged shares of capital stock, promissory notes,
member interests, other ownership interests, all other securities, all assignments of any amounts
due or to become due, all other instruments which are now being delivered by each Pledgor to the
Perfection Agent or may from time to time hereafter be delivered by each Pledgor to the Perfection
Agent for the purpose of pledge under this Pledge Agreement or any other Loan Document, and all
proceeds of any of the foregoing.



     “Pledged Share Issuer” means each Person identified in Item A of
Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.



     “Pledged Shares” means all shares of capital stock of any Pledged Share Issuer that
are delivered by each Pledgor to Perfection Agent hereunder and all other pledged shares of capital
stock from time to time hereafter delivered by each Pledgor to the Perfection Agent for the purpose
of pledge under this Pledge Agreement or any other Loan Document, and all proceeds of any of the
foregoing.



     “Secured Obligations” is defined in Section 2.2.



     “Securities Act” is defined in Section 6.2(a).



     “UCC” means the Uniform Commercial Code as in effect in the State of Texas, as the
same may be amended from time to time.



     SECTION 1.2. Second Lien Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Pledge Agreement, including
its preamble and recitals, have the meanings provided in the Second Lien Credit Agreement.



Exhibit G




3









 





     SECTION 1.3. UCC Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the UCC are used in this
Pledge Agreement, including its preamble and recitals, with such meanings.



ARTICLE II

PLEDGE




     SECTION 2.1. Grant of Security Interest. Each Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for
its benefit and the ratable benefit of each of the Lender Parties, and hereby grants to the
Administrative Agent, for its benefit and the ratable benefit of the Lender Parties, a continuing
security interest in, all of the following property (the “Collateral”):




     (a) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item A of Attachment 1 hereto;




     (b) all other Pledged Shares issued from time to time;




     (c) all promissory notes of each Pledged Note Issuer identified in Item
B of Attachment 1 hereto;




     (d) all other Pledged Notes issued from time to time;




     (e) all issued and outstanding member interests, general or limited
partnership interests or other ownership interests of each Pledged Interest Issuer
identified in Item C of Attachment 1 hereto;




     (f) all other Pledged Interests issued from time to time;




     (g) all other Pledged Property, whether now or hereafter delivered to the
Perfection Agent (or the Administrative Agent, if it is not then the Perfection Agent) in
connection with this Pledge Agreement;




     (h) all Dividends, Distributions, interest, and other payments and rights
with respect to any Pledged Property; and




     (i) all proceeds of any of the foregoing.



     SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
prompt payment and performance in full of all Obligations of each Loan Party now or hereafter
existing under the Second Lien Credit Agreement, the Notes and each other Loan Document to which
any Pledgor or any other Loan Party is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all other obligations of each Pledgor or any other Loan
Party to any Lender Party, now or hereafter owing, howsoever created, arising or evidenced, whether
direct or indirect, primary or secondary, fixed or absolute or contingent, joint or several,
regardless of how evidenced or arising, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing under this Pledge Agreement and each
other Loan Document to which it is or may become a party, including all renewals,



Exhibit G




4









 




rearrangements, increases, extensions for any period, substitutions, modification, amendments
or supplements in whole or in part of any of the above loan documents or obligations (all such
obligations of the each Pledgor, including the Borrower, and any other Loan Party being the
“Secured Obligations”).




     SECTION 2.3. Delivery of Pledged Property.




     (a) All certificates or instruments representing or evidencing any
Collateral, including all Pledged Shares, Pledged Interests and all Pledged Notes, shall be
delivered to and held by or on behalf of (and, in the case of the Pledged Notes, endorsed to
the order of) the Perfection Agent pursuant hereto, shall be in suitable form for transfer
by delivery, and shall be accompanied by all necessary endorsements or instruments of
transfer or assignment, duly executed in blank.




     (b) To the extent any of the Collateral constitutes a “certificated
security” (as defined in Section 8.102(a)(4) of the UCC), an “uncertificated security” (as
defined in Section 8.102(a)(18) of the UCC) or a “security entitlement” (as defined in
Section 8.102(a)(17) of the UCC), each Pledgor shall cause the issuer thereof or the
securities intermediary thereof to take all actions necessary or as requested by the
Perfection Agent to grant “control” (as defined in Section 8.106 of the UCC) of such
Collateral to the Perfection Agent over such Collateral.



     SECTION 2.4. Dividends on Pledged Shares and Pledged Interests; Payments on
Pledged Notes. In the event that any Dividend is to be paid on any Pledged Share or any
Pledged Interests or any payment of principal or interest is to be made on any Pledged Note at a
time when no Event of Default has occurred and is continuing, such Dividend or payment may be paid
directly to the applicable Pledgor. If any such Event of Default has occurred and is continuing,
then any such Dividend or payment shall be paid directly to the Administrative Agent subject to the
terms of the Intercreditor Agreement.



     SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and shall




     (a) remain in full force and effect until payment in full of all Secured
Obligations and the termination of all Commitments,




     (b) be binding upon each Pledgor and its successors, transferees and
assigns, and




     (c) inure, together with the rights and remedies of the Administrative
Agent hereunder, to the benefit of Administrative Agent and each other Lender Party.



     Without limiting the foregoing clause (c), any Lender may assign or otherwise transfer (in
whole or in part) any Note or Loan held by it to any other Person or entity, and such other Person
or entity shall thereupon become vested with all the rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Pledge Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the provisions of
Section 10.06 of the Second Lien Credit Agreement and Article IX of the Second Lien Credit



Exhibit G




5









 




Agreement. Upon the indefeasible payment in full of all Secured Obligations and the termination or
expiration of all Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Pledgors. Upon any such payment and termination or
expiration, the Administrative Agent will, at the Pledgors’ sole expense, deliver to the Pledgors,
without any representations, warranties or recourse of any kind whatsoever, all certificates and
instruments representing or evidencing all Pledged Shares, all Pledged Interests and all Pledged
Notes, together with all other Collateral held by the Administrative Agent hereunder, and execute
and deliver to the Pledgors such documents as the Pledgors shall reasonably request to evidence
such termination.




     SECTION 2.6. Security Interest Absolute. All rights of the Administrative
Agent and the security interests granted to the Administrative Agent hereunder, and all obligations
of the Pledgors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of
validity or enforceability of the Second Lien Credit Agreement, any Note or any other Loan
Document; (b) the failure of any Lender Party or any holder of any Note (i) to assert any claim or
demand or to enforce any right or remedy against the Borrower, any other Loan Party or any other
Person under the provisions of the Second Lien Credit Agreement, any Note, any other Loan Document
or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral
securing, any Obligations of the Borrower or any other Loan Party; (c) any change in the time,
manner or place of payment of, or in any other term of, all or any of the Obligations or any other
extension, compromise or renewal of any Obligation of the Borrower or any other Loan Party; (d) any
reduction, limitation, impairment or termination of any Obligations of the Borrower or any other
Loan Party for any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and each Pledgor hereby waives any right to or claim of)
any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, any Obligations of the Borrower, any other Loan Party or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to departure
from, any of the terms of the Second Lien Credit Agreement, any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of any collateral (including the
Collateral), or any amendment to or waiver or release of or addition to or consent to departure
from any guaranty, for any of the Obligations; or (g) any other circumstances which might otherwise
constitute a defense available to, or a legal or equitable discharge of, the Borrower, any other
Loan Party, any surety or any guarantor.



     SECTION 2.7. Waiver of Subrogation. Each Pledgor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against the Borrower or any
other Loan Party that arise from the existence, payment, performance or enforcement of such
Pledgor’s obligations under this Pledge Agreement or any other Loan Document, including any right
of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any
claim or remedy of Lender Parties against the Borrower or any other Loan Party or any collateral
which Administrative Agent now has or hereafter acquires, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including the right to take or
receive from the Borrower or any other Loan Party, directly or indirectly, in cash or other
property or by set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Pledgor in violation of the preceding sentence and the
Obligations shall not have been paid in cash in full and the Commitments have not been



Exhibit G




6









 




terminated or expired, such amount shall be deemed to have been paid to such Pledgor for the
benefit of, and held in trust for, Lender Parties, and shall forthwith be paid to Lender Parties to
be credited and applied upon the Obligations, whether matured or unmatured. Each Pledgor
acknowledges that it will receive direct and indirect benefits from the financing arrangements
contemplated by the Second Lien Credit Agreement and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.




ARTICLE III

REPRESENTATIONS AND WARRANTIES




     SECTION 3.1. Warranties, etc. Each Pledgor represents and warrants unto
each Lender Party, as at the date of each pledge and delivery hereunder (including each pledge and
delivery of Pledged Shares, each pledge and delivery of Pledged Interests and each pledge and
delivery of a Pledged Note) by such Pledgor to Perfection Agent of any Collateral, as set forth in
this Article.



     SECTION 3.1.1. [Reserved].



     SECTION 3.1.2. Ownership, No Liens, etc. Each Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right and authority to
pledge and assign) the Collateral, free and clear of all Liens, security interests, options, or
other charges or encumbrances, except any Permitted Encumbrance or encumbrances contemplated by the
Second Lien Credit Agreement.



     SECTION 3.1.3. Valid Security Interest. The delivery of the Collateral
(other than any Pledged Interest that constitutes a general intangible or uncertificated investment
property under the UCC) to Perfection Agent is effective to create a valid, perfected, second
priority security interest, subject to the terms of the Intercreditor Agreement, in the Collateral
and all proceeds thereof, securing the Secured Obligations. No filing or other action will be
necessary to perfect or protect such security interest in the Collateral, other than with respect
to Collateral constituting a general intangible or uncertificated investment property under the UCC
for which the filing of a financing statement is required in order to perfect such security
interest.



     SECTION 3.1.4. As to Pledged Shares. In the case of any Pledged Shares
constituting Collateral, all of such Pledged Shares are duly authorized and validly issued and
constitute all of the issued and outstanding shares of capital stock of each Pledged Share Issuer
owned by each Pledgor set forth across from the name of such Pledged Share Issuer on Attachment
1 hereto.



     SECTION 3.1.5. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and delivered, and are
the legal, valid and binding obligation of the issuers thereof, and are not in default.



     SECTION 3.1.6. Authorization, Approval, etc. No authorization, approval,
or other action by, and no notice to or filing with, any governmental authority, regulatory body or
any other Person is required either



Exhibit G




7









 






     (a) for the pledge by each Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this Pledge Agreement by
each Pledgor, or




     (b) for the exercise by the Administrative Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to any Pledged Shares
or any Pledged Interests, as may be required in connection with a disposition of such
Pledged Shares or Pledged Interests by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this Pledge Agreement.



     SECTION 3.1.7. Compliance with Laws. Each Pledgor is in compliance with
the requirements of all applicable laws, rules, regulations and orders of every governmental
authority, the non-compliance with which could reasonably be expected to materially adversely
affect the business, properties, assets, operations, condition (financial or otherwise) or
prospects of such Pledgor or the value of the Collateral or the worth of the Collateral as
collateral security.



     SECTION 3.1.8. Certificated Nature of Equity Interests. All equity
interests in each Pledged Share Issuer or Pledged Interest Issuer that are represented by
certificates have been delivered to the Perfection Agent and are held in its possession, together
with transfer documents as required by this Pledge Agreement (and each Pledgor covenants and agrees
that any certificates or instruments evidencing all equity interests in each Pledged Share Issuer
or Pledged Interest Issuer hereafter received by such Pledgor with respect to any of the Collateral
will be held in trust for the Perfection Agent and promptly delivered to the Perfection Agent).



     SECTION 3.1.9. State of Organization, Formation or Incorporation; Name.
(a) The signature page to this instrument lists the true legal name of each Pledgor as registered
in the jurisdiction in which such Pledgor is organized, formed or incorporated, (b) each Pledgor’s
state of incorporation, formation or organization, its organization identification number as
designated by the state of its incorporation, formation or organization, and its principal place of
business (or, if it has more than one place of business, its chief executive office) are as set
forth on Attachment 3 hereto as supplemented from time to time, and (c) each Pledgor is not
now and has not been known by any trade name.



     SECTION 3.1.10. As to Pledged Interests. In the case of any Pledged
Interests constituting Collateral, such Pledged Interests constitute one hundred percent (100%) of
each Pledgor’s interest in the Pledged Interest Issuer and the percentage of the total membership,
partnership and/or other equity interests in the Pledged Interest Issuer indicated on
Attachment 1. The Pledged Interests indicated on Attachment 1 are duly registered
in the permanent ownership records of the respective Pledged Interests Issuer, and such
registration is maintained in the principal office of such issuer. Such registration continues
valid and genuine and has not been altered. All Pledged Interests have been duly authorized and
validly issued and registered and were not issued in violation of the preemptive rights, if any, of
any Person or of any agreement by which each Pledgor, including the Borrower, is bound. All
documentary, stamp or other taxes or fees owing in connection with the registration, issuance,
transfer or pledge of Collateral have been paid. No restrictions or conditions exist with respect
to the registration, transfer, voting or capital of any Pledged Interests. All requisite
formalities for the granting of a security interest in the Pledged Interests required pursuant to
the organic documents of each Pledgor or the Pledged



Exhibit G




8









 




Interest Issuer have been complied with on or prior to the execution and delivery of this
Pledge Agreement. Each Pledgor represents that, as of the date hereof, none of the Pledged
Interests is dealt with or traded on any securities exchange or in any securities market.




ARTICLE IV

COVENANTS




     SECTION 4.1. Protect Collateral; Further Assurances, etc. Except as
permitted under the Second Lien Credit Agreement, no Pledgor will sell, assign, transfer, pledge,
or encumber in any other manner the Collateral. Each Pledgor will warrant and defend the right and
title herein granted unto the Administrative Agent in and to the Collateral (and all right, title
and interest represented by the Collateral) against the claims and demands of all Persons
whomsoever. Each Pledgor agrees that at any time, and from time to time, at the expense of such
Pledgor, such Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Administrative Agent may reasonably
request, subject to the terms of the Intercreditor Agreement, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the Administrative Agent
to exercise and enforce its rights and remedies hereunder with respect to any Collateral, subject
to the terms of the Intercreditor Agreement. Each Pledgor agrees that without the prior written
consent of the Administrative Agent, in its sole and absolute discretion, it will not permit any
Pledged Share Issuer or Pledged Interest Issuer, or vote its interest in the Pledged Shares or the
Pledged Interests in a way that allows the Pledged Share Issuer or the Pledged Interest Issuer, to
(a) make any amendments to the articles of organization, certificate of formation, operating
agreement, limited liability company agreement, partnership agreement or any other organic
agreement of the Pledged Share Issuer or the Pledged Interest Issuer, or (b) enter into any other
agreements which, in the opinion of the Administrative Agent, in its sole and absolute discretion,
will reduce the value of the Collateral. Each Pledgor agrees that, upon the acquisition after the
date hereof by such Pledgor of any Collateral, with respect to which the security interest granted
hereunder is not perfected automatically upon such acquisition, to take such actions with respect
to the Collateral or any part thereof as required by the Loan Documents.



     SECTION 4.2. Stock Powers, etc. Each Pledgor agrees that all Pledged
Shares and all Pledged Interests (and all other shares of capital stock, member interests or other
equity ownership interest constituting Collateral) delivered by such Pledgor pursuant to this
Pledge Agreement will be accompanied by duly executed undated blank stock powers, in substantially
the form of Attachment 2 hereto, or other equivalent instruments of transfer acceptable to
the Administrative Agent. Each Pledgor will, from time to time upon the request of Administrative
Agent, promptly deliver to the Administrative Agent such stock powers, in substantially the form of
Attachment 2, instruments and similar documents, satisfactory in form and substance to the
Administrative Agent, with respect to the Collateral as the Administrative Agent may reasonably
request and will, from time to time upon the request of the Administrative Agent after the
occurrence of any Event of Default, promptly transfer any Pledged Shares, Pledged Interests or
other shares of common stock, member interests or other ownership interests constituting Collateral
into the name of any nominee designated by the Administrative Agent, subject to the terms of the
Intercreditor Agreement.



Exhibit G




9









 





     SECTION 4.3. Continuous Pledge. Subject to Section 2.4, each
Pledgor will, at all times, keep pledged to the Administrative Agent pursuant hereto all Pledged
Shares, all Pledged Interests, all other shares of capital stock, member interests, general or
limited partnership interests or other ownership interests constituting Collateral, and all
securities, security entitlements and securities accounts constituting Collateral, Dividends and
Distributions with respect thereto, all Pledged Notes, all interest, principal and other proceeds
received by or on behalf of the Administrative Agent with respect to the Pledged Notes, and all
other Collateral and other securities, instruments, security entitlements, financial assets,
investment property, proceeds, and rights from time to time received by or distributable to such
Pledgor in respect of any Collateral.



     SECTION 4.4. Dividends, etc. Each Pledgor agrees:




     (a) after any acceleration under the Second Lien Credit Agreement or
Default occurring on the Maturity Date, promptly upon receipt thereof by such Pledgor and
without any request therefor by the Administrative Agent, to deliver (properly endorsed
where required hereby or requested by the Administrative Agent) to the Administrative Agent
all Dividends, Distributions, all interest, all principal, all other cash payments, and all
proceeds of the Collateral, all of which shall be held by the Administrative Agent, subject
to the Intercreditor Agreement, as additional Collateral for use in accordance with
Section 6.4; and




     (b) after any Event of Default shall have occurred and be continuing and
the Administrative Agent has notified such Pledgor of the Administrative Agent’s intention
to exercise its voting power under this Section 4.4(b),




     (i) the Administrative Agent may, subject to the Intercreditor
Agreement, exercise (to the exclusion of such Pledgor) the voting power and all
other incidental rights of ownership with respect to any Pledged Shares, Pledged
Interests or other shares of capital stock, member interests or other ownership
interests constituting Collateral and EACH PLEDGOR HEREBY GRANTS THE ADMINISTRATIVE
AGENT AN IRREVOCABLE PROXY, EXERCISABLE UNDER SUCH CIRCUMSTANCES, TO VOTE THE
PLEDGED SHARES, THE PLEDGED INTERESTS AND SUCH OTHER COLLATERAL, WITH SUCH PROXY TO
REMAIN VALID UNTIL THE EARLIEST OF (A) SUCH TIME AS SUCH EVENT OF DEFAULT IS NO
LONGER CONTINUING; AND (B) THE INDEFEASIBLE PAYMENT IN FULL IN CASH OF ALL SECURED
OBLIGATIONS AND THE TERMINATION OR EXPIRATION OF ALL COMMITMENTS; and




     (ii) promptly to deliver to the Administrative Agent such
additional proxies and other documents as may be necessary to allow the
Administrative Agent to exercise such voting power.



     All Dividends, Distributions, interest, principal, cash payments, and proceeds which may at
any time and from time to time be held by each Pledgor but which such Pledgor is then obligated to
deliver to the Administrative Agent, subject to the Intercreditor Agreement, shall,



Exhibit G




10









 




until delivery to the Administrative Agent, be held by such Pledgor separate and apart from
its other property in trust for the Administrative Agent. The Administrative Agent agrees that
unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall
have given the notice referred to in Section 4.4(b), each Pledgor shall have the exclusive
voting power with respect to any shares of capital stock, member interests, general or limited
partnership interests or other ownership interest (including any of the Pledged Shares or Pledged
Interests) constituting Collateral and the Administrative Agent shall, upon the written request of
such Pledgor, promptly deliver such proxies and other documents, if any, as shall be reasonably
requested by such Pledgor which are necessary to allow such Pledgor to exercise voting power with
respect to any such share of capital stock, member interests, general or limited partnership
interests or other ownership interests (including any of the Pledged Shares or Pledged Interests)
constituting Collateral; provided, however, that no vote shall be cast, or consent,
waiver, or ratification given, or action taken by such Pledgor that would impair any Collateral or
be inconsistent with or violate any provision of the Second Lien Credit Agreement or any other Loan
Document (including this Pledge Agreement).




     SECTION 4.5. Additional Undertakings. Each Pledgor will not, without the
prior written consent of the Administrative Agent, subject to the terms of the Intercreditor
Agreement:




     (a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant to which such
Pledged Note is issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof;




     (b) take or omit to take any action the taking or the omission of which
would result in any impairment or alteration of any obligation of the maker of any Pledged
Note or other instrument constituting Collateral;




     (c) cause or permit any change to be made in its name, identity, corporate
structure or state of incorporation or formation, or cause or permit any change in the
location of (i) any Collateral, or (ii) such Pledgor’s place of business (or, if it has more
than one place of business, its chief executive office), to a different jurisdiction from
the jurisdiction represented herein, unless such Pledgor shall have notified the
Administrative Agent of such change at least thirty (30) days prior to the effective date of
such change, and shall have first taken all action, if any, reasonably required by the
Administrative Agent, subject to the terms of the Intercreditor Agreement, for the purpose
of further perfecting or protecting the security interest in favor of the Administrative
Agent in the Collateral;




     (d) permit the issuance of (i) any additional equity interests of any
Pledged Share Issuer or Pledged Interest Issuer (unless immediately upon such issuance the
same are pledged and delivered to the Perfection Agent pursuant to the terms hereof to the
extent necessary to give the Administrative Agent a security interest after such issue in at
least the same percentage of such Pledgor’s outstanding interests as before such issue),
(ii) any securities or other ownership interests convertible voluntarily by the holder
thereof or automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares or other ownership interests, or (iii) any



Exhibit G




11









 






warrants, options, contracts or other commitments entitling any Person other than a
Pledgor to purchase or otherwise acquire any such shares or other ownership interests; or




     (e) enter into any agreement creating or otherwise permit to exist, any
restriction or condition upon the transfer, voting or control of any Pledged Share or
Pledged Interest.



     Each Pledgor shall provide, or cause the relevant Pledged Share Issuer or Pledged Interest
Issuer to provide, the Administrative Agent with a copy of any amendment or supplement to, or
modification or waiver of, any term or provision of any of the by-laws and other organic documents
of the relevant Pledged Share Issuer or Pledged Interest Issuer, provided that such Pledgor shall
not enter into any such amendment, supplement, modification or waiver which could reasonably be
expected to be adverse to the interests of the Administrative Agent and the other Lender Parties.
Each Pledgor covenants and agrees that it shall not consent to or permit (i) any Pledged Interest
to be dealt with or traded on any securities exchanges or in any securities market or (ii) any
Pledged Interest Issuer to elect to have its Pledged Interests treated as a “security” under
Article 8 of the UCC.



     SECTION 4.6. Status of Pledged Interests. The registration of the Pledged
Interests on the permanent ownership records of Pledged Interest Issuer shall at all times be valid
and genuine and shall not be altered. The Pledged Interests at all times shall be duly authorized
and validly registered and shall not be registered in violation of the organic documents of each
Pledgor or the preemptive rights of any Person, if any, or of any agreement by which such Pledgor
or any Pledged Interest Issuer is bound.



     SECTION 4.7. Consent to Transfer. To the extent that the grant of a
security interest in the Collateral in favor of the Administrative Agent by any Pledgor pursuant to
this Pledge Agreement or the exercise of any remedies by the Administrative Agent, subject to the
terms of the Intercreditor Agreement, hereunder (or otherwise in accordance with applicable law)
would, in any case, violate the Organization Documents of any Pledged Interest Issuer, each Pledgor
hereby consents to such transfer for purposes of the Organization Documents of each Pledged
Interest Issuer.



ARTICLE V

ADMINISTRATIVE AGENT




     SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Subject to
the Intercreditor Agreement, each Pledgor hereby irrevocably appoints the Administrative Agent such
Pledgor’s attorney-in-fact, with full authority in the place and stead of such Pledgor and in the
name of such Pledgor or otherwise, from time to time in the Administrative Agent’s discretion, to
take any action and to execute any writing or paper which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement, including without
limitation: after the occurrence and continuance of an Event of Default, to ask, demand, collect,
sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral; to receive, endorse,



Exhibit G




12









 




and collect any drafts or other instruments, documents and chattel paper which the
Administrative Agent may deem necessary in connection therewith; and to file any claims or take any
action or institute any proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights of the
Administrative Agent with respect to any of the Collateral. Each Pledgor hereby acknowledges,
consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and
coupled with an interest.




     SECTION 5.2. Administrative Agent May Perform. If any Pledgor fails to
perform any agreement contained herein, the Administrative Agent may itself perform, or cause
performance of, such agreement, subject to the terms of the Intercreditor Agreement, and the
expenses of the Administrative Agent incurred in connection therewith shall be payable by such
Pledgor pursuant to Section 6.5.



     SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on behalf of the Lender
Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except
for reasonable care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Shares, whether or not the
Administrative Agent has or is deemed to have knowledge of such matters or (b) taking any necessary
steps to preserve rights against prior parties or any other rights pertaining to any Collateral.



     SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the Collateral, if it takes
such action for that purpose as each Pledgor reasonably requests in writing at times other than
upon the occurrence and during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.



ARTICLE VI

REMEDIES




     SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing, then subject to the terms of the Intercreditor Agreement:




     (a) the Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may, without notice except as specified below,
(or, if notice cannot be waived under the UCC, as required to be provided by the UCC) sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any
of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative Agent may deem



Exhibit G




13









 






commercially reasonable. Each Pledgor agrees that, to the extent notice of sale shall
be required by law, at least ten days’ prior notice to such Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Administrative Agent may
adjourn any public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time and place to
which it was so adjourned.




     (b) The Administrative Agent may transfer all or any part of the Collateral
into the name of the Administrative Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest hereunder, notify the parties
obligated on any of the Collateral to make payment to the Administrative Agent of any amount
due or to become due thereunder, enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto, endorse any checks, drafts, or
other writings in each Pledgor’s name to allow collection of the Collateral, take control of
any proceeds of the Collateral, and execute (in the name, place and stead of each Pledgor)
endorsements, assignments, stock powers and other instruments of conveyance or transfer with
respect to all or any of the Collateral.



     SECTION 6.2. Securities Laws. If the Administrative Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to Section 6.1 and in
accordance with and subject to the terms of the Intercreditor Agreement, each Pledgor agrees that,
upon the reasonable request of the Administrative Agent, such Pledgor will, at its own expense:




     (a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts and things,
as may be necessary or, in the opinion of the Administrative Agent, advisable to register
such Collateral under the provisions of the Securities Act of 1933, as from time to time
amended (the “Securities Act”), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements thereto and to
the related prospectus which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;




     (b) use its commercially reasonable efforts to qualify the Collateral under
the state securities or “Blue Sky” laws and to obtain all necessary governmental approvals
for the sale of the Collateral, as requested by the Administrative Agent;




     (c) cause each such issuer to make available to its security holders, as
soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a)
of the Securities Act; and



Exhibit G




14









 






     (d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law.



     Each Pledgor further acknowledges the impossibility of ascertaining the amount of damages that
would be suffered by the Administrative Agent or the Lender Parties by reason of the failure by
such Pledgor to perform any of the covenants contained in this Section and, consequently, agrees
that, if the Pledgor shall fail to perform any of such covenants, it shall pay, as liquidated
damages and not as a penalty, an amount equal to the value (as determined by the Administrative
Agent) of the Collateral on the date the Administrative Agent shall demand compliance with this
Section.



     SECTION 6.3. Compliance with Restrictions. Each Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have occurred and be
continuing, the Administrative Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is necessary in order to
avoid any violation of applicable law (including compliance with such procedures as may restrict
the number of prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders and purchasers to
persons who will represent and agree that they are purchasing for their own account for investment
and not with a view to the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any governmental regulatory authority or
official, and such Pledgor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner, nor shall the
Administrative Agent be liable nor accountable to such Pledgor for any discount allowed by the
reason of the fact that such Collateral is sold in compliance with any such limitation or
restriction.



     SECTION 6.4. Application of Proceeds. Subject to the terms of the
Intercreditor Agreement, all cash proceeds received by the Administrative Agent in respect of any
sale of, collection from, or other realization upon, all or any part of the Collateral may, in the
discretion of the Administrative Agent, be held by the Administrative Agent as additional
collateral security for, or then or at any time thereafter be applied (after payment of any amounts
payable to the Administrative Agent pursuant to clauses (a) and (b) of Section 10.04 of the Second
Lien Credit Agreement and Section 6.5) in whole or in part by the Administrative Agent
against, all or any part of the Secured Obligations in the order set forth in Section 8.03 of the
Second Lien Credit Agreement.



     Any surplus of such cash or cash proceeds held by the Administrative Agent and remaining after
payment in full of all the Secured Obligations, and the termination of all Commitments, shall be
paid over to each Pledgor or to whomsoever may be lawfully entitled to receive such surplus.



     SECTION 6.5. Indemnity and Expenses. Each Pledgor hereby indemnifies and
holds harmless the Administrative Agent from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including enforcement of this
Pledge Agreement), except claims, losses, or liabilities resulting from the Administrative Agent’s
gross



Exhibit G




15









 




negligence or willful misconduct. Upon demand, each Pledgor will pay to the Administrative
Agent the amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Administrative Agent may
incur in connection with:





     (a) the administration of this Pledge Agreement, the Second Lien Credit
Agreement and each other Loan Document;




     (b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;




     (c) the exercise or enforcement of any of the rights of the Administrative
Agent hereunder; or




     (d) the failure by any Pledgor to perform or observe any of the provisions
hereof.



     SECTION 6.6. Warranties. The Administrative Agent may sell the Collateral
without giving any warranties or representations as to the Collateral. The Administrative Agent
may disclaim any warranties of title or the like. This procedure will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.



     SECTION 6.7. Intercreditor Agreement. The security interest granted by
this Pledge Agreement on the Collateral is junior and subordinate to the security interest in such
Collateral created by any pledge agreement, security agreement or similar instrument now or
hereafter granted to the First Lien Administrative Agent in such Collateral, in accordance with the
provisions of the Intercreditor Agreement.



ARTICLE VII

MISCELLANEOUS PROVISIONS




     SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Second Lien Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the terms and
provisions thereof.



     SECTION 7.2. Amendments, Etc.. No amendment to or waiver of any provision
of this Pledge Agreement, nor consent to any departure by any Pledgor herefrom, shall in any event
be effective unless the same shall be in writing and signed by the Administrative Agent, and then
such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which it is given.



     SECTION 7.3. Protection of Collateral. The Administrative Agent may from
time to time, at its option, perform any act which any Pledgor agrees hereunder to perform and
which such Pledgor shall fail to perform after being requested in writing so to perform (it being
understood that no such request need be given after the occurrence and during the continuance of an
Event of Default) and the Administrative Agent may from time to time take any other action



Exhibit G




16









 




which the Administrative Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.




     SECTION 7.4. Obligations Not Affected. The obligations of each Pledgor
under this Pledge Agreement shall remain in full force and effect without regard to, and shall not
be impaired or affected by:




     (a) any amendment or modification or addition or supplement to the Second
Lien Credit Agreement, any Note, any other Loan Documents, any instrument delivered in
connection therewith, or any assignment or transfer thereof;




     (b) any exercise, non-exercise, or waiver by the Administrative Agent or
any Lender of any right, remedy, power, or privilege under or in respect of, or any release
of any guaranty or collateral provided pursuant to, this Pledge Agreement, the Second Lien
Credit Agreement, Pledgors’ Guaranty or any other Loan Document;




     (c) any waiver, consent, extension, indulgence, or other action or inaction
in respect of this Pledge Agreement, the Second Lien Credit Agreement, Pledgors’ Guaranty or
any other Loan Document or any assignment or transfer of any thereof; or




     (d) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation, or the like, of any Pledgor or any other Person, whether or not
such Pledgor shall have notice or knowledge of any of the foregoing.



     SECTION 7.5. Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing, unless otherwise specifically
provided herein and shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy (with telephonic confirmation of transmission, by delivery service with proof
of delivery, or by registered or certified United States mail, postage prepaid, to the Pledgors at
the address of the Pledgors specified on the signature pages hereto and to each Agent and each
Lender at their addresses specified on the signature pages to the Second Lien Credit Agreement
(unless changed by similar notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given: in the case of
personal delivery service, as of the date of first attempted delivery at the address provided
herein; in the case of telecopy, upon receipt; or in the case of registered or certified United
States mail, three days after deposit in the mail, postage prepaid.



     SECTION 7.6. No Waiver; Remedies. No failure on the part of any Lender
Party or any holder of a Note to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by law.



     SECTION 7.7. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the construction of this
Pledge Agreement.



     SECTION 7.8. Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable
law,



Exhibit G




17









 




but if any provision of this Pledge Agreement shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement.




     SECTION 7.9. Execution in Counterparts, Effectiveness, etc. This Pledge
Agreement may be executed by the parties hereto in several counterparts, each of which shall be
executed by each Pledgor and the Administrative Agent and be deemed to be an original and all of
which shall constitute together but one and the same agreement. This Pledge Agreement shall become
effective as against a Pledgor when counterparts hereof executed on behalf of such Pledgor and the
Administrative Agent shall have been received by the Administrative Agent.



     SECTION 7.10. Filing as a Financing Statement. At the option of the
Administrative Agent, this Pledge Agreement, or a carbon, photographic or other reproduction of
this Pledge Agreement or of any UCC financing statement, continuation statement or amendments
thereto, covering all of the Collateral or any portion thereof shall be sufficient as a UCC
financing statement and may be filed as such without the signature of any Pledgor where and to the
full extent permitted by applicable law. Each Pledgor hereby expressly authorizes the
Administrative Agent to file UCC financing statements, continuation statements and amendments with
respect to the Collateral without such Pledgor’s signature (to the extent permitted by applicable
law).



     SECTION 7.11. Governing Law, Entire Agreement. THIS PLEDGE AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICT OF LAW); PROVIDED THAT THE ADMINISTRATIVE AGENT AND
EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. THIS PLEDGE AGREEMENT AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.



     SECTION 7.12. Waiver of Jury Trial. EACH OF EACH PLEDGOR, AGENTS AND
LENDERS HEREBY (a) IRREVOCABLY WAIVES, THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (d)



Exhibit G




18









 




ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO AND ACCEPT THIS PLEDGE AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.




     SECTION 7.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF LENDER PARTIES OR ANY PLEDGOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PLEDGOR 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 OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, EACH PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS PLEDGE AGREEMENT.



     THIS WRITTEN PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



[SIGNATURES BEGIN ON FOLLOWING PAGE]




Exhibit G




19









 





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



	 	 	 	 	 	 	 
	 	 	CONCHO RESOURCES INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO EQUITY HOLDINGS CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	COG OPERATING LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO LP LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	COG OIL & GAS LP

By:   COG Operating LLC, its sole general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 






Exhibit G




S - 1  









 





	 	 	 	 	 	 	 
	 	 	COG REALTY LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO ENERGY SERVICES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 






	 	 	 	 	 	 	 
	 	 	Notice information for all Pledgors:	 	 
	 

	 	Address:
	 	550 W. Texas, Suite 1300
	 	 
	 

	 	 	 	Midland, Texas 79701	 	 
	 

	 	Attention:
	 	Curt F. Kamradt	 	 
	 

	 	Telephone:
	 	(432) 683-7443	 	 
	 

	 	Telecopy:
	 	(432) 683-7441	 	 
	 

	 	with a copy to:	 	 
	 
	 

	 	 	 	David Copeland	 	 
	 

	 	Address:
	 	550 W. Texas, Suite 1300	 	 
	 

	 	 	 	Midland, Texas 79701	 	 
	 

	 	Telephone:
	 	(432) 683-7443	 	 
	 

	 	Telecopy:
	 	(432) 683-7441	 	 






Exhibit G




S - 2  









 





	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,

as Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

Todd G. MacNeill
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Notice information for Administrative Agent:	 	 
	 
	 	 	 	 	 	 
	 	 	Bank of America, N.A.

Todd MacNeill	 	 
	 	 	Agency Officer	 	 
	 	 	100 Federal Street	 	 
	 	 	Boston, MA 02110	 	 
	 	 	Mail Code: MA5-100-11-02	 	 
	 	 	Telephone:  (617) 434-6842	 	 
	 

	 	Fax:
	 	(617) 790-1361	 	 
	 	 	Email: todd.g.macneill@bankofamerica.com	 	 






Exhibit G




S - 3  









 





ACKNOWLEDGMENT




     Each of the undersigned (each individually a “Pledged Interests Issuer” and
collectively, the “Pledged Interests Issuers”), hereby severally and not jointly (a)
acknowledges and consents to the assignment by each of Concho Resources Inc., a Delaware
corporation (the “Borrower”), Concho Equity Holdings Corp., a Delaware corporation
(“Concho Holdings”), COG Operating LLC, a Delaware limited liability company (“COG
GP”), Concho LP LLC, a Delaware limited liability company (“COG LP”), COG Oil & Gas LP,
a Texas limited partnership (“COG Oil & Gas”), Concho Energy Services, LLC, a Texas limited
liability company (“Concho Energy”), COG Realty LLC, a Texas limited liability company
(“COG Realty”; COG Realty together with each of Borrower, Concho Holdings, COG GP, COG LP,
COG Oil & Gas, Concho Energy and COG Realty, each a “Pledgor” and, collectively, the
“Pledgors”), of its right, title and interest in, to and under, respectively, each of their
respective Organization Documents pursuant to the terms of the Pledge Agreement and Irrevocable
Proxy, dated as of                      (the “Pledge Agreement”), made by the Pledgors for Bank of
America, N.A., as Administrative Agent (in such capacity, together with its successors in such
capacity, the “Administrative Agent”) for the Lender Parties (as defined in the Pledge
Agreement), (b) confirms that such Pledged Interests Issuer has reviewed the Pledge Agreement and
this notice of assignment, (c) agrees, upon notice from the Administrative Agent, to make direct
payment to the Administrative Agent of any amounts due or to become due Pledgors under its
respective Organization Documents, (d) agrees to recognize, subject to the Intercreditor Agreement,
the Administrative Agent (to the exclusion of the Pledgors) as the sole Person entitled to exercise
the voting power and all other incidental rights of ownership with respect to such membership or
other equity interests in accordance with the terms of the Pledge Agreement, (e) agrees to comply
with instructions provided by the Administrative Agent, subject to the Intercreditor Agreement,
without further consent by the Pledgors, and (f) agrees that the pledge by the Pledgors pursuant to
the Pledge Agreement, and any transfer of the Pledged Interests to the Administrative Agent upon
the exercise of its rights under the Pledge Agreement, shall be, and hereby are, expressly
permitted for purposes of its Organization Documents.



	 	 	 	 	 	 	 
	 

	 	Dated:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO EQUITY HOLDINGS CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 






Exhibit G




S - 4  









 





	 	 	 	 	 	 	 
	 	 	COG OPERATING LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO LP LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	COG OIL & GAS LP

By: COG Operating LLC, its sole general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	COG REALTY LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CONCHO ENERGY SERVICES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

David W. Copeland
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	550 W. Texas, Suite 1300	 	 
	 

	 	 	 	Midland, Texas 79701	 	 
	 

	 	Attention:
	 	Curt F. Kamradt	 	 
	 

	 	Telephone:
	 	(432) 683-7443	 	 
	 

	 	Telecopy:
	 	(432) 683-7441	 	 






Exhibit G




S - 5  









 





EXHIBIT A




PROMISSORY NOTE




			
	$                    
	 	                                        
	 	 	 





     FOR VALUE RECEIVED, the undersigned,                     
                    , a                                          corporation (the
“Maker”), promises to pay to the order of                                         , a                      corporation (the
“Payee”), [in equal
                    
installments, commencing                     , 200 ___ to and including
                    , 200_], the principal sum of                                                              UNITED STATES
DOLLARS (U.S.$                    ), representing the aggregate principal amount of an intercompany loan made
by the Payee to the Maker.



     The unpaid principal amount of this promissory note (this “Note”) from time to time
outstanding shall bear interest at a rate of interest equal to                     , which the Maker
represents to be a lawful and commercially reasonable rate, payable                     , and all payments of
principal of and interest on this Note shall be payable in lawful currency of the United States of
America. All such payments shall be made by the Maker to an account established by the Payee at
                     and shall be recorded on the grid attached hereto by the holder hereof (including
the Administrative Agent as pledgee). Upon notice from the Administrative Agent (hereinafter
defined) that an Event of Default (as defined in the Second Lien Credit Agreement) has occurred and
is continuing under the Second Lien Credit Agreement, the Maker shall make such payments, in same
day funds, to such other account as the Administrative Agent shall direct in such notice.



     This Note is one of the Pledged Notes referred to in, and evidences Indebtedness incurred
pursuant to of Section 7.03(b) of the Second Lien Credit Agreement, dated as of                                         ,
(together with all amendments and other modifications, if any, from time to time hereafter made
thereto, the “Second Lien Credit Agreement”), among Concho Resources Inc., a Delaware
corporation, and Bank of America, N.A., as Administrative Agent, and the other various commercial
lending institutions as lenders from time to time parties thereto. Upon the occurrence and
continuation of an Event of Default under the Second Lien Credit Agreement, and notice thereof by
the Administrative Agent to the Maker, the Administrative Agent shall have all rights of the Payee
to collect and accelerate, and enforce all rights with respect to, the Indebtedness evidenced by
this Note. Unless otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Second Lien Credit Agreement.



     Reference is made to the Second Lien Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Administrative Agent as security for
the Obligations outstanding from time to time under the Second Lien Credit Agreement and each other
Loan Document.



     In addition to, but not in limitation of, the foregoing, the Maker further agrees to pay all
expenses, including reasonable attorneys’ fees and legal expenses, incurred by the holder
(including the Administrative Agent as pledgee) of this Note endeavoring to collect any amounts
payable hereunder which are not paid when due, whether by acceleration or otherwise.



A-1 









 





     THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE (WITHOUT GIVING
EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT OF LAW).



     THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE. THE MAKER ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.



	 	 	 	 	 	 	 	 	 
	 	 	[Name of Maker]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Pay to the order of [Name of Payee]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 






Exhibit G




A-2 









 





GRID




     Intercompany Loans made by                                          to                      and payments of principal of such Loans.



	 	 	 	 	 	 	 	 	 
	 	 	 	 	Amount of	 	Outstanding	 	 
	 	 	Amount of	 	Principal	 	Principal	 	Notation
	Date	 	Intercompany Loan	 	Payment	 	Balance	 	Made By
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 








A-3 










 





ATTACHMENT 1

to Pledge Agreement




Item A. Pledged Shares




	 	 	 	 	 	 	 	 	 	 	 
	Pledged Share Issuer	 	Stock	 	 	 	 
	 	 	 	 	 	 	 	 	% of Shares of
	 	 	Type of	 	 	 	Shares Owned	 	Pledgor
	 	 	Stock	 	Pledgor	 	by Pledgor	 	Pledged
	Concho Holdings

	 	Common
	 	Borrower
	 	Between 97% and 100%
	 	 	100	%
	Concho Holdings

	 	Preferred
	 	Borrower
	 	Between 97% and 100%
	 	 	100	%






Item B. Pledged Notes




Pledged Note Issuer            Description




None




Item C. Pledged Interests




	 	 	 	 	 	 	 	 	 
	Pledged Interests Issuer	 	Interests	 	 	 	 
	 	 	 	 	 	 	Interests	 	% of Interests
	 	 	 	 	 	 	Owned by	 	of Pledgor
	 	 	Type of Interest	 	Pledgor	 	Pledgor	 	Pledged
	 
	 	Limited Liability	 	 	 	 	 	 
	COG GP
	 	Company Membership	 	Concho Holdings	 	100%	 	100%
	 
	 	Limited Liability	 	 	 	 	 	 
	Concho LP
	 	Company Membership	 	Concho Holdings	 	100%	 	100%
	 
	 	Limited Liability	 	 	 	 	 	 
	COG Realty
	 	Company Membership	 	Concho Holdings	 	100%	 	100%







Attachment 1 - 1









 








	 	 	 	 	 	 	 	 	 
	Pledged Interests Issuer	 	Interests	 	 	 	 
	 	 	 	 	 	 	Interests	 	% of Interests
	 	 	 	 	 	 	Owned by	 	of Pledgor
	 	 	Type of Interest	 	Pledgor	 	Pledgor	 	Pledged
	 
	 	Limited Liability	 	 	 	 	 	 
	Concho Energy
	 	Company Membership	 	COG GP	 	100%	 	100%
	 
	 	General Partnership	 	 	 	 	 	 
	COG Oil & Gas
	 	Interest	 	COG GP	 	1%	 	100%
	 
	 	Limited Partnership	 	 	 	 	 	 
	COG Oil & Gas
	 	Interest	 	COG LP	 	99%	 	100%







Attachment 1
- 2









 





ATTACHMENT 2

to Pledge Agreement




STOCK POWER




     FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______ ___(___) shares of common stock in ___,
a ___organized under the laws of ___, represented by the attached Certificate No.
___herewith and do hereby irrevocably constitute and appoint ___
attorney to transfer the said stock on the books of ___with full
power of substitution in the premises.



     DATED:                     



	 	 	 	 	 	 	 
	 	 	[PLEDGOR]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

	 	 
	 

	 	Title:	 	 	 	 






IN PRESENCE OF




                                        




Attachment 2
- 1









 





ATTACHMENT 3

to Pledge Agreement




	 	 	 
	Pledgor:

	 	CONCHO RESOURCES INC.
	State of Organization:

	 	Delaware
	Organizational ID Number:

	 	4094844
	Federal ID Number:

	 	76-0818600
	Principal Place of Business:

	 	550 W. Texas, Suite 1300
Midland, Texas 79701
	 
	 	 
	Pledgor:

	 	CONCHO EQUITY HOLDINGS CORP.
	State of Organization:

	 	Delaware
	Organizational ID Number:

	 	3793531
	Federal ID Number:

	 	37-1488902
	Principal Place of Business:

	 	550 W. Texas, Suite 1300
Midland, Texas 79701
	 
	 	 
	Pledgor:

	 	COG OPERATING LLC
	State of Organization:

	 	Delaware
	Organizational ID Number:

	 	3793530
	Federal ID Number:

	 	61-1469854
	Principal Place of Business:

	 	550 W. Texas, Suite 1300
Midland, Texas 79701






Attachment 3
- 1









 






	 	 	 
	Pledgor:

	 	CONCHO LP LLC
	State of Organization:

	 	Delaware
	Organizational ID Number:

	 	3828143
	Federal ID Number:

	 	57-1209784
	Principal Place of Business:

	 	550 W. Texas, Suite 1300


Midland, Texas 79701
	 
	 	 
	Pledgor:

	 	COG REALTY LLC
	State of Organization:

	 	Texas
	Organizational ID Number:

	 	800411215
	Federal ID Number:

	 	84-1661959
	Principal Place of Business:

	 	550 W. Texas, Suite 1300


Midland, Texas 79701
	 
	 	 
	Pledgor:

	 	CONCHO ENERGY SERVICES LLC
	State of Organization:

	 	Texas
	Organizational ID Number:

	 	800570024
	Federal ID Number:

	 	74-3158759
	Principal Place of Business:

	 	550 W. Texas, Suite 1300


Midland, Texas 79701
	 
	 	 
	Pledgor:

	 	COG OIL & GAS LP
	State of Organization:

	 	Texas
	Organizational ID Number:

	 	800364536
	Federal ID Number:

	 	14-1913261
	Principal Place of Business:

	 	550 W. Texas, Suite 1300


Midland, Texas 79701







Attachment 3
- 2









 





EXHIBIT H




COUNTERPART AGREEMENT





     This COUNTERPART AGREEMENT, dated [                     ] (this “Counterpart Agreement”) is delivered
pursuant to that certain Second Lien Credit Agreement, dated as of March 27, 2007 (as it may be
amended, supplemented or otherwise modified, the “Credit Agreement”; the terms defined therein and
not otherwise defined herein being used herein as therein defined), by and among CONCHO RESOURCES
INC., as Borrower, CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party thereto, and
BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”).



     Section 1. Pursuant to Section 6.12 of the Credit Agreement, the undersigned hereby:



          (a) agrees that this Counterpart Agreement may be attached to the Guaranty and that by the
execution and delivery hereof, the undersigned becomes a Guarantor under the Guaranty and agrees to
be bound by all of the terms thereof;




          (b) represents and warrants that each of the representations and warranties set forth in the
Credit Agreement, the Guaranty and each other Loan Document and applicable to the undersigned is
true and correct both before and after giving effect to this Counterpart Agreement, except to the
extent that any such representation and warranty relates solely to any earlier date, in which case
such representation and warranty is true and correct as of such earlier date;




          (c) agrees to irrevocably and unconditionally guaranty the due and punctual payment in full of
all Obligations when the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a))
and in accordance with the Guaranty;




          (d) (i) agrees that this counterpart may also be attached to the Pledge Agreement, (ii) agrees
that the undersigned will comply with all the terms and conditions of the Pledge Agreement as if it
were an original signatory thereto, (iii) grants to Administrative Agent for the benefit of each of
the Lender Parties (as such term is defined in the Pledge Agreement) a security interest in all of
the undersigned’s right, title and interest in and to all “Collateral” (as such term is defined in
the Pledge Agreement) of the undersigned, in each case whether now or hereafter existing or in
which the undersigned now has or hereafter acquires an interest and wherever the same may be
located and (iv) agrees to deliver to the Administrative Agent supplements to all schedules and
other attachments to the Pledge Agreement. All such Collateral shall be deemed to be part of the
“Collateral” and hereafter subject to each of the terms and conditions of the Pledge Agreement; and




     Section 2. The undersigned agrees from time to time, upon request of Administrative Agent, to
take such additional actions and to execute and deliver such additional documents and instruments
as Administrative Agent may request to effect the transactions contemplated by, and to carry out
the intent of, this Counterpart Agreement. Neither this Counterpart Agreement nor any term hereof
may be changed, waived, discharged or terminated, except by an instrument in writing signed by the
undersigned and the Administrative Agent. Any notice or other



Form of Pledge Agreement




Exhibit H




 









 




communication herein required or permitted to be given shall be given in pursuant to Section
5.4 of the Guaranty, and all for purposes thereof, the notice address of the undersigned shall be
the address as set forth on the signature page hereof. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.




     THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.



Form of Pledge Agreement




Exhibit H




 









 





     IN WITNESS WHEREOF, the undersigned has caused this Counterpart Agreement to be duly executed
and delivered by its duly authorized officer as of the date above first written.



	 	 	 	 	 
	 	[NAME OF SUBSIDIARY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




	 	 	 	 	 
	Address for Notices: 	 	 
	 	 	 
	     	 	 	 
	     	 	 	 
	     	 	 	 
	     	Attention: 	 	 
	     	Telecopier 	 	 
	 	 	 
	with a copy to: 	 	 
	 	 	 
	     	 	 	 
	     	 	 	 
	     	 	 	 
	     	Attention: 	 	 
	     	Telecopier 	 	 




	 	 	 	 	 
	ACKNOWLEDGED AND ACCEPTED,

as of the date above first written:



BANK OF AMERICA, N.A.,

as Administrative Agent

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 



Form of Pledge Agreement




Exhibit H




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	ARTICLE I.
	 	DEFINITIONS AND ACCOUNTING TERMS	 	 	1	 
	1.01
	 	Defined Terms	 	 	1	 
	1.02
	 	Other Interpretive Provisions	 	 	22	 
	1.03
	 	Accounting Terms	 	 	22	 
	1.04
	 	Rounding	 	 	23	 
	1.05
	 	Times of Day	 	 	23	 
	1.06
	 	Classifications of Loans and Borrowings	 	 	23	 
	1.07
	 	Oil and Gas Definitions	 	 	23	 
	ARTICLE II.
	 	THE COMMITMENTS AND BORROWINGS	 	 	23	 
	2.01
	 	Term Loans	 	 	23	 
	2.02
	 	Loans and Borrowings	 	 	23	 
	2.03
	 	Requests for Borrowings	 	 	24	 
	2.04
	 	[Reserved]	 	 	24	 
	2.05
	 	[Reserved]	 	 	24	 
	2.06
	 	Funding of Borrowings	 	 	24	 
	2.07
	 	Interest Elections	 	 	25	 
	2.08
	 	Termination or Reduction of Commitments	 	 	26	 
	2.09
	 	Repayment of Loans	 	 	26	 
	2.10
	 	Optional Prepayment of Loans	 	 	27	 
	2.11
	 	Mandatory Prepayment of Loans	 	 	27	 
	2.12
	 	Fees	 	 	29	 
	2.13
	 	Interest	 	 	29	 
	2.14
	 	Alternate Rate of Interest	 	 	30	 
	2.15
	 	Increased Costs	 	 	30	 
	2.16
	 	Break Funding Payments	 	 	31	 
	2.17
	 	Taxes	 	 	32	 
	2.18
	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	 	 	33	 
	2.19
	 	Mitigation Obligations; Replacement of Lenders	 	 	34	 
	ARTICLE III.
	 	[RESERVED]	 	 	35	 
	ARTICLE IV.
	 	CONDITIONS PRECEDENT TO LOANS	 	 	35	 






-i-









 






TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	4.01
	 	Conditions of Loans	 	 	35	 
	ARTICLE V.
	 	REPRESENTATIONS AND WARRANTIES	 	 	39	 
	5.01
	 	Existence, Qualification and Power; Compliance with Laws	 	 	39	 
	5.02
	 	Authorization; No Contravention	 	 	39	 
	5.03
	 	Governmental Authorization; Other Consents	 	 	40	 
	5.04
	 	Binding Effect	 	 	40	 
	5.05
	 	Financial Statements; No Material Adverse Effect	 	 	40	 
	5.06
	 	Litigation	 	 	40	 
	5.07
	 	No Default	 	 	40	 
	5.08
	 	Ownership of Property; Liens	 	 	41	 
	5.09
	 	Environmental Compliance	 	 	41	 
	5.10
	 	Insurance	 	 	41	 
	5.11
	 	Taxes	 	 	41	 
	5.12
	 	ERISA Compliance	 	 	41	 
	5.13
	 	Subsidiaries; Equity Interests	 	 	42	 
	5.14
	 	Margin Regulations; Investment Company Act	 	 	42	 
	5.15
	 	Disclosure	 	 	42	 
	5.16
	 	Compliance with Laws	 	 	43	 
	5.17
	 	Licenses, Permits and Franchises	 	 	43	 
	5.18
	 	Liens Under the Security Instruments	 	 	43	 
	5.19
	 	Mortgages with Respect to Borrowing Base Properties	 	 	43	 
	5.20
	 	Solvency	 	 	43	 
	5.21
	 	Direct Benefit	 	 	43	 
	ARTICLE VI.
	 	AFFIRMATIVE COVENANTS	 	 	43	 
	6.01
	 	Financial Statements	 	 	44	 
	6.02
	 	Certificates; Other Information	 	 	45	 
	6.03
	 	Notices	 	 	46	 
	6.04
	 	Payment of Obligations	 	 	47	 
	6.05
	 	Preservation of Existence, Etc	 	 	47	 
	6.06
	 	Maintenance of Properties	 	 	47	 






-ii-









 






TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	6.07
	 	Maintenance of Insurance	 	 	47	 
	6.08
	 	Compliance with Laws	 	 	48	 
	6.09
	 	Books and Records	 	 	48	 
	6.10
	 	Inspection Rights	 	 	48	 
	6.11
	 	Use of Proceeds	 	 	48	 
	6.12
	 	Additional Guarantors	 	 	48	 
	6.13
	 	Operations	 	 	49	 
	6.14
	 	Delivery of Title Opinions	 	 	49	 
	6.15
	 	Post-Closing Deliverables by COG LP	 	 	49	 
	6.16
	 	Further Assurances	 	 	50	 
	ARTICLE VII.
	 	NEGATIVE COVENANTS	 	 	50	 
	7.01
	 	Liens	 	 	51	 
	7.02
	 	Investments	 	 	52	 
	7.03
	 	Indebtedness	 	 	52	 
	7.04
	 	Fundamental Changes	 	 	53	 
	7.05
	 	Dispositions	 	 	53	 
	7.06
	 	Restricted Payments	 	 	54	 
	7.07
	 	Change in Nature of Business	 	 	55	 
	7.08
	 	Transactions with Affiliates	 	 	55	 
	7.09
	 	Burdensome Agreements	 	 	55	 
	7.10
	 	Use of Proceeds	 	 	55	 
	7.11
	 	Financial Covenants	 	 	55	 
	7.12
	 	Swap Contracts	 	 	56	 
	7.13
	 	Limitation on Sale/Leasebacks	 	 	56	 
	7.14
	 	Disqualified Stock	 	 	56	 
	ARTICLE VIII.
	 	EVENTS OF DEFAULT AND REMEDIES	 	 	56	 
	8.01
	 	Events of Default	 	 	56	 
	8.02
	 	Remedies Upon Event of Default	 	 	58	 
	8.03
	 	Application of Funds	 	 	59	 
	8.04
	 	Production Proceeds	 	 	59	 






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TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	ARTICLE IX.
	 	ADMINISTRATIVE AGENT	 	 	60	 
	9.01
	 	Appointment and Authority	 	 	60	 
	9.02
	 	Rights as a Lender	 	 	60	 
	9.03
	 	Exculpatory Provisions	 	 	60	 
	9.04
	 	Reliance by Administrative Agent	 	 	61	 
	9.05
	 	Delegation of Duties	 	 	62	 
	9.06
	 	Resignation of Administrative Agent	 	 	62	 
	9.07
	 	Non-Reliance on Administrative Agent and Other Lenders	 	 	63	 
	9.08
	 	No Other Duties, Etc	 	 	63	 
	9.09
	 	Administrative Agent May File Proofs of Claim	 	 	63	 
	9.10
	 	Collateral and Guaranty Matters	 	 	64	 
	ARTICLE X.
	 	MISCELLANEOUS	 	 	64	 
	10.01
	 	Amendments, Etc	 	 	64	 
	10.02
	 	Notices; Effectiveness; Electronic Communication	 	 	65	 
	10.03
	 	No Waiver; Cumulative Remedies	 	 	67	 
	10.04
	 	Expenses; Indemnity; Damage Waiver	 	 	67	 
	10.05
	 	Payments Set Aside	 	 	69	 
	10.06
	 	Successors and Assigns	 	 	69	 
	10.07
	 	Treatment of Certain Information; Confidentiality	 	 	72	 
	10.08
	 	Right of Setoff	 	 	73	 
	10.09
	 	Interest Rate Limitation	 	 	73	 
	10.10
	 	Counterparts; Integration; Effectiveness	 	 	74	 
	10.11
	 	Survival of Representations and Warranties	 	 	74	 
	10.12
	 	Severability	 	 	74	 
	10.13
	 	[Reserved]	 	 	74	 
	10.14
	 	Governing Law; Jurisdiction; Etc	 	 	74	 
	10.15
	 	Waiver of Jury Trial	 	 	75	 
	10.16
	 	USA PATRIOT Act Notice	 	 	75	 
	10.17
	 	ENTIRE AGREEMENT	 	 	76	 
	10.18
	 	INTERCREDITOR AGREEMENT	 	 	76	 






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TABLE OF CONTENTS

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	 	 	 	 	Page	 
	 
	SCHEDULES
	 	 	 	 	 	 
	1.01
	 	Security Instruments	 	 	 	 
	2.01
	 	Commitments and Applicable Percentages	 	 	 	 
	5.06
	 	Litigation	 	 	 	 
	5.13
	 	Subsidiaries, Other Equity Interests of the Borrower	 	 	 	 
	7.01
	 	Existing Liens	 	 	 	 
	7.08
	 	Affiliate Transactions	 	 	 	 
	10.02
	 	Administrative Agent’s Office; Certain Addresses for Notices	 	 	 	 
	 
	 	 	 	 	 	 
	EXHIBITS
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	Form of	 	 	 	 
	 
	 	 	 	 	 	 
	A
	 	Note	 	 	 	 
	B
	 	Compliance Certificate	 	 	 	 
	C
	 	Assignment and Assumption	 	 	 	 
	D
	 	Guaranty	 	 	 	 
	E
	 	Solvency Certificate	 	 	 	 
	F
	 	Mortgage (without exhibits)	 	 	 	 
	G
	 	Pledge Agreement	 	 	 	 
	H
	 	Counterpart Agreement	 	 	 	 







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